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Bank mistake when closing a short sale.

We are in the process of closing on a short sale property in Orgeon.  The seller and we have signed all the papers and the escrow has been submitted.  The bank now says that  Their original approval letter to accept the offer should never have been sent because they did not get the mortgage insurance lender to approve the process.  There is still time to get that signature and close by the agreed upon date and keep the mortgage rate lock.  So far the bank has not done anything outside the sales contract.  But we are trying to look ahead and have contingent plans in place in case they can not obtain the signature.  What can we expect and push the bank to do in this situation if they can not get the signatures in time.  While they accept fault that does not  nec. translate into doing the right thing without some pushing. We want the sale to go through but this could cost the rate lock and we have already paid for the appraisal and inspection.  Plus there has been lost opportunity of other contracts during the whole contract process.  The bank involved is Wachovia.  thank you.
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March 13 2010 - Bend
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Answers (5)

The long and short of it is that there is no bank "mistake" because they can do whatever they want. If someone screws up along the line, too bad--that's the way it goes.

Data point: The mortgage insurer only insured what should have been the downpayment in a conventional loan, in most cases, 20% of the purchase price.

The long and short of it, IMO, is that you have no options other than to be upset with all parties. That notwithstanding, rates are still pretty low, so losing a lock may not be the end of the world.
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March 14 2010

Trying to purchase a short sale property is not for the faint-of-heart. Hang in there and do what is requested of you. If you have to start over and still only want distressed property, I would suggest seeking a REO. Less fall-out and much easier to close. .... Happy funding, Rudi

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March 13 2010
The bank will not accept any responsibility for the error and you will be your appraisal and inspection fees if this doesn't close.

You know short sales are not a fair process so trying to insert fair and reasonable terms into the process just lends itself to frustration on the part of buyers and sellers.  Buyers have to enter into the short sale process knowing that things like this can happen and be prepared to take the bumps in the process.  The reason short sales can be good deals is because buyers have to be willing to put up with things like this.  The reward is often a really good deal.

I am sure the listing agent is being aggressive in trying to get the PMI people on board for the short.
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March 13 2010
Another basic answer comes to mind:  re-submitting the HUD-1 closing statement showing additional closing costs to be incurred by the bank if the sale is delayed in the process of getting the additional approval(s).  If I'm the bank taking a large loss on a short sale, I probably have the power.  But maybe I can be influenced to rush the signatures if I see it can cost me more to delay?
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March 13 2010

As you probably know, Wells Fargo purchased Wachovia.  In Northeast Florida, and on a national teleconference, Wells Fargo announced that it is sending professionals into the field to help facilitate short sales, especially on the front end about eligibility.  Of course, you're well past that "front-end" point, but you might try to get in touch with the designated local person for your area in case that person can help. 

If that is no help, my initial reaction is that I would do my best to fight for my customer but would also tell my seller customer or buyer customer that it may be VERY difficult to get a bank to step up to the plate and reimburse someone for missing a rate opportunity or for lost time on the market.

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March 13 2010
 
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