In the last few years many of my buyers have called me a couple of weeks after closing to ask about a letter they receive in the mail that asks for $89 for certified copies of your closing documents.  The letter looks  very official, like it comes from a government agency.  It is a scam.  They are asking for the money to send you copies of documents that were in the packet you received at closing.  I now tell all my buyers about this as we walk away from the closing.  Save you money, don’t fall for it!!!

None of us likes any extra paperwork that we need to keep.  I am writing this because 2 times this year I have had a seller who needed the closing paperwork from when they purchased their home, and did not have it.  In both cases the owners had refinanced their home and thought they did not need the paperwork from the original purchase any longer.  In both cases, this purging of this old paperwork was a costly mistake.

Both parties lived in a property with an HOA.  For most HOA’s you put in what is called Working Capital when purchase a home.  Working Capital is like a reserve, it is collected at closing from the buyer and returned to them when they sell the home, as it is then collected by the new buyer.  The sellers in both of these cases had to show their closing paperwork from when they purchased their homes to prove how much had been put in to Working Capital.  Since they could not produce the paperwork prior to closing, they received nothing, the HOA kept their Working Capital.  I believe this is wrong, it should be the HOA management companies responsibility to account for the working capital.   The seller wanted to close, so they just allowed the HOA to keep the amount since they could not prove it.

Another example I can show is that a seller purchased a town home in 2009 from Fannie Mae, Refinanced it in 2011, and then in 2013 for some reason the lender that had foreclosed in 2009 decided to file another Public Trustees deed with the county.  The seller did not have their closing paperwork that would have had information on the title company that had insured the title.  The lender who had filed the deed in 2013 was also  no longer in business.  We were able to clear it up, but had there been a claim, we would have needed to know who the insurance company was to make the claim.  Below is a list of documents you should keep after the closing as long as you have the home!!!

Items to Keep

Purchase Contract and all Disclosures

Deed

Bill of Sale

Note and Deed of Trust

Truth in Lending

Title Insurance (to be added later as it is mailed to you shortly after closing)

HUD Settlement Statement

 

A question I am asked often is what is the difference between Bank owned  or REO (REO which stands for Real Estate Owned) and a short sale.  Many buyers after going thru the short sale process think they should be named Long sale as it can take a long time.  A bank owned home is what happens after foreclosure, when the bank actually owns the home and wants to sell it.  This can be very close to working with a normal owner except that the asset manager, the person who can make decision about the property is usually only available Monday thru Friday.   In Colorado, a standard contract is used, but almost all banks have their own addenda that attaches to the contract.  It is their version of a a contract.  You can do an inspection, but the bank will have their own policy about fixing things.  Some will fix things, some will not, leaving you to decide if you find a big defect if you still want to buy the home.

A short sale is like a per-foreclosure.  The owner still owns the home, however they owe  more that the home is worth, and are working with their bank to allow the home to be sold in order to avoid foreclosure.  The bank does not get paid in full, thus the name short sale.  In many cases, the bank will approve the short sale if it makes sense to them even if they don’t get paid in full.  If the owners mortgage is an FHA loan, it is possible to get the short sale per- approved.  If it is not an FHA loan, the bank will not per-approve the short sale, or look at the paperwork until there is an offer on the property.   For the home owners, it requires some work, they have to show their bank a hard ship and why they can not keep their home, ie. job loss, divorce, death, job transfer, sickness etc.  Simply not wanting the home because it has decreased in value is not a reason for a short sale.    Each bank has their own process.  Once an offer is submitted, the sellers bank will order an appraisal.  As I mentioned, the deal needs to make sense, if  the offer will only net the bank 50% of what the appraisal shows the home is worth, the bank is not going to approve the offer.  If the offer nets the bank 90%, they are likely going to approve it.  Nothing is set in stone.  It all hinges on the appraisal, this is how the bank determines what a home is worth.  If an appraisal comes in high, that is not a good, as an offer that was netting the bank say 90% may look as if it only nets them 75%.   I often see where a bank may counter after the appraisal, and the counter may be higher that the price that home was listed in MLS.  The price the home is listed in MLS is nothing more than the agents best guess between what the bank will accept, and a price attractive enough to a buyer to get them to hang out for the short sale process. After the short sale is approved, the sale will proceed as normal.  A buyer can and should do an inspection, but the owner is not likely going to fix anything.  They are loosing their home, and have little or no incentive to fix things.  Occasionally some will, but the majority wont.   For more answers on the home buying process, please contact me.  The process can be complicated and I am happy to explain all the ins and outs.

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