How to Apply for a Bank of America Cooperative Short Sale
The B of A Cooperative Short Sale Program Might Pay a Relocation Assistance
Before I tell you how to do a Bank of America cooperative short sale, I have a disclosure for you. When Bank of America's stock was moving into single-digit territory, I bought a bunch of it. That's because I believe, regardless of what you may hear, that Bank of America turned the corner with its short sales and distressed properties. Cooperative short sales were streamlined.
I have been selling short sales for a long time, so I was there in the beginning in 2005 with a Bank of America short sale.
I know the pain -- the torture, the agony -- first hand. Since 2010, when Bank of America moved to Equator, its short sale process began to dramatically improve.
Due to a proactive stance versus reactive, Bank of America had since knocked its approval time from 12 to 18 months down to 2 to 3 months. Some short sales were approved in as little as four weeks. But the Cooperative Short Sale was a different animal. Also, if the existing loan had been with Countrywide, the cooperative short sale was almost automatic.
Why Bank of America Is Offering the Cooperative Short Sale
Banks are not in the business of making life easier for its customers much less its short sale candidates. Banks are in the business to turn a profit. The main reason Bank of America had initiated the Cooperative Short Sale was to increase the bank's bottom line profit.
The bank faced several problems in the early years of short sales:
- Bad reputation for taking too long to process short sales
- Due to length of time to buy a short sale, buyers were making lowball offers.
- Unsure of how to do a short sale, many agents were pricing short sales inappropriately.
It would seem that Bank of America came to this conclusion: If Bank of America could choose the list price of the short sale and approve that short sale in advance through a Cooperative Short Sale, it would gain control of the short sale transaction.
The bank would also greatly increase the odds that a buyer would pay market value if a buyer was not forced to wait months and months for that short sale approval letter.
How to Do a Bank of America Cooperative Short Sale
You can hire a real estate agent if you want, but it's not a necessary step to get preapproved for the short sale. I helped my sellers get preapproved but not every short sale agent offers this type of service because we don't get paid to do it. Here is the old way the program worked in a nutshell:
- Write a hardship letter.
- Send the hardship letter to the bank and ask the bank to do a Cooperative Short Sale.
- Follow up with Bank of America weekly to make sure your Cooperative Short Sale is being processed.
The bank might request other documents but might not. The program was streamlined. This meant the bank would run a credit report. If your FICO score was very low and your credit report terrible, Bank of America probably would not ask for supporting documents. It would simply approve your Cooperative Short Sale. This process took anywhere from 30 days to 3 months or so.
Beginning May of 2012, the program changed. The new rules allowed your real estate agent to initiate the Cooperative Short Sale in Equator for you without a hardship letter.
If you wanted to do a strategic short sale, the bank asked for supporting documentation. The bank might also ask for a seller contribution. Due to SB 458, a contribution was not allowed in the state of California. But the beauty of a Cooperative Short Sale was the sales price was approved and the seller was approved. The Cooperative Short Sale also paid a seller up to $2,500 to $3,000 in relocation assistance, providing the seller qualified. Throw the HIN initiative into it, and the money could quadruple. I had some sellers receiving $20,000.
After the seller received an offer, Bank of America would respond to that buyer's offer within 10 business days. I had not had that happen -- it was closer to 30 -- but that was still a good response time, and was possible those files were not portfolio loans.
The upside was there were no surprises.
Drawbacks to Bank of America's Cooperative Short Sale
- Incorrect Pricing Possibility.
After the Cooperative Short Sale was approved, your short sale agent then listed the home and marketed at the approved short sale price. Hopefully, this was a realistic price. If it was not, you were hosed. That was the risk to participate in the Cooperative Short Sale program.
- Deed in Lieu.
Be aware if your home did not sell, the program allowed for an automatic deed-in-lieu of foreclosure. You could lose your home if you could not sell as a short sale. But sellers considered this, if you're about to lose it anyway, what is the difference?
- Second Lender / MI Refusal.
If you had two loans on a short sale, you would always need the approval of the second lender to participate. If the second lender stood to make more money through a foreclosure, the lender might refuse to approve the short sale. Moreover, if the loan has mortgage insurance, the MI company also needed to approve the sale as well.
Whether Bank of America will consider a Cooperative short sale all these years later is most likely evaluated on a case-by-case basis now. Your best bet is to call the bank and ask if the program still exists. It might not.
At the time of writing, Elizabeth Weintraub, CalBRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.