Profile picture for clairecurt

Advice on asking for closing costs on a short sale?

 Looking to buy my first home and this is certainly my first short sale. We have put forth an offer on a short sale but somebody else put forth a better offer, hours before we did. The first buyer has backed out and removed their offer, after 3 weeks of waiting.  Now I am first in line.

The details of the house are:

-Single loan with us bank (I think it was chase originally)
-Sold in 2006 for 256k (I think the house actually sold for 236K but they got a home equity loan when they purchased)
-Home is occupied by the owner(not a renter or vacant)
-Been on the market since September of 2010 and dropping fast since Dec/Jan 2011
-Home is in good condition and we think it will apprise for the list (190k)
-The bank hired a negotiator

Details of me:

-Pre approval letter from my credit union
-I have a 20% down payment
-Standard fixed 30yr w/o points (debating points based on if I can get closing)

So the home is listed at 189k, and I offered 187k with 5k closing. I ran an Amortization on a 257k loan with 20% down(maybe too high on the down) and after 4-5 years of payments there should be 193k-190k left on the loan (I'm guessing). I dont want to mess around anymore with counters back and forth and I am pretty sure the bank will counter me for full price and no closing.

So the question is...(thank you for being patient) If/when the bank counters, what should my offer look like. Full price with no closing or Full with 1-2k closing?

And does it really matter that I have 20% down? Does the short sale lender care at all? I ask because I think its not very common to come in with 20% down.

Curt
  • February 16 2011 - Hillsboro
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Answers (12)

Profile picture for nwhome.us
Anyone who tries to predict what the lender will do is blowing smoke.  You have to take the transaction one counter offer at a time.
You've made yours, the bank will come back with something else.  What is their counter offer?
  • February 16 2011
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I am pretty sure the bank will counter me for full price and no closing.

I'm guessing they will counter for 187k and no closing, but it's just a guess.

If you are planning on putting 36k down, they might request proof of funds as that is a big check to bring to the closing table. This can be a letter from your bank that says you indeed have 36k down in the bank or a copy of a bank statement with any pertinent account numbers inked out.
  • February 16 2011
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Hi Curt,

Dealing with a short sale will require patience but if you can hack it there are some deals to be had. If you are working a buyers agent they should be able to walk you it, if not it just know that it will come down to what the bank needs to net and you up the price to fetch the seller paid closing costs you need. Too many what-ifs, ands, or buts where the counter offer is concerned so best to wait it out. 

There are many obstacles in financing these days so having a pre-approval letter from your credit union is recommended and having the 20% down payment should help to show you are better qualified and not just a waste of time .

Best of luck, let us know how it turns out.  
  • February 16 2011
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Actually, I think your offer is fine.  But, I think your amoritization numbers are off.  Plus, it is likely that the owner stopped paying some time ago, so there will be back payments owed.

None of that is really important to you.  What is important is that your offer is based on the market value of the home, not the listing price.

The bank will look at what their "net" is going to be and will base their acceptance on how your offer compares to the market value.
  • February 16 2011
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On short sales most banks counter; if you like the house a lot, then my advice is to accept.  Otherwise, you will end up going through th whole waiting period all over again.
  • February 16 2011
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Profile picture for clairecurt
Thanks for the replies.

I think banks are very predictable, they are just running a numbers game. If I know the numbers I can ensure I do not over pay. What the heck do I know though, honestly.

Sounds like a 20% down payment only give you serious consideration from the loan holder (short sellers bank). Good to know.

The amortization thing.  I was trying to understand why the bank choose the previous list prices and where they were in terms on being able to turn a profit. If had made an offer of 187k in October I would have been laughed at. Now its being considered. I kinda fudged the numbers I listed here to obscure (so paranoid) the home's location, to avoid giving too much attention to it, so the amortization is kinda off.

Good point about the sellers having probably stopped making regular payments and thus increasing the outstanding loan amount. I had not considered this.

The bank has not offered a counter yet, I just wanted to move as swiftly as possible.

Buying a home has been a lesson in expectations. Mine were way off initially, so I am still playing catchup.

Curt
  • February 16 2011
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Profile picture for nwhome.us
If it is a short sale, and not a REO, the bank didn't choose the list prices, the listing agent did.  In some cases that is done in coordination with the lender but it is not a given.
How does the loan fit into the lenders current asset ratio and how much can they afford to write off this month?  I think you underestimate the number crunching that they will do to make it work for them and how out of the control of the officer you talk to it can be.
Has the borrower committed to contributing to the workout?  Is it an unsecured, secured loan or cash?  What if they aren't going to contribute?
I've had a number, on the same piece of property, agreed to in July of 2010 and ignored in February of 2011 because it was too low.  The market isn't going up, what sense does that make?
  • February 16 2011
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Profile picture for clairecurt
Small world. My clever scheme (joke) to hide the property failed.

You guys are right. Too many what ifs etc.

I guess I will have to go back to my default strategy (relax, offer what you think its worth, and stop bugging the nice agents on zillow)

Guess I had to be talked down from the ledge.
  • February 16 2011
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Profile picture for nwhome.us
Or back from the edge....
Short sales are not necessarily the best buys in this market.
Make an offer on a market rate (non-SS) listing and find out how motivated the seller is.  If you value your time, this can be much more producrtive.
  • February 17 2011
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Hey there--
First, your amortization numbers appear to be 'way off.

Second--with 20% down, you have a strong offer. But the lender will balance an offer with what they'd get in a foreclosure.  If you ask for a $2k price reduction and $5k in closing, the lender sees $7k off its asking price and will decide which action, foreclosure or short sale, will bring the higher amount. Lenders paying closing costs is very rare.

Honestly? If you like the house and plan on staying there a while, consider that the $5k at 6% is around 30 bucks a month.
  • February 17 2011
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Whether the bank counters or not will depend on how that BPO comes in, and they have flexibility from their BPO amount. Your cash back shouldnt be much of an issue. The only time I have run into problems with cash back is ewhen it exceeds 3% of purchase price ( or it is an FHA short sale - their limit is 1% and to FHA only)
Just relax. There is absolutely nothing you can do until the lender has a BPO. If they dont care for your offer they will counter and then you can decide how to proceed.
  • February 17 2011
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If you're in a contractual sales agreement, then you should be speaking directly with your real estate agent regarding your concerns.

Since you seem to be in a legal purchase agreement, I am not giving you specific advice about your transaction, and need to make that clear.

Generally speakiing, short sales with the buyer requesting closing costs as a seller concession will not be approved. 

Although I dislike banksters, I will play devil's advocate on this one.  The home owner in a distressed sale owes more than the current market will bear.  They are asking their lender/service provider to approve the offer -- which has already created a deficiency against what the sellers owe.  If the buyer wants or needs to have their closing costs paid for by the seller . . . in a short sale . . . yeah, good luck with that.  It's never gonna happen.

I consult my customers and clients: don't expect the lender to approve the offer with a closing cost concession, don't expect the seller to be in a position to make any repairs to the property, don't expect a 30 day escrow, don't expect to hear from the lender/servicer any time soon, etc.

While short sales are possible, workable and doable -- they are extremely difficult, they are not time sensitive. and both listing agent and buyer agent need to be very versed in the short sale process, and advice their clients accordingly.
  • February 18 2011
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