When a Bank Won't Accept a Short Sale

[andy0573]

From a distressed homeowner in Southern Cal:

Just wondering what steps (if any) anyone here as taken when your lender won't accept a short sale. I've been trying to sell my condo for 11 months.

Bought in '05 for $359,000.
Has been on the market over a year.
Had 2 offers last summer ($259K & $258K all cash).
The lender (Carrington) rejected both offers, "stating the offer is too low."
(finally got this answer in November).
Had the unit appraised at $225K in August '08.
Real estate agent left the case out of total frustration.
Found another agent/short sale specialist.
New offer just came in at $207K, bank rejected offer again, "stating the offer is too low."

It seems like the bank just wants to own the property themselves to try and get a better deal. I don't know what more I can do as the seller to try and elicit an offer high enough for this bank. I'm doing all I can to avoid foreclosure...they offered a loan mod for $305K which would be too high to even cover a potential renter.

Has anyone experience anything similar to this? I've basically walked away from the property but would like to short sale instead of have a foreclosure on my record.

[The Professor]

Welcome Andy. Best explanation I can give you is that the lender is unwilling to recognize the loss that would be created if the short sale were completed. You see, having a history that touches the Resolution Trust Corporation (RTC), I can tell you that it is important for the decision makers at lending institutions to keep their jobs. One way they can lose their jobs is for the FDIC and state regulators to drive into the parking lot one late Friday afternoon and seize the lender, sell off its deposits to another bank over the weekend, close down existing operations, and create job loss for senior lender executives. The decision is made as the result of lender insolvency. Friday bank failures included:

Pinnacle Bank, Beaverton, OR
Corn Belt Bank & Trust, Pittsfield, IL
Riverside Bank, Cape Coral, FL
Sherman County Bank, Loup City, NB

I can assure you what took these lenders down was bad loans where they could no longer hide the loss recognition.

Given that your are in California, I think key to your decision making process is application of CCP Section 580b. So answer a few questions for me.

1. Was your California condominium purchased as your primary residence?
2. Was the loan you've identified created at the time you purchased the condo and were all of the funds received from the lender used to purchase the condo?

Daniel

[andy0573]

Professor...thanks so much for responding.

Yes, the condo was purchased as my original residence with purchase money loans. The 1st (through Carrington) was for $286K and the second (purchase money as well) was through Chase for $75K or around there.

Chase has went ahead and written their loan off and sent it to a collections agency (they were tired of waiting for Carrington to agree to a short sale).

I'm now on my 2nd real estate agent with this property and don't know what to do....Like I said, I had the property appraised at $225K last August. I'm sure it's worth much less now. Carrington seems unwilling to even issue a new BPO with my current offer for $207K.

Are there any options here outside of foreclosure?