Why will banks approving short sales not approve "private financing"?

Real Estate Broker/Owner with BKG - Brokerage Atlanta GA - 315107

We list a lot of short sales every month at
GaRealtyGroup | 2ShortSaleGuys, we are
You can't do Private Financing in Short Salescurrently working about 35 listings right now.  A lot of times we get the short sale listings approved and then have to wait on the buyer's financing to get approved.  As we negotiate the transaction between buyer's and seller's we make sure it's disclosed where the buyer is getting their funding from.  THIS IS VERY IMPORTANT!!!

With as much Mortgage Fraud that has went around since the real estate market has fallen, banks are already taking a "hit", the banks holding the loans need to be reassured that they aren't taking anymore of a "hit" from inside deals going on between buyer and seller.

We had an instance this week that we negotiated the transaction about 30 days ago.  The offer went binding with the buyer obtaining a USDA Rural Development loan.  When we got the approval this week, the buyer decided that they were just going to obtain "private financing".  I explained to their buyer's agent that private financing is out of the question as the mortgage lender must know where the money is coming from.  The agent was flabbergasted as to why I would ask where her clients money was coming from.  I explained that the seller had agreed to pay $250,000 of this house.  You have offered the bank $108,000 for this house, that's a $142,000 difference and the bank has a right to ensure that there are no underlying deals going on between the buyer and seller as well as we will be asking that your client sign an ARMS length affidavit.  The agent was appalled by my request and essentially said we were trying to be "Control Freaks" on this transaction.  I responded politely, I enjoy my real estate license, it supports my mortgage and my family, however you choose to look at it, this is the way it will be done.

After she finished throwing her temper tantrum, I asked her to explain to me why she needed "private financing" and why she couldn't continue with the USDA loan that she disclosed in our offer.  She stated that her client had some issues that would not allow her to obtain the loan and that her step father was going to give her the loan.  I said, "great"; let's do it this way, you get the step father to wire the money into her account, we can have the attorney draw up the promissory note separate from this transaction, as we close the transaction, we will close the transaction in her name and we can do a separate security deed adding the step father and all is done.

By looking outside of the box, we were able to keep the transaction together, help the buyer's agent understand her errors in thinking and prevent the homeowner from foreclosure.  We aren't "control freaks" we just know what it takes to get the job done.  It's our responsibility to represent the best interest of our clients as listing agents.


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Posted by


Nakia Brooks, REALTOR ®



GA Realty Group | 2ShortSaleGuys
Keller Williams Realty – Lanier Partners


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