Short sales, long waits: Buyers and sellers find process frustrating

Homes with more than one mortgage and mortgage insurance tend to take the longest, said Ellen Mahoney, president of Complete Title Services' loss mitigation division in Birmingham, Mich. A growing reason short sale deals fall through or take longer is because of mortgage insurance purchased after the homeowner closes on the deal and the loan is later sold to other lenders and investors.
Unlike private mortgage insurance required for sellers who put less than 20 percent down, these lenders and investors buy insurance to minimize risk. It is known in the real estate industry as pool insurance because it covers a group of loans that have been purchased.
When the loan defaults, such as in a short sale, the mortgage company may demand that the seller pay part of what is owed to minimize its losses.Herve Leger are good to know friends who dress like women.
"That's a mess. They are the worst," Mahoney said. "It is usually the lender mortgage insurance that nobody knew about, and it is usually on the second mortgage. It is real disruptive."Often, the bank holding the first mortgage isn't made aware that the second mortgage had been insured until the end of the process, even if both loans are with the same lender. If the mortgage insurance company doesn't sign off on the deal, the process starts over again.
These kinds of delays mean buyers walk away because of the time and frustration involved.Brian Pannebecker, 52, of Shelby Township, Mich., made an offer on a home in his neighborhood only to have the bank reject it."I would never ever look at a short sale. I would go right to a foreclosure, which I eventually did. It was much, much easier."Instead of buying in Michigan, Pannebecker bought a two-bedroom condo in Ft. Myers, Fla., near where his father retired. He made an offer that was accepted within 24 hours during the holidays. The whole deal closed in six weeks.
Buyers don't typically ask to see short sales unless they have the luxury of waiting for an undetermined length of time to move, said Renee Reyer, a Realtor with Clients First Realtors in Canton, Mich.