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Short Sale Sellers, yes you SHOULD expect to Contribute

Today Short Sale are getting approved, and some banks want the seller to help pay to close the deal.

If your loan is with Bank of America/Countrywide, or if you have a second and YOU ARE THE SELLER _ you need to expect to PAY something to contribute to the sale of your home.

3 of my recent Short Sale approvals in Tracy CA, and one in Mountain House expected contributions from the seller.

Think of it this way Mr & Ms. Seller - if your bank said to you - "Give us $10,000 and we'll put $100,000 in your account would you do it? Of course you would. This is a similar situation. The Bank (loan holder) is offering to eliminate your debt in exchange for you paying something. Sounds like a deal to me.

Yes you can still go into foreclosure, and I always recommend seeking the advise of a good attorney before deciding to proceed with a short sale or going forward with a foreclosure.

Mr /MS Seller if you're not paying your mortgage, save some of that money so you can contribute towards the sale of your property if you are asked.

Tracy & Mountain House, CA

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Posted by Susan Goulding; Central Valley Realtor Tracy & Mountain House CA Real Estate on 09/07/2009 01:12 AM

Comments (8)

short sales sellers need to pay

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8 Comments on Short Sale Sellers, yes you SHOULD expect to Contribute

SEP

Interesting information, Susan...I'm curious to find out if the sellers of those 4 properties you were referring to were insolvent? Just a general question, because it seems like the lender wouldn't require a contribution from the seller unless their review of the seller's financials revealed an ability to pay. Thanks in advance for your reply!

I'll be interested to see what comments you receive. The short sellers that I have had haven't had the financial resources to contribute. But as you say, if they aren't making mortgage payments...

Thank you for the useful linguistics! Are they doing this as a note? Which other lenders are doing this in your experience? What are the terms? Which banks have streamlined the process so that it is a viable process? I have almost completed one with M&T Bank that had no second and no requirements attached.

There are so many individual differences in the borrowers' situations that it is very tough to generalize in this area. Sure, a borrower should contribute to his/her short sale, and further, he/she should really pay off his/her entire mortgage at full face value. The trouble is, the borrowers do not have the resources to do this. If they did, they might not be in these situations.

The idea here is to get the situation resolved as quickly and as reasonably as possible. This takes effort, experience and common sense. In most cases the borrowers are in trouble through no fault of their own. Lenders contributed to the problems, and lenders must contribute to the solutions.

Akron, Ohio

SEP

As a California Broker specializing in Short sales, I have to disagree with your absolute stance.

What you should first consider is what recourse, if any, the bank has if they were to foreclose. This is important as if the borrowers found out that if they foreclosed, they didn't need to pay a dime, guess who they will be sueing? Since you mentioned BofA, I bet you are talking about cash out non-purchase HELOCs in 2nd position.

The second consideration is the borrower's ability to pay. Maybe it is better for them to foreclose and see if BofA will just 1099 them.

And Finally, maybe the third consideration is that you should pass the cost to the buyer to prevent your seller from paying.

My clients never pay a dime.

Susan - Just speaking of Florida practice, I advise my seller they may be asked for prom note or cash contribution or even denied. It's a "heads up".

SEP

Wendy makes a good point. The only reason why I stated that I am a California broker is because Susan and I are in the same state. And we are a non-deficiency state.