COOP Short Sale Program
We have access to the asset management companies who negotiate these pre-approved short sale transactions where: Bank of America appoints an outside asset management company like UTLS or AMS or REDC Default Solutions to negotiate the COOP Short Sale (Bank of Americas Cooperative Short Sale) on their behalf. This program is basically the banks internal alternative to the government sponsored HAFA short sale program and it is aimed at those distressed home owners who do not qualify for the stringent conditions of the HAFA program.
There are many similarities to the HAFA program in terms of timelines and deadlines, and the main purpose of this newly launched pilot program is to cut through the red tape, with clear guidelines to the listing and buyers agents, which is aimed at reducing the typically extended COE times of normal short sale transactions.
More importantly, it is designed to obtain investor approval, often even before the property is listed. It also aims to reduce the time in which short sales are closed and give specific guidelines regarding a full 6% agent’s commissions. In addition, it addresses other important matters such as cash for keys/relocation assistance, possible waiver of deficiency judgments and guaranteed contributions to junior lien holders.
In an exclusive interview: Matt Vernon (REO and short sale executive at BofA), gave a brief explanation regarding this program. See full article: Bank of America tests new co-op short sale program
Conditions of the COOP program:
1. Home owner is responsible for all maintenance and expenses on the subject property until it is sold.
2. Financial hardship and inability to afford the mortgage payments on the property are needed to qualify for a cooperative short sale.
3. The short sale must be an “arm’s length” transaction: An arm’s length transaction means that the seller(s) cannot list the property with or sell it to anyone that they are related to or with whom they have a close personal or business relationship (Family or Friends).
4. Bank of America will use proceeds from the sale to pay off the balance of the loan, and will work together with the listing agent on the seller’s behalf to facilitate the sale process.
5. Bank of America may begin or continue the foreclosure process while they review the request. B of A will suspend any foreclosure sale date until the expiration date of the signed “Acknowledgement of Interest” or the date of closing of an approved short sale, whichever is later, as long as seller continues to abide by the terms and conditions of the agreement.
Benefits of the COOP program:
Possible benefits to the distressed short sale seller, the home buyer, buyer’s agent, and listing agents may be significant:
1. If the cooperative short sale is unsuccessful, BofA may offer seller the opportunity to participate in a deed – in – lieu of foreclosure program.
2. Once the short sale was completed, BofA will report to the major credit reporting bureaus that the loan was completed as a short sale.
3. If the cooperative short sale is successful, BofA will pay seller $2,500.00.
4. If the cooperative short sale is successful, BofA will not pursue the deficiency balance on the loan.
5. If the cooperative short sale is successful, BofA will not foreclose on the home.
6. The agent’s commission cannot be cut and this program offers full commission (6%) to the agents. - This obviously serves as a great motivation for buyer’s agents to participate in the transaction, since lenders often cut their commission in a normal short sale transaction.
7. If the cooperative short sale is successful: then B of A will offer the Junior lien holder(s) a pay-off percentage or a fixed amount as an incentive to approve of the short sale.
8. Reduced qualifying documentation may be required, making it easier for the distressed home owner to qualify for the short sale.
Steps of the COOP Short Sale Program:
As previously mentioned, reduced financial and other qualifying documentation are normally required to allow the distressed seller into the program.
· Step 1: Home owner gets accepted for the COOP Short Sale and the Acknowledgement of Interest Invitation gets send to the home owner for acceptance. The homeowner has 14 days to accept or reject and return the documentation to B of A, together with all other financial documentation as requested by the short sale department.
· Step 2: Once B of A acknowledges receipt of the COOP package: the case gets transferred to the “Asset Management Company”. From this point onwards the listing agent starts to negotiate with the negotiator(s) of the asset Management Company and not B of A. One of the advantages of this program is that there are dedicated negotiator(s), allowing the listing agent direct access al through the process.
· Step 3: Once the negotiator acknowledges receipt of the “Acknowledgement of Interest” invitation as well as all the requested financial documentation from B of A: an appraisal gets ordered and once completed the negotiator will submit it to the investor for pre-approval.
· Step 4: Upon investor approval of the appraisal (this step could take anything between 7 to 30 days), the negotiator will forward a report and Valuation Certification Letter for the PRE-APPROVED SHORT SALE. (See example at bottom)
· Step 5: At this stage the listing agent is allowed to change the status of the short sale to Pre-Approved Short Sale then only does the negotiator invite the listing agent to enter the transaction into Equator.
· Step 6: Once the newly pre-approved short sale has been uploaded in EQUATOR: listing agent has 120 days to market the property, and close escrow.
· Step 7: Upon receipt of an acceptable offer, the listing agent has to notify the COOP negotiator, who will opened a task in EQUATOR allowing the listing agent to upload the offer for underwriting and approval.
· Step 8: Provided the submitted offer is a strong offer and in compliance with the Valuation Certification Letter. The negotiator is supposed to be able to obtain final approval from the investor within 10 business days.
**** Please keep in mind that since this is a pilot program nobody can predict the actual outcome and timelines, but at least there are timelines and deadlines set for all parties to follow!
When submitting a buyer’s offer, please keep in mind that an appraisal report has been ordered and paid for by the investor/lender, who has pre-approved the short sale at a predetermined value of x amount. It is obvious that the listing agent will not entertain any offers below that amount.
Keep in mind that the most important condition of a COOP short sale is that there can’t be any offers submitted to the lender prior to application for a COOP short sale, the following two categories will be explained: a) Pre-existing offers received on listing prior to COOP pre-approval, and b) New offers on listing after COOP pre-approval:
Ø Pre-existing offers received on listing prior to COOP pre-approval:
Once the Valuation Certification Letter has been received: invitations will be send to all those who have previously submitted offers on the property (if there was any pre-existing offers prior to the Valuation Certification Letter): the listing agent may disclose the highest and best offer (amount only - no personal information), and at the same time extend an invitation to all participants to revise their offers (if necessary), in order to present their clients with the best possible opportunity to be accepted as the highest and best.
***Please keep in mind that submitting an offer at the exact pre-approved amount, may not necessarily qualify prospective buyers as being accepted and/or approved, since only the highest and best offer received at or above the suggested list price will be submitted to the investor! All other offers may remain in back-up position.
Ø New offers on listing after COOP pre-approval:
Only the highest and best offer at or above the suggested list price on the Valuation Certification Letter will be submitted to the negotiator for approval by the investor. All other offers may remain in back-up position.
Please note that any of the predetermined dates can be changed at any time pending lenders and/or seller’s instructions. In addition please keep in mind that due to time constrains, the listing agent may at any time have to accept and present the highest and best offer, even though it may be before the pre-determined cut-off date as mentioned above.