We recently closed on the short sale in Peekskill, NY and it was rather unique. For one, the seller, a licensed professional, had to come up with some money at the closing due to being lighter in the hardship department. We warned the client of this possibility, but the way the bank went about it is indicative of why we have the problems we have in this economy. In addition to that, the buyer almost couldn’t close because of a discrepancy on the taxes.
The seller had relocated out of state and was renting the home. He moved to an area of the country with a lower salary scale, and was now teaching in his field rather than in practice. He therefore could not write a check for 6 figures to make the lender whole. There was some acrimony with the lender as to the value of the home; as is often the case, the lender broker price opinion was done by an out of area licensee with no clue on the local market, and their “value” came in at a price point where we once were, and could not get anyone to even come look. Bad BPOs are a problem that could easily be solved by using local brokers and appraisers. Why lenders do not grasp this is beyond me.
Meanwhile, the buyer’s purchase appraisal came in too low! Their bank was reticent to loan that much on the home, and there was another problem with a re assessment raising our published tax figure. Evidently, both my and the buyer agent’s verification of taxes came prior to the bill going up. Their appraiser caught the discrepancy. This temporarily put the kabosh on the buyer’s mortgage.
As with many short sales, it was our job to go to the mat with the lender to get the deal done, which we did. The seller had to write a small percentage of the shortfall at closing to avoid any long term deficiency, which he had and did.
Lessons learned:
- Re-verify taxes when homes are listed on or near reassessment dates.
- For the banks: stop using out of market brokers for price opinions. The same goes for out of market appraisers.
I give credit to our proactive seller for helping himself and remaining in strong communication. I am more leery than ever as to the wisdom of those people at the lenders, whose myopia about local knowledge for BPOs contributes to muddying up the short sale process and causing more stress and angst. I am sure this is part of the issue with recent moratoriums on foreclosures– the banks are getting unforgivably sloppy.
