2nd lender approved, not the 1st?

A

ally_IHB

New member
I am a first time home buyer and started looking to buy a house a few months ago. As a regular reader of IHB since 2008, I've learned a lot from the blog and the forum; this is the first time I dare to pop a question... I've witnessed some "discussions" between oldies vs. newbies...... It's fun, but I hope it's not gonna happen to me....... :wow:



Here is the story, I put in an offer on a detached condo in AV this July. The property is a short sale, decent size (1450sf), vacant, nice and clean, priced at $390,000. I did some calculation based on the rental parity theory, it is not too far away from that standard; most important thing is I can afford it. So I offered at a bit higher than the asking price since the low ball strategy was not working at all in this market (my personal experience......). My offer got accepted and submitted to the bank for short sale approval, along with a few other offers I think, because some much higher offers just backed out due to the long wait. My agent just told me I'm the first in position right now, and here comes the question: the owner has two loans, 410K with the 1st lender and 130K with the second, the property is 150K short in other words..... After 2 months of waiting, we were told that the 2nd lender approved (finally!!) but the first lender is still considering/process/or whatever!!! (too many exclamation marks?)



Is this normal? I thought the 2nd lender is usually the difficult one to deal with, how come it is the other way around this time?



Thank you for reading and looking forward to the advices.
 
[quote author="ally" date=1253601482]I am a first time home buyer and started looking to buy a house a few months ago. As a regular reader of IHB since 2008, I've learned a lot from the blog and the forum; this is the first time I dare to pop a question... I've witnessed some "discussions" between oldies vs. newbies...... It's fun, but I hope it's not gonna happen to me....... :wow:



Here is the story, I put in an offer on a detached condo in AV this July. The property is a short sale, decent size (1450sf), vacant, nice and clean, priced at $390,000. I did some calculation based on the rental parity theory, it is not too far away from that standard; most important thing is I can afford it. So I offered at a bit higher than the asking price since the low ball strategy was not working at all in this market (my personal experience......). My offer got accepted and submitted to the bank for short sale approval, along with a few other offers I think, because some much higher offers just backed out due to the long wait. My agent just told me I'm the first in position right now, and here comes the question: the owner has two loans, 410K with the 1st lender and 130K with the second, the property is 150K short in other words..... After 2 months of waiting, we were told that the 2nd lender approved (finally!!) but the first lender is still considering/process/or whatever!!! (too many exclamation marks?)



Is this normal? I thought the 2nd lender is usually the difficult one to deal with, how come it is the other way around this time?



Thank you for reading and looking forward to the advices.</blockquote>


Welcome Ally,



This is normal when there are two loans. The first position lender has to know how much it is going to net (bottom-line HUD-1) and needs the second lender to give a firm settlement number first. Keep us updated.



-IR2
 
[quote author="ally" date=1253601482]I am a first time home buyer and started looking to buy a house a few months ago. As a regular reader of IHB since 2008, I've learned a lot from the blog and the forum; this is the first time I dare to pop a question... I've witnessed some "discussions" between oldies vs. newbies...... It's fun, but I hope it's not gonna happen to me....... :wow:



Here is the story, I put in an offer on a detached condo in AV this July. The property is a short sale, decent size (1450sf), vacant, nice and clean, priced at $390,000. I did some calculation based on the rental parity theory, it is not too far away from that standard; most important thing is I can afford it. So I offered at a bit higher than the asking price since the low ball strategy was not working at all in this market (my personal experience......). My offer got accepted and submitted to the bank for short sale approval, along with a few other offers I think, because some much higher offers just backed out due to the long wait. My agent just told me I'm the first in position right now, and here comes the question: the owner has two loans, 410K with the 1st lender and 130K with the second, the property is 150K short in other words..... After 2 months of waiting, we were told that the 2nd lender approved (finally!!) but the first lender is still considering/process/or whatever!!! (too many exclamation marks?)



Is this normal? I thought the 2nd lender is usually the difficult one to deal with, how come it is the other way around this time?



Thank you for reading and looking forward to the advices.</blockquote>
Typically the second lender will need to approve first before the first will make a decision because if they second lender won't do anything the short sale will be a no-go. A smart second lender will be willing to accept some small token amount (like $5k-$20k depending upon the amount of the first) because they know they'll get $0 in most all cases if the property gets foreclosed on by the first (the second lender typically will not bid on at the auction unless they have so huge loan compared with the first mortgage). So once the second has determined what they'll end to sign off and go away, it is in the first lender's court to make the decision if they will give the second the amount they are looking for out of the net proceeds. Besides, the analysis is a lot more drawn out at the first lender than the second lender so that's another reason why you'll usually get the second lender approval before the first lender approves the short sale. Btw, did your agent give you the property/loan detail on the condo so you could see what the first and second mortgage amounts were?



Don't worry, IHB is a kinder and gentler place that it was before. Good luck and keep us posted.
 
Thanks for the warm welcome, IR2 and USCTrojan~~



One of my friends sent me something from foreclosure radar, showing this property is in the process of preforeclosure and has the history like this:



Transaction History

Type # Date Grantee Amount

Unknown 02/29/96 Owner $165,500

Loan 1st 08/18/05 HOMEFIELD FINANCIAL INC $415,000

- NOD 08/05/09 QUALITY LOAN SERVICE CORP $7,046

Loan 10/19/05 NATIONAL CITY BANK $133,950

Loan 2nd 08/30/06 J P MORGAN CHASE BANK $141,600



Is this something you are asking, USCTrojan?
 
[quote author="ally" date=1253601482]I am a first time home buyer and started looking to buy a house a few months ago. As a regular reader of IHB since 2008, I've learned a lot from the blog and the forum; this is the first time I dare to pop a question... I've witnessed some "discussions" between oldies vs. newbies...... It's fun, but I hope it's not gonna happen to me....... :wow:</blockquote>


My comment doesn't relate to your scenario... but I am glad you have finally joined us and sorry to read that you were hesitant to do so based on the responses to previous newbie questions. That is valuable feedback and it is something we should work on here. Everybody should feel like they can participate and ask their questions. I hope that any lurkers reading this will come out of hiding and participate... don't be shy. Most of us don't bite, promise!
 
Ally,



No one would flame you when you are asking for advice and your question is not vague. You referenced the theories you learned and applied it to your decision making. As much IHO gets on my nerve with his 3CWG but he did some awesome posts lately with his renting/owning. Regardless of seniority both of you deserve a thank. Good to see a brave newbie.
 
[quote author="ally" date=1253603678]Thanks for the warm welcome, IR2 and USCTrojan~~



One of my friends sent me something from foreclosure radar, showing this property is in the process of preforeclosure and has the history like this:



Transaction History

Type # Date Grantee Amount

Unknown 02/29/96 Owner $165,500

Loan 1st 08/18/05 HOMEFIELD FINANCIAL INC $415,000

- NOD 08/05/09 QUALITY LOAN SERVICE CORP $7,046

Loan 10/19/05 NATIONAL CITY BANK $133,950

Loan 2nd 08/30/06 J P MORGAN CHASE BANK $141,600



Is this something you are asking, USCTrojan?</blockquote>
Ok I'm glad to hear that you saw this information so you went in with your eyes wide open. From what you posted from FC the 2nd lender is JP Morgan (I'm assuming they refi'ed the National City Bank second). Depending on the current value of the property, JP Morgan will probably end up taking around $10k (I know a broker who closed a few short sales with second mortgages so I'm using the info he shared with me). The property is at least 6+ months away from get foreclosed on at the auction from the current pace of foreclosures so you should have enough time for the first lender to go through their analysis.
 
Welcome ally. A year ago I was in your shoes. I was first in line for 3-4 short sales over the course of 4-8 months, none of which resulted in a response from the holder of the 1st mortgage. One of my situations was similar to your situation. Initially, I was told that the short sale was approved. Next, I was told that the 1st was waiting on the 2nd to approve. Thereafter, the 2nd approved with stated conditions (I actually received a copy of the letter), but the 1st didn't agree to the conditions. Over the course of the following 3-4 months, the listing agent had a new excuse or a different spin on an existing excuse each time my agent spoke with him (that is, if the agent returned my agent's calls or emails).



I did receive one response on a short sale right before the TS. The bank countered with a WTF price increase of $35-45k. My agent responded with a list of the recent comps; my offer was about $10k below the recent comps. The bank never responded, took the property back at auction, and listed it not long after for $10k below my short sale offer! This time, I placed an offer on the home as REO, for about $10K less than the REO list price ($20K below my original offer). The bank eventually accepted but I walked because I was already in escrow for the home that I currently own.



My advice to you is: (1) listen to the experts on this site; (2) keep looking, and (3) detach yourself (emotionally) from this property because it's very likely that this short sale will never be bank-approved.



Who knows, you may end up in a place that exceeds your original expectations and blows the short sale out of the water, like me!
 
[quote author="Sunshine" date=1253615899]Welcome ally. A year ago I was in your shoes. I was first in line for 3-4 short sales over the course of 4-8 months, none of which resulted in a response from the holder of the 1st mortgage. One of my situations was similar to your situation. Initially, I was told that the short sale was approved. Next, I was told that the 1st was waiting on the 2nd to approve. Thereafter, the 2nd approved with stated conditions (I actually received a copy of the letter), but the 1st didn't agree to the conditions. Over the course of the following 3-4 months, the listing agent had a new excuse or a different spin on an existing excuse each time my agent spoke with him (that is, if the agent returned my agent's calls or emails).



I did receive one response on a short sale right before the TS. The bank countered with a WTF price increase of $35-45k. My agent responded with a list of the recent comps; my offer was about $10k below the recent comps. The bank never responded, took the property back at auction, and listed it not long after for $10k below my short sale offer! This time, I placed an offer on the home as REO, for about $10K less than the REO list price ($20K below my original offer). The bank eventually accepted but I walked because I was already in escrow for the home that I currently own.



My advice to you is: (1) listen to the experts on this site; <strong>(2) keep looking, and (3) detach yourself (emotionally) from this property because it's very likely that this short sale will never be bank-approved.</strong>



Who knows, you may end up in a place that exceeds your original expectations and blows the short sale out of the water, like me!</blockquote>
Thanks for sharing your experience. I tell my buyers exactly the same thing as the bolded text when we submit offers on short sale listings (you have to manage your expectations with these short sales or else you'll end up wanting to pull all your hair out or wanting to kick the listing agent's arse or both....haha).
 
Thank you all for the great advices and experience sharing, now I know a bit more about where I am in the whole process........ I think all I can do is wait now.



I'll try to detach myself from this property as Sunshine and USCTrojan suggested, I'm kinda too obsessed with it.



Thanks again. I'll come back and resume my story (hopefully) soon!!
 
I made a offer to short-sale property with 3% lower than comp price.



The seller's agent call my agent.



That seller demands following (not from the 1st lender demand, but demand from current home owner)



buyer need to pay to close:



pay seller $12,000 for moving expenses and rent subsidize



Judgment max. $ 1700 to be paid off to lienholder



HOA collection $ 1700 to be paid to attorney for HOA



Past due HOA fees approx. $600



The seller agent said paying current home owner is not legal.

So she want me to pay current home owner behind bank's (1st lender) back.



I was surprised to hear the demand:

First , I thought cash for key is typically 1 month rent , which should come around $2500.

2nd, How can seller agent invovled with illegal demand, and ask me pay seller behind bank's back ?

Does she worry about her real estate license get suspended ?



Anyone can give me advice how do I proceed from here ?





Thanks
 
[quote author="greenpot168" date=1254966370]I made a offer to short-sale property with 3% lower than comp price.



The seller's agent call my agent.



That seller demands following (not from the 1st lender demand, but demand from current home owner)



buyer need to pay to close:



pay seller $12,000 for moving expenses and rent subsidize



Judgment max. $ 1700 to be paid off to lienholder



HOA collection $ 1700 to be paid to attorney for HOA



Past due HOA fees approx. $600



The seller agent said paying current home owner is not legal.

So she want me to pay current home owner behind bank's (1st lender) back.



I was surprised to hear the demand:

First , I thought cash for key is typically 1 month rent , which should come around $2500.

2nd, How can seller agent invovled with illegal demand, and ask me pay seller behind bank's back ?

Does she worry about her real estate license get suspended ?



<strong>Anyone can give me advice how do I proceed from here ?</strong>





Thanks</blockquote>


I don't think I would proceed. Some others will have better advice, but it just sounds too fishy to me.
 
[quote author="USCTrojanCPA" date=1253616219][quote author="Sunshine" date=1253615899]Welcome ally. A year ago I was in your shoes. I was first in line for 3-4 short sales over the course of 4-8 months, none of which resulted in a response from the holder of the 1st mortgage. One of my situations was similar to your situation. Initially, I was told that the short sale was approved. Next, I was told that the 1st was waiting on the 2nd to approve. Thereafter, the 2nd approved with stated conditions (I actually received a copy of the letter), but the 1st didn't agree to the conditions. Over the course of the following 3-4 months, the listing agent had a new excuse or a different spin on an existing excuse each time my agent spoke with him (that is, if the agent returned my agent's calls or emails).



I did receive one response on a short sale right before the TS. The bank countered with a WTF price increase of $35-45k. My agent responded with a list of the recent comps; my offer was about $10k below the recent comps. The bank never responded, took the property back at auction, and listed it not long after for $10k below my short sale offer! This time, I placed an offer on the home as REO, for about $10K less than the REO list price ($20K below my original offer). The bank eventually accepted but I walked because I was already in escrow for the home that I currently own.



My advice to you is: (1) listen to the experts on this site; <strong>(2) keep looking, and (3) detach yourself (emotionally) from this property because it's very likely that this short sale will never be bank-approved.</strong>



Who knows, you may end up in a place that exceeds your original expectations and blows the short sale out of the water, like me!</blockquote>
Thanks for sharing your experience. I tell my buyers exactly the same thing as the bolded text when we submit offers on short sale listings (you have to manage your expectations with these short sales or else you'll end up wanting to pull all your hair out or wanting to kick the listing agent's arse or both....haha).</blockquote>


Another thing too is to not count on anything until you have keys. I went through a similar 5 month short sale process that went back and forth waiting for both banks to approve. Once both banks approved and we were about to open escrow the sellers backed out with a loan mod. The DAY the listing agent said we would open escrow. We did such a good job of not falling in love even after waiting for 5 months, but when we heard both banks approved we were beyond excited and ready to go. I guess the owners had other plans and we just took that champagne off the ice :(
 
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