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Need advice for this short sale that has seemingly gone awry

In March, I put significant earnest money down on a condo and signed the agreement for the selling agent to represent me. The seller accepted my initial offer, which was 5% below asking price. I have a stable job and very strong credit and was planning to put 20% down, so obtaining pre-approval letters was not an issue with me. I basically had no interaction with my realtor in April or May and had to track him down to get any sort of update on how the lender approval process was going. He pushed me to the broker who was working on the file at the time to gain additional info, which basically wasn't much.
Finally earlier this month I heard back that the lender had completed its BPO. Good news, right? I would finally be hearing back on whether my offer was accepted or if there is a counteroffer. Well I still haven't heard anything on that yet. All I've heard is that there are outside investors involved who want to be repaid by July 13th, but I haven't even started a formal loan approval because there is no purchase agreement in place. To my knowledge, a mortgage officer will not start a formal application until they have a purchase agreement on hand, correct? I don't know why I have had such trouble conveying this point to my realtor and the broker.
Also, my realtor never suggested that I order condo financials/docs to me, and I was the one who had him ask the seller to do it for me, after he had told me that the BPO was complete. So I am still waiting on those condo docs and I feel it would be too risky to sign a PA before I have property reviewed them.
I just don't know what I can do at this point. I am going to call my mortgage officer to see if they would start a formal application without a PA, but I am starting to feel like this property isn't worth it anymore. If I wanted to get my earnest money back, what are the ways I could go about doing that without breaching contract? Thanks. Also location not Staten Island
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June 14 2012 - Staten Island
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Answers (4)

I bought and sold more than ten millions in short sales and was a former bank vp, enough said. Ok. Let me save you some grief. Here you go.

 I put significant earnest money down on a condo and signed the agreement for the selling agent to represent me.  
[BIG MISTAKE. YOU DON'T GIVE THE SELLING AGENT THE MONEY. YOU COULD LOSE YOUR MONEY! YES. THEY MAY HAVE SPENT IT AND YOU HAVE TO FILE SUE TO GET IT BACK. PLUS ALL SHORT SALES ARE NON-BINDING TILL APPROVAL EVEN THEN YOU COULD CANCEL WITHOUT OBLIGATION...IT IS IN YOUR NY CONTRACT READ IT.]

 The seller accepted my initial offer, which was 5% below asking price 
[BIG MISTAKE#2. SELLER HAS NOTHING TO DO WITH HOW MUCH YOU ARE BUYING OR ACCEPTANCE. EVERYTHING IS BASED ON THE BANK'S BPO AND THE BPO IS BASED ON 99% AGENT'S LISTING PRICE SO IF YOUR OFFERING PRICE IS LOWER THAN THE LISTING PRICE YOU HAVE 33% OF GETTING ACCEPTED BECAUSE THE LISTING PRICE IS TOO HIGH AND NOT WORTH THE PRICE.]

He pushed me to the broker who was working on the file at the time to gain additional info, which basically wasn't much. 
[BIG MISTAKE#3 YOU ARE DEALING WITH INEXPERIENCED AGENT AND DOES NOT DESERVE THE COMMISSION OF 6% WHEN HE IS REPRESENTING THE SELLER AND BUYER (YOU) AND KEEPING YOUR MONEY AND NO STRAIGHT UP COMMUNICATE WITH YOU.]

To my knowledge, a mortgage officer will not start a formal application until they have a purchase agreement on hand, correct? 
[BIG MISTAKE#4 YOU CAN GET BOA OR WELLSFARGO PRE-QUALIFY WITHOUT A PURCHASE AGREEMENT FOR HOW MUCH OF A HOUSE YOU CAN BUY. SINCE YOUR LOAN AGENT IS "LAZY" AND DOES NOT WANT TO DO THE WORK TO PREQUALIFY YOU FOR THE AMOUNT JUST FIND ANOTHER MORTGAGE BROKER. OH BY THE WAY, WHEN I SELL MY SHORT-SALE FLIP PROPERTY, I GIVE THE BUYER WHO HAS ALREADY PRE-QUALIFIED APPROVAL LETTER ALONE WITH THE OFFER "THE FIRST PRIORITY" OF CONSIDERATION WHEN THE AGENT SUBMIT THE OFFER TO ME!]

So I am still waiting on those condo docs and I feel it would be too risky to sign a PA before I have property reviewed them. 
WRONG. YOU CAN NOT VIEW THE CONDO DOC UNLESS YOU SIGNED THE PURCHASE AGREEMENT. I HAVE TO ADVOCATE FOR AGENT'S POSITION, NOW. THERE WILL BE NO DOC OR CC&R OF ANY KIND FOR YOU TO REVIEW UNLESS YOU WANT THE PROPERTY FIRST AND HAVE SUBMITTED AN OFFER. IF YOU SIGNED THE PA THEN YOU HAVE THE RIGHT TO DEMAND TO REVIEW THE DOC WITHIN 10 DAYS. IF YOU CAN'T THEN DON'T BUY. REVIEW CONDO DOC IS REALLY IMPORTANT THERE ARE RESTRICTIONS ON EASEMENT AND PARKING AND UTILITIES AS TO WHO PAYS WHAT AND HOW ASSOCIATION IS GOVERN AND COLLECTION POLICIES.

IF YOU WANT THE PROPERTY THIS IS WHAT YOU DO
1. GET YOUR DEPOSIT BACK.
2. MAKE SURE THERE IS NO OFFER OTHER THAN YOURS AND THEN SIGN AN OFFER THAT IS CLOSE TO THE LISTING PRICE, IF YOU CAN'T THEN DON'T WASTE TIME BECAUSE THE BPO WILL COME IN AT LISTING PRICE.
3. GET A PRE-APPROVAL LETTER FROM ANY BANK YOU DON'T NEED MORTGAGE BROKER OR AGENT OR PRUCHASE AGREEMENT TO GET A PRE-QUAL CERTIFICATE.

THERE IS NO CONTRACT BREACHED. ALL SHORT-SALE ARE NON-BINDING BUT THEY WILL TELL YOU OTHERWISE. DON'T BELIEVE IT THEN JUST READ YOUR NY STATE SHORT SALE PURCHASE AGREEMENT. IT IS NOT BINDING SINCE IT IS SUBJECT TO CONDITIONS AFTER CONDITIONS AND THOSE ARE NOT YET MET.

THESE PEOLE ARE TRYING TO SCARE YOU. DON'T BE. IT IS YOUR MONEY AND DON'T LET THE LAZY PEOPLE EAT YOUR LUNCH. YOU NEED TO FIGHT FOR YOUR RIGHT AND YOU HAVE DONE NOTHING WRONG!!!

THEY DON'T DESERVE PAYMENT IF THEY CAN'T DO THE SHORT-SALE AND JUST BLAME ON THE BANK FOR THE MISHAP.
 
IF THE AGENT HAD NOT DONE THE SHORT-SALE THEN I RECOMMEND YOU GET OUT OF THERE DON'T WASTE TIME. 

I HOPE YOU GET YOUR MONEY BACK IN FULL IF NOT YOU TELL THEM YOU WILL BE CALLING THE AG. IN YOUR STATE, YOUR SHORT SALE IS NON-BINDING TILL YOU HAVE OPEN DEPOSIT WITH CLOSING ATTORNEY AND SELLER'S CONDITIONS ALL HAVE BEEN MET "IN GOOD FAITH" SUCH AS APPROVALS AND OTHER CONDITIONS; OTHERWISE, YOU ARE NOT OBLIGATED FOR ANYTHING. STATEN ISLAND OR NOT, SHORT-SALE PURCHASE AGREEMENT IS NOT "BINDING"; AGENT WILL TELL YOU OTHERWISE. 



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June 15 2012
Dear Buyer,

You must be EXTREMELY frustrated, given the situation you describe above!

The handling of short sales varies from state to state, office to office, and lender to lender. Without speaking directly to the agent handling this file for you, I am unable to know exactly what is creating the delay. However, I hope that I may be able to reassure you a little. I'll start by telling you that I manage all of the short sales at our real estate office, so I have quite a bit of experience with situations such as this.

According to the information I read above, you signed the Purchase and Sale Contract in March, and are concerned because 3 months have passed and you have yet to receive and approval from the short sale lender? You also seem to be frustrated with your REALTORS lack of updates and communication throughout the process? Finally, you are unsure of the next steps in the short sale process, and concerned that you should be taking action to finalize your financing?

I'll start with the timeline. The current timeline that you described, as lengthy as it may seem, is actually rather typical for a short sale. While, lenders are supposed to complete the required reviews in a shorter period of time, increased workload, changing government regulations, and difficulty getting required documentation from the seller, often prolong the review process. It is not uncommon for this process to take between 60-120 days. Additionally, some lenders provide few to no updates throughout the process, making it seem as though no progress is being made. The BPO being completed, is a great sign. If you are able I would try to be patient for just a while longer. I would speculate that the lender will be issuing an approval or counter within the next month.

The second issue, of your agents lack of updates/communication, is somewhat disconcerting to me. However, depending on the updates that the lender is relaying to the agent, they may not have updates to communicate to you? If I were you, I would take the time to speak with your agent. Let them know that you feel as though their current level of direction is not meeting your needs. Ensure that they are calling the lender on your short sale at least once every week, and ask them to update you weekly on those calls. I would also ask them to give you a detailed plan of what the process will be to get a decision from the lender from this point on.

FInally, finalizing your funding. I would be EXTREMELY hesitant to make any moves towards finalizing your funding until the approval letter is issued and you have confirmed that the sellers agree to the terms. You could end up paying for various expenses out-of-pocket, should parties involved not be able to agree upon the terms of the agreement. Once the lender issues the approval, they frequently stall the foreclosure process and you should have approximately 30days to get your financing in order. If, as you are finalizing your financing, you suspect that 30 days is not going to be enough time, many lenders have processes in place to request extensions on approval letters. Your Mortgage Banker and REALTOR should be able to confirm this information.

Believe it or not, your experience thus far, is not totally uncommon. I warn all of my clients that Short Sales are NOT for the faint of heart! you are often expected to exist in a kind of limbo for an undisclosed amount of time, until an approval letter is issued (if you are lucky enough to get an approval). Then, all of the sudden, you find yourself in a dead sprint trying to finalize financing, complete inspections, and what may seem like a million other tasks in an incredibly short period of time. BUT...they can be INCREDIBLE DEALS!!!

Best of luck! I hope this was helpful!!!
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June 14 2012
You really need to have your case reviewed by a real estate lawyer who handles short sales for advice on how you can protect your deposit.Of course you know now that you should have done this earlier. Even short sales have an attorney review period. Short sales take time and if your agent won't even speak to you chances are he/she is not following up with the bank either. To all of the readers who are contemplating short sales, before you sign a contract with an agent to represent you, ask for references from other clients they have successfully represented in the short sale process. You need to know what you can and can not expect this person to do! Follow up is critical with the bank and a smart agent will make it part of the contract that the seller agrees to add them as an authorized person to whom the bank can give information on the progress of the short sale request. That way the bank representatives will actually speak to them when they call for information.
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June 14 2012
I suggest that you retain an Attorney who handles residential real estate matters as soon as possible. From what you have reported, it appears that this may a short sale transaction.  It would have been much better had you chosen a Buyer's Agent, but that is "20-20 hindsight." 
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June 14 2012
 
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