Wells Fargo Short Sale Approval

Yesterday I received final approval for a short sale from Wells Fargo. The home in question is a 1950′s rambler in the Cascade area of Renton, WA. The loan was an FHA 100% cash-out refinance of $305,000 taken out in Feb. of 2008.

I listed the property back in November of 2009 and at the time, although there was still three months until the scheduled trustee sale date, I was a bit worried that the deal may not close because we were entering the slowest part of the year for the Seattle real estate market. Getting an offer at all let alone top dollar was going to be a challenge.

I was also concerned about the amount this loan was going to be short–in the first place there was no way this property should ever have been refinanced for that amount–the most it would have sold for before the mortgage meltdown would be around $260,000. Makes you wonder where the checks and balances were at during the underwriting process. It also helps you understand what types of lending activity helped contribute to the mortgage crisis.

The offer came in the second week of January from another agent in my office, Bonnie Stuart. The offer was $175k and asking 3% in seller paid closing costs. I’d originally listed the house at $195k, then dropped it to $185 before the Holidays. With a net to the bank about 50% of the underlying loan amount I had reason to be concerned about getting this one approved but I had the seller sign the offer and proceeded with long process of short sale approval.

That was about mid-January. It’s now mid-April and we just got final approval. It’s an FHA insured loan so FHA took a big haircut on this one–maybe this one is something they will go back and investigate to see where they went wrong, I’m sure it would be interesting to see how many sets of eyes looked the other way to make that refi go through.

So three months to get a short sale approval from Wells Fargo on a single FHA-insured loan. Were there unnecessary delays? Mostly in the last month. Half of that taken up by a set of a three page addendum Wells Fargo required to be added to the agreement that had to be signed by buyer, seller and agents. They never seemed to receive it; everytime I sent it they would send another version either to me or the seller and in another version. Finally I got a nice PDF form via email that I dutifully returned as well. Now you ask, why not just call and get these little things worked out and understood? Great idea. But the gatekeepers at lenders don’t let you talk to the people handling the file–it actually wastes time if an agent could call in and reach a negotiator anytime they wanted.

So it’s all done via email. As a real estate agent submitting a short sale packet, you wait until they are ready to contact you. After that you’re able to communicate and deal with the fine details leading up to an approval; such as re-negotiating price and terms.

So all the shouting is done and we’re moving to closing. The best part for my seller is on the first page of the approval letter that the credit agency reporting will state, “Agreed settlement short of full payment” and they agreed to relieve the seller from any future deficiency for the amount short on this loan–over $150,000. It cost them nothing to have me help them plus they were able to stay in their home an additional three months past the auction date. At least now they have peace of mind about being in foreclosure and they are even looking forward to rebuilding their credit.

If you or anyone you know could be losing their property to foreclosure, please contact me at 253-709-8200 to schedule a free consultation.