Understanding Fannie Mae Short Sales (Good luck!)

Since I “cut my teeth” practicing short sales back in 2006 when I began my career as a Realtor in Cleveland Ohio, I formed a skill set not many Realtors were willing to undertake…spending more time processing paperwork dealing with banks and counseling sellers so they could prevent having “foreclosure” noted on their credit record.

This began my love for an segment of the industry which many (inside and outside real estate) found confusing and a tough way to make money.  I would brag about my love for short sales, help teach other Realtors how to process them and sit on short sale panels with peers guiding our industry with sound practices and lessons on creating systems and out-dueling banks, mortgage insurance companies and the third party interests all for the benefit of cleaning up our messing house industry.

Many know by now that a short sale by definition is when a bank allows “short of a full payment” on their mortgage by allowing the home to be sold at market value so the bank does not have to take the home back as a foreclosure and take title to the home.

Short sales generally always need the approval and the blessing of more than just one single entity.  Even if you have a loan at one of the biggest national banks, like Wells Fargo, Bank of America or Chase, these banks in most cases are what we call the Servicing Bank–they manage your loan.  However, the money behind the loan (often termed the Investor) could be Fannie Mae, Freddie Mac or Hud (an FHA loan).

Increasingly, these Investors and Fannie Mae in particular have taken a stronger role in the decision making process and in most cases employing an errant system of valuation and process of timely rebuttal.

My experience has been consistent that Fannie Mae’s guidelines, system and processes have created an institution trying to attain unachievable selling prices for their properties, allowing the houses to sit vacant and wither in the process and then accept LESS than current market value just prior to the property foreclosing.

As a taxpayer and a citizen who wants my government to run with efficiency, it is appalling to watch this process unfold and hardly seems believable to watch such inefficiency in action.

My most recent experience has been trying to help a retired librarian (whose partner has cancer) short sale a home she has been trying to sell for the better part of five years after attempting to rent it unsuccessfully.

I received an offer very close to market value back in early March 2014, began processing it with Everhome Mortgage (who was the first lienholder) and Fifth Third Bank (who owned a 2nd lien to the property).  Fannie Mae being the Investor for the primary lien.

Fifth Third Bank amazed us all and had their whole short sale process complete within 1 month while we waited impatiently for Everhome (following up weekly) to pick up the file which they finally did in mid-September (yep…count em…6 months later).

The offer was for $74, ooo and is a 4 bedroom, 1 bath outdated home in the Cleveland Ohio suburb of Cleveland Heights which has 127 homes for sale with 12 solds for the month of September 2014…anything but stellar numbers! My market analysis put the property right around the $80,000 price point.

After another month waiting for an answer, Fannie Mae came back and wanted $120,000 to complete the sale.  Fannie Mae offers a valuation dispute process on www.homepath.com and so we contested the value online (there is no person to call) and waited for a response.

After several setbacks (like wanting the Fifth Third Bank’s appraisal to be uploaded in color), we finally got an answer…Fannie Mae still maintained they want $120,000.

When I told the negotiator from Everhome, she said I should submit highest and best.  The buyers came up to $80,000 and we submitted again.  Their response came back.  Fannie Mae doesn’t see the property as a potential short sale because their analysis lead them to believe it is worth $120,000 and we just need to market it to get this amount of money!

Wow…if only I would have thought of that? (sarcasm unavoidable…sorry)  The property has been on the market at all different price points over the course of the last 5 years and there was no buyer interest until a young couple whose parents live one street over saw the convenience of the home and really liked the proximity to Mom for babysitting, visiting, etc..

Today, I am sending a mutual release to the buyer and seller and thank them for the opportunity and their perseverance.  The Seller will most certainly cry and ask me what to do next.   The buyer will start looking at other homes and most certainly will stay away from anything marked “short sale” or “bank-owned”.

Being a Realtor has been the most amazing job I have ever had.  However, days like today, crushing dreams and seeing a inept system in action in a country i love with all my heart is crushing.

 

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