Short Sale Lenders Want Seller Contributions

Posted on: May 29th, 2012 by Margaret No Comments

Greetings to all. There is a disturbing trend in lender practices regarding short sales that I would like to share with you. For anyone who is unfamilar with short sales, a short sale is a process for a homeowner to sell a property for less than the amount they owe on the mortgage. Many of these homes are also in default or foreclosure, but that is not necessarily the case for all. Perhaps the homeowner bought at the top of the market and now needs to sell. When I started doing short sales several years ago, the banks seemed more flexible in what they were willing to take to close the transaction. The problem now: the banks are seeking seller contributions — that means they want cash from the sellers for the short sale to close. However, most sellers are in serious financial trouble by the time they get into a short sale situation. This can be a devastating blow to the parties who have waited patiently, usually many months, and then face the deal cancelling. I have heard of some banks wanting $50,000 or more to allow the escrow to close. There have been recent laws enacted to help homeowners get past deficiency claims on the loan after the sale, but it appears that the banks are counter-acting that legislation by asking for the money during the transaction, rather than after. This is creating an impossible impasse between the sellers and the mortgage holders and many deals are falling out of escrow. The result is buyers and sellers who have waited months, maybe even a year, looking for the light at the end of the tunnel only to find out that unless someone comes up with cash, the months of waiting were for nothing. If you have a short sale disaster story to share, please feel free to share it here. I would like to know your story.

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