My daughter made an offer on a house for $452,000. this was the full asking price and she asked for $12,000 seller paid closing cost. It was accepted by the seller and since it is a short sale it took close to 3 months for the broker to give us a verbal OK from the bank supposedly. The value came in $7000 lower. They agreed but also lowered the closing cost paid to $5000. My daughter agreed. Now that the loan is close to closing the agent is calling us and telling us the bank will not pay the $5000.
My feeling is that they never presented a full short sale package to the bank and never had a full approval by the bank. they just played the game until the last mintue and now they are putting the buyer under pressure to come up with the difference? I want to ask to see a copy of the pakage presented to bank and a copy of the short sale HUD approved by the bank. Any suggestions? my daughter has $13,500 in earnest deposit that I do not want it lost.
On the original terms, your daughter agreed to pay $452K and with a $12K seller concession, her cost basis would have been $440K.
Since the appraisal came in $7000 lower, wasn’t the contract price for the property lowered by $7000 to $445K? With a $5K seller concession, her cost basis is still $440K. The sellers will argue that after the seller concessions. your daughter still has the same deal.
Your daughter should counter back for the lower purchase price but keep the seller concession the same. She should argue that if there had been no seller concession, the purchase price would have still been lowered to the appraised value. If the sellers were willing to give $12K out of pocket to make a short sale work at the higher price, they should still be willing to give the same $12K concession to make the sale go through at the lower appraised value.
After all the dust settles, the sellers will still have the same net out of pocket cost after the price is adjusted for the lower appraisal – provided the deal was a true short sale deal.
At this point, negotiations have been reopened. If the sellers reject your daughter’s counteroffer, then there is no contract and your daughter should get her earnest money deposit refunded.
how long did you give the owner and bank to finalize the deal? usually 90 days is standard…so you’re in contract 90 days - after that - buyer has options to sign extensions or not.
also - we’re talking about $5000 - correct? i mean at this point - just pay the 5k (1% of the deal) and be done with it.
the bank probably issued a pay off and that’s what the owner and agents are dealing with.
also - ask the agents to take a hit if you want. reduce the 5k to 2500.
at the end of the day - sometimes common sense has to prevail. and think about this - A BANK is not going to want to have a deal for 445k and only get 440k (minus lawyer fees and realtor fees).
AT THE VERY BEGINNING - any agent with half a brain KNOWS that seller concessions on a SHORT SALE - are VERY TOUGH. I personally treat them as a joke - unless it’s an investor who’s very savvy - then i do the deal and learn from them.
I think you have misunderstood the deal structure.
Susan was to receive a $12K seller concession that has now been reduced to $5K just because the appraised value came in lower. She should argue that the amount of the seller concession that had been agreed to should not change simply because the appraisal came in $7K less than the contract price.
If the lender had agreed to the original deal structure, then the language of the contract should have also stipulated that the contract price will be reduced if the appraisal came in lower.
I suspect that it is the sellers who agreed to pay the concession out of pocket and now want to take advantage of the lower appraisal to same themselves some out of pocket costs.
Thank you all for the great advice. I now know that the agents did not negotiate properly upfront and the bank had not agreed to a $12000 seller paid so then the last minute they started negotiating and the bank said NO. Now the most the bank is willing to pay is $2320 and the agent is coming in with $2680 and my dauther is paying the difference. The agent called me yesterday to see if the loan docs are ready and I explained that since we changed the structure of the deal we had to get the underwriter approval again, which we have. She told me that my daughter will lose her money for “non performance” and I, very nicely, let her know what our reaction would be. They had presented a contract that was not valid to begin with.
If your daughter has the $5k…negotiate that down to where she is comfortable.
Seems like if there was a short sale done that the property is probably a decent value now.
Also…who is holding the money? Keep in mind that the money will not be released from a title company unless both parties agree to release it.
I’m sure the seller and listing agent want the property to close with you. Qualified buyers at $450k are just not readily available and they will have to start over again with a new buyer, new package, etc. Another 3 months. You have that on your side.