I am a Realtor who is representing a buyer of a short sale property. The bank wants the Buyer to incurr a 75.00/ day penalty if we go beyond the closing date. My Buyer is going with a 203k loan, and it looks like we will be going beyond the date. I have heard that FHA prohibits these fees when the buyer is taking out an FHA loan, which the 203k is. An agent told me there is a law against it, but she couldn’t tell me exactly what law. I need to read it for myself so I can send it to all parties involved in this transaction. Does anyone know of this law?
cottagecash, great question…I work in conjunction with the former #1 agent in the state of Texas (he works for Remax). I don’t know the law, but I do know some of the policies…Fannie Mae for example will no longer hold the earnest money. They recently got sued and it’s now their policy to return all earnest money on any deals that fall apart.
Second, banks generally look at it like it’s not their fault. They didn’t choose the lender (for your buyer), and actually say it’s the buyer’s problem and thus the penalty per-diem charge. Actually, over the past 5 years of working with this agent, my clients have only had a per-diem charge involked twice that I can think of. Most of the time, and by negotiating firmly, not angrilly, but firmly, one can get the per-diem dropped. Remember, the bank does want to liquidate the home. A per-diem is just one of the many tactics that banks have to pressure the buyers.
I have had a couple of Realtors (REO Listing agents) tell me that they have no pitty on buyers that allow themselves to be in a position like this. They’ve even gone to the point to tell buyers that it was their greed that put them in this position by trying to purchase a home so cheaply and they got stuck. In addition they’ve stated that they should have known what they were getting into and that maybe they shouldn’t have considered a foreclosure or a short sale at all…As you can see, they’re vicious…
Being aware of this and a Realtor I ALWAYS point this out to any potential buyers that I have…Letting buyers know up front will always pay off…But you might not have known and it’s a bit late now…
As far as the actual LAW, well the banks addendums are written for them by their attorneys and if the buyer signed and thus agreed to the stipulation, they may not have much choice…I hope someone else can give you a different opinion. I’d love to see this practice go away, or turn out to be illegal…
A per-diem can sometimes be avoided. Many times it is not even brought up or requested, it has to do with the guide of the investor who is backing the loan. A bank may ask for a per-diem if the approval has already been extended before and if it has not there is a good chance you can negotiate for the extension to be per-diem free.
In short sales there are so many things that could be going on, it is hard to tell what the remedy is from the outside.
If you go to a doctor he or she can only tell you whats wrong once they have all the information they need. My office processes short sales for nationwide for agents and almost every short sale has a different curve ball, most of the time you can find your way around it.