As someone who follows the distressed property field very closely, it’s important to understand what various lenders are doing with their non-performing assets (aka loans in default) and how they’re working, or not working, with borrowers on short sales.
In the latest DS News (Default Servicing News) update, word has come down from Wells Fargo regarding their policy on extending trustee sales for homes in foreclosure. You can read the full article here at this link.
Basically, it breaks down to this….
1. An approved short sale contract must be in effect.
2. The buyer must show proof of funds and/or lending for the purchase of the asset (home).
3. The sale can close within 30 days of the bank’s approval of the contract.
There are some other caveats to this, such as investors who are behind a Wells Fargo loan that won’t follow these guidelines or issues in states where foreclosures are not allowed to be delayed. Each state is different, so you have to check first to see what applies to your individual situation.
What does this mean to borrowers who are in a position of default or imminent default due to unemployment, medical issue, divorce, or other hardship? It’s important that if you would prefer to do a short sale versus going through the full foreclosure process (and some people can’t due to job viability/security clearance concerns) that you should put your home on the market as soon as possible and price it right to lure in a buyer. Pricing obviously will make a difference on whether or not WF will consider accepting the terms, so completely lowballing it won’t necessarily help you, but there have been some percentages that do tend to get attention from banks that are operating under HAFA / HAMP and receiving TARP funds to help fill in shortfalls on the losses they’re taking from short sales.
In Washington State, the foreclosure timeline is 190 days, so getting on market earlier is better. If you wait till the end of the process, you’ll find it a much harder task to tackle, and the banks will be less open to working with you – and that’s not true just for Wells Fargo, but across the board with most banks/lenders and loan servicing companies.
Another consideration on the WF list is that many banks have 30-45 processing times for new purchases, so you must be sure that your buyer can get the lending process done within that 30 day window or less. For FHA loans, it could be more problematic than a conventional loan but not necessarily impossible. Qualifying everything in this process is critical!
Be sure to talk to an attorney and an accountant for your situation – and when interviewing an agent to help you with marketing the home for sale, look for individuals or teams that have experience in this area. Preferably, look for someone with a Certified Distressed Property Expert (CDPE) who is trained in this field of real estate as there are real estate brokers in all 50 states who have earned this worthwhile designation.
