Reversing Short Sale Rejection

Recently, we assisted a couple here in Michigan with a short sale. It was one of the better examples we’ve had where we were initially told no and fought it. Here are the details:

John & Jane (not their real names) become engaged, but live about 60 miles apart. He shares joint-custody of a young daughter from a previous marriage and is required to live near his ex-wife and within their daughter’s current school district. Jane therefore decides she’ll list her condo and move into John’s place. Months pass, no offers. They get married, no offers. She becomes pregnant, no offers. Finally, after a year on the market, an offer comes in. It’s a good offer; probably a couple thousand above fair market value. We submit it.

Now, at this point, I could share stories of the incompetence and inefficiencies we typically experience, but for the sake of keeping this from turning into a novel, just know there was plenty of each. That said, after almost two months to the day since submitting, we received the following email:

“The request for short sale has been declined by investor. The borrower is current on both loans and shows a fico over 700. This request does not show a hardship that warrants the request of a short sale. Sorry I do not have better news for you.”

What? Did they bother to read the hardship letter? We went back and forth with our negotiator, who seemed to think that Jane would just stay in the condo and had been looking to move for casual reasons, so we turned to the executive offices at GMAC. Our argument to them went something like this:

Ms. Jane will not be keeping this condo. She has done everything she possibly can to honor her obligation. She’s continued to make timely payments, while assisting her husband with her new residence, knowing that all equity in her home was lost to the collapsing market. She’s tried for a year to sell her home and this is the first offer she’s received. She’s pregnant and wants to be with her husband. She will not carry the baby in a separate residence, nor will she raise the baby in a separate residence. They can’t afford both homes, as is shown in the paper work we submitted. They can’t live in her condo, as noted in the hardship letter we submitted. You have two options, accept the short sale or tell us where to send the keys. Staying in the residence is not an option. If you’d like the opportunity to sell a condo in Michigan right now, then it’s all yours. Otherwise, I highly recommend reconsidering.

They did.

Of course, I’m condensing this for the sake of everyone’s attentions spans. Even after the initial rejection, it still took over two weeks before a new negotiator was assigned in the Executive office. From there, it took about 30 more days, but we received our approval. Not only was the deal approved, but our client was also released from all liability for the deficiency.

Now, I won’t attempt to dissect how this was rejected in the first place. The point is – as it often is in my blogs – don’t give up. Tell them you want to hear “no” from the most important person available before you’ll stop calling…