Is this a Short Sale dream, or nightmare?
February 25, 2012 7:15 AM   Subscribe

Is this a Short Sale dream, or nightmare? I put an offer on a house back in September, a short sale. It was approved by the owner in September and selling bank in December. 10 days before closing, the loan officer I had been working with discovered that his bank doesn't write mortgages for anyone that has had a loan modification in the past 4 years. I modified under making home affordable in 2009.

My credit is stellar, over 800. I have no debt and am putting 20% down on this house.

So, I found a new mortgage broker, who lined me up with yet another bank. That bank requested that I make some improvements before they would lend. So I did. (yeah, I know crazy -- fixing a house owned by someone else. The broker told me that there was a risk, but I assumed the risk believing that the onus was on me to get the repairs done in time. Which I did.) One new roof and floors throughout the whole house later - the house is ready to go. Except that now, 4 days before closing, the second bank's loan officer 'discovered' that her bank doesn't lend for homes that are in a redemption period. It's confusing I know. There should be no issue of redemption period with an accepted short-sale offer, but apparently there is. It has something to do with the amount of time this has taken.

So, I got another extension to close from the selling bank, I now need to close by the 29th. A new apprasial was ordered last week, completed Thursday and will go to the bank on Monday. I need the new bank to turn everything around in time to close on Wednesday, about 48 hours. The broker says it'll work if there are no snafus. I believe I've already used up any available snafus, so I'm optimistic it'll go through in time. But, it's going to be close.

-- Now for the question --
If it looks like this latest bank cannot pull the loan through in time for a Wednesday close, I'm considering placing a lien on the property to protect my investment of time & materials, about 20k. I really want this house, and am wondering what the hive thinks placing a lien on the home will do for my chances to get it down the road, should the deal fall through this coming week.

I know a lien will make other buyers shy away from the property, and complicate things for the selling bank as well -- but I'm wondering how complicated it will make the purchase for me, in the future?

My attorney says no problem placing a lien on the property. I have a mtg tentative with him on Tuesday afternoon.

Somewhat related: I divorced in December and am still living with my ex and two kids. This house is 2.5 miles away & will be great for our 50/50 parenting time arrangement. The kids helped with the cleanup & fixup. Formerly owned by a lady with lots of cats -- stench mitigation was a high priority & has been successfully completed.
posted by bricksNmortar to Work & Money (2 answers total) 1 user marked this as a favorite
Ugh. Sorry for this hassle. Would a lien not complicate the close for your bank, e.g., be subtracted from the appraisal?

Also, do you have the qualifications (e.g., licensure) it would take to legitimately foreclose on the lien? I can't speak for other states, but in CA, you have to be a licensed contractor to file suit to foreclose on a mechanic's lien. But there are other kinds of liens that maybe you'd qualify for. You could always place one there to create complications, but my sense is that it'd hurt you much more than anyone else if it's not something you could actually use.

Personally, I'd put a lien on only if the sale doesn't go through, assuming that you're not right up against the deadline.
posted by slidell at 9:28 AM on February 25, 2012

Could your lawyer threaten the selling bank with the lien as part of a campaign to get them to issue the loan? That is, if you can do a lien. The selling bank must have granted permission for the improvements and documented the conditions. You need to read that fine print in case it prevents you from liening them. Also, is there any documentation that bank could provide that would counter the redemption issue for the second bank; the lien might get them to cough it up. If you really want this house (and it looks great), it may be worth moving down the lender food chain and paying a higher rate. As an aside, I am continually astounded by the incompetence of loan officers re their lack of familiarity with their own requirements. Good luck.
posted by carmicha at 9:42 AM on February 25, 2012

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