Short Sale Mistakes

I just got off the phone with an agent on a short sale. I do that a lot these days as I have four short sales in escrow at the moment and expect one more by tomorrow. Pretty much all the horror stories you hear about short sales are true. They usually take "for ever" and typically fall apart once or twice before the sale can actually close. I thought its time I created an on-line journal to vent about the frustrations, perhaps learn something more in hind-sight or possibly help others in their pursuit of real estate.

As I said, I just got off the phone with an agent on a short sale. I submitted an offer for my client in mid-February 2009. We had a seller signed contract within a few days and then began our "wait" for "bank approval". I had every intention of showing my client many other homes to see if we could find something better, but he was just emotionally stuck on this one short sale (mistake #1 - never let your client fall in love with a short sale). So we waited. I hate to name names, but let's just say this certain bank we'll call "bank of annoyance" eventually gave us bank approval in early July. So we're on our way! If it were that simple, I wouldn't be writing about it now.

Anyway, we thought we were on our way to escrow, however, we subsequently learned that the gracious tenant who had been living at the property rent-free for at least six months decided to change the locks and stay...forever (mistake #2 - never trust a tenant; just be pleasantly surprised if they cooperate).

Well, my client was not happy. We had offered a very good price for the property, had waited about five months, and our bank approval had a mid-August expiration date. The listing agent was going to try and get the tenant to leave. After some time, it became evident that the tenant was not going to leave. So the conversation turned towards eviction. I told the listing agent he had to go to his seller or the bank to evict the guy. The seller claimed no funds and the listing agent wanted my client to pay for an eviction. I told him to make the bank pay for it. The bank said forget it. Eventually, an arrangement was made between brokers and the buyer, and an eviction began.

As I understand it, typically a tenant in a situation like this doesn't resist and will pack up and leave. Not this one. He fought tooth and nail dodging notice, challenging the seller's rights and fighting in court. He produced forged documents and made lots of accusations. Eventually, the judge ruled in the seller's favor. That was great news accept we were pretty concerned about what the tenant would do to the property prior to his departure. Well, the day came - October 23 - and so did the sheriff. Eight months had passed and my client still wanted this place. The good news was that property condition wasn't as bad as we had feared. The tenant took the dishwasher, stove/oven and mirrors from the bathrooms. The carpets were completly unusable and backyard appeared to be the neighborhood poop grounds for every dog in the city. Hard to be anywhere near that back yard. Anyway, my client still wants this place and I want him to have it....

Now before I allow my client to spend one nickle on this place, I want to see valid, current bank demand. So I call the listing agent. "Not to worry," I'm told, should only be a couple days. Later, I learn that the great Bank of Annoyance feels they can't extend the approval without some concessions. They feel they have lost money on this property and are now refusing to honor (pay for previously agreed upon expenses such as termite work) what they promised and worse, they want my client to pay a per diem penalty from mid-August through close of escrow.

I wish I could give you more context, but this has been a very, very painful experience for my client (and I hate it too). The last thing I told the listing agent as I hung up the phone a few minutes ago is that my client will NOT be paying a per diem fee nor will he pay for any other losses the bank is claiming. Even if Bank of Annoyance snaps out of their stupor and extends their approval date, I do expect my client to walk. He can only take so much....