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As the closing date approached on one of my recent listings in Fairfax, VA, my clients who had moved due to a job-loss informed me that they had not made mortgage payments for the past few months. Now, when I am filling in my listing paperwork there is a section where I have to ask, “Are you current on your payments?”
The truthful answer last November was, “yes”.
But moving and renting a new place out of the area takes money, and it is easy to picture the financial strain on any family’s budget.
So, there we were approaching an early March settlement and the truth finally surfaced requiring me to recalculate the Seller’s net proceeds. Proceeds? Well, like many folks, this client was upside-down which means they owed more than the property was worth and they knew that they would have to bring cash to the table to sell the home.
But now it was “x” + 5 months of mortgage payments!
Home Sellers bring money to the table to close the sale
Are you thinking that they should have done a short sale? If you have read my posts on the subject you may know why I’m not a fan of pushing sellers into that mine-field of possible deficiency judgments. I do have to warn you of these things! Here is another opinion.
The new numbers were still do-able thanks to some help from their family, and we were headed to settlement as planned until… the buyer’s agent called to say there was a glitch in the sale of his client’s place. Yes, we understood it was contingent on that sale but things had looked firm until the 11th hour.
And, at that 11th hour we got the notice withdrawing from the contract. We were back at square-one now with a looming foreclosure situation.
But then, within a week, the same agent called back to say, “their financing has been approved and we are closing today, is your place still available because my client wants to buy it?”
Obviously the answer was yes! Are you still following this roller coaster?
The Homer Seller’s emotional roller coaster…
Since the old financing had expired and the buyer had to “re-lock” his rate, the new RESPA rules require a “cooling-off period” of seven days before a loan can be closed.
So there we were, on hold with everything teetering in the balance… and then the F-bomb dropped.
Phone rings: “This is Doug,” I said in my upbeat, breezy, yet professional way.
Client: “Hey, I just got a letter from my mortgage company’s law firm saying they are going to FORECLOSE if I don’t get my account up to date, paying $17k-something before April 1, 2010.”
Doug: “Wow, that’s right when you are gonna close. You are really going to need a Virginia real estate attorney to check this out, so why don’t you give John a call at …”
To make a long story short, the attorney advised him to pay the amount to catch up and then sell the place as planned at the end of March. My client took this advice and Fed-Ex’ed a certified check to the mortgage company’s law firm in Maryland.
“Received” they told him the next day and that they would notify his big city mortgage company he was “reinstated” and in good graces.
But, that law firm never sent the check to the big city mortgage company, and my client’s account continued to be flagged “FORECLOSURE”.
So, there we were on March 31st and all set to close, buyer was ready, seller was ready, but the existing mortgage company said “no” because the account was still flagged as a “FORECLOSURE”.
Folks, this is one example how everything can fall apart at the last minute. When you read about the government relaxing rules to make the process easier whether it be a short sale or a foreclosure, please keep in mind that these are unique, often complex situations where human error can cause the whole situation to go beyond the point of return.
If you are interested, I will write another post telling the story of how this situation ended. Anyone?
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