Chicago Short Sales: Why do short sale negotiators break the rules?

Posted on August 27th, 2010 in Financing, Market Conditions, Other Real Estate, Short Selling/Buying.

Chicago IL – I had a negotiator at one of the largest lenders in the US try to push me around last week. I’ve spent the last 12 months figuring out all the rules for different loan owners, or insurers. I’m talking about FHA, VA, Fannie Mae, Freddie Mac, and “sliced and diced.”

You see, the people who own the loan (Fannie Mae, Freddie Mac, or “Sliced and Diced”) make the rules for a Chicago Short Sale. The one other common parties that makes the rules are the federal mortgage insurers, FHA, VA, and USDA. I’ve done a lot of research and figured out all their rules.

80% of all loans are owned or insured by someone other than the company handling them. That means in most cases, Wells Fargo, Bank of America, or JP Morgan Chase are acting on behalf of the actual owner (or insurer) of the loan. This entity makes the rules. That makes getting short sales approved much easier.

This was an FHA loan, which means FHA’s guidelines dictate whether or not the short sale is approved. Here’s what happened.

Discover how other sellers successfully did a short sale and request a free consultation by clicking here.

FHA puts out a letter called “Mortgagee Letter 2008-43.” It details exactly how the lender servicing an FHA loan is supposed to negotiate on a short sale. This letter is 16 pages long and gives them specific directions on what percentage of the appraisal they can accept, how much to pay agents, etc.

Because of a prior experience, I had read thru this letter 2-3 times. Bottom line, I know a little bit about FHA’s rules for short sales. The problem was the short sale negotiator didn’t want to follow the rules!

Instead she made up her own rules! She told me that the buyer and seller had to split the cost of the title insurance. However, page 12 of Mortgage Letter 2008-43, says that they are allowed to pay the standard title insurance costs. In our area, the sale’s contracts are written with the seller paying for title insurance.

But, this negotiator didn’t want to allow that rule. I had to argue back and forth with her for 2-3 days until she finally relented. Here is the problem I have with these lenders.

If your investor gives you specific instructions on how to negotiate a short sale, then follow those instructions! If you are short selling, make sure you agent understands the rules laid out by the owner or insurer of your loan. That way, if a negotiator tries to break the rules, then they can keep them in line.

If a negotiator is lying to them, they can ask for their manager. When they talk to the manager, they will explain how they are breaking the rules. Your agent can even contact the investor or insurer directly and tell them about the problem.

Do you want to short sale your property and never pay the bank another penny? I can help you do that.

Call me at (312) 953-6725 for a free consultation. When you call, I will explain how the process works in detail and answer any questions you may have. Or, if you prefer, you can e-mail me at

Discover how other sellers successfully completed a short sale and request a free consultation by clicking here.

Remember to visit my short sale blog daily for updates and news

Thanks for reading this, Phil Buoscio.

Phil is a Real Estate Agent at Better Living Realty – Buoscio Brokerage, Inc..

Phone: (312) 953-6725.

View My homes for sale at

Phil Buoscio specializes in loan modifications and short sales in Chicago Illinois. Chicago Loan Modification Help. Chicago Short Sales. Chicago Short Sale Realtor. Chicagoland Short Sale Realtor. Chicago IL Short Sales. Chicago Realtor. Bridgeport Short Sales. Pilsen Short Sales. McKinley Park Short Sales. West Town Short Sales. Wicker Park Short Sales. Ukrainian Village Short Sales. Bucktown Short Sales. South Loop Short Sales. Lincoln Park Short Sales.

Copyright 2010 SFI Marketing Institute, LLC. All Rights Reserved.