Should you tell the bank No Way or should you Sleep on it?

Real Estate Broker/Owner with Antonelli Realty 3137972

Hi everybody, Paul Antonelli here with another short sale tip from questions asked on the website, That Short Sale Guy dot com.  One of the questions that I get asked a lot is "Hey Paul, how much is it going to cost me to do short sale"? Or "How much are you going to charge me to do a short sale"? And "What is my out of pocket expense to do a short sale"? And typically the first questions are always all about what do I have to pay to get a short sale.

  The simple answer is not so simple. Usually you pay nothing out of pocket, usually.  The bank is going to tell me how much we can get paid and I say "we" because I don't sell all my listings.  I try to, but I'm not always the one that brings the buyer, especially when I list a property 3 hours away.  We list it on MLS and a lot of times we have a buyer's agent that brings in the buyer, so we have to pay them their percentage.  I just had one close and the bank said "listen our investor says because the offer is so low we're only going to pay you four percent."  So typically, I would get two percent and they would get two percent, but nothing comes out of your pocket. 

     Now, some short sales are a little more on the difficult side.  You have two loans; you have mortgage interest- also known as MI- (because you didn't put twenty percent down).  You may qualify for a loan modification and that is a whole other story that I won't get into right here.  If you can get into a loan modification and it will help, that's the route to take and then we don't have to do a short sale because you'll still have the property.    

      Let's say your second mortgage is a HELOC (home equity line of credit) then be prepared for the bank to ask you to bring money to the closing table and / or sign a note for a portion of the outstanding loan amount. Depending on the bank and your personal financial health, this amount could be between 10% and 60% of the outstanding debit amount.  It will also depend on what you did with the Heloc funds. Now I know your first instinct is to say "No friggin way will I pay them anything". However, let me explain why you may want to at least sleep on this. I'm going to give you an example that happened to me last month.  Seller owed $390K on a property that has a good offer in at $226K the bank says they will approve it but you have to come to the table with $5000 and sign a note for $30000 for 6 years at 0% interest. Then you're done and will be issued a 1099C at the end. And the $130000 balance of the debit will be excused. You think about it for 2 minutes and say No Way to the bank. The bank forecloses on the property and sells it on the steps of town hall for $200K. That's $26000 less than they would have made if they took the short sale. I know, what they are thinking. You owe $390K; they sold it for $200K which leaves a $190000 deficiency. The bank has four years to file for a judgment against you for $190000. They can keep coming after you about this with you for 10 years and renew the judgment for another 10 years. It will be like having the flu that won't go away. You want to get rid of the judgment, then you will have to file bankruptcy. Isn't that what you were trying to avoid with all this?

  So what did we learn in this example? $5000 at closing and sign a note for $30000 for 6 years and you're done. Credit is not totally destroyed and you can begin to rebuild.  Flip side; tell the bank where to go and how to get there. They foreclose and file a judgment against you for $190000. Your credit is ruined for 7 to 10 years, and you still owe $190000.  So please Sleep On it for a day.

Need help or have more questions? Email me at

Paul Antonelli AKA That Short Sale Guy


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suzanne welch
Coldwell Banker - Croton on Hudson, NY

oy veh...its all so messy.

Jun 19, 2010 08:57 AM #1
Jeffrey Smith
Author of 'Realtors Guide To Short Sale Success - Eustis, FL
Short Sale Education

Great advice. I only wish a couple of the people I've had in this situation would have listened to me, or sat down to talk with me about this. Instead, I got instant tell them where to go and a slam down of the phone with a refusal to talk any further. I admit, I've also had a couple more where the sellers were agreeable so you're right can't win them all.

Jun 21, 2010 01:28 AM #2
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Paul Antonelli

Broker Owner; Antonelli Realty
All our listings are FEATURED on Zillow, Trulia
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