Short sales - dealing with a request for cash contribution
Posted by Minna Reid on Thursday, December 8th, 2011 at 10:35am.Short sales - dealing with a request for cash contribution
Not all short sales are completely "free". While closing costs are generally covered by the lender, sometimes and lately more often, the lender will in fact ask the seller to contribute to the short sale in the form of cash or a promissory note in order to approve the short sale.
These requests are more common for certain sellers over others. If this sounds like you, you may want to prepare for the fact that you will be asked to chip in some cash to get your sale to happen.
You may in fact agree to just pay the cash or sign up for the note to move things along, but there are a few ways that are often successfull in minimizing or eliminating the request altogether:
1. Just say no - but write a letter to the investor, describing your hardship and inability to pay the note or cash. You would be surprised how often this simply strategy will completely eliminate the request altogether. This is usually my first recommended line of defense against a cash or note request.
2. Counter the request with a lesser amount. ALMOST EVERYTHING IS NEGOTIABLE. For example, if asked for $10,000 offer $2,500 and see what happens. More often than not, the lender will accept, or at least come down. Be prepared for another counter.
3. Counter the request with an alternate payment method. If cash is tight, you may offer a note instead cash, but be prepared that notes are less favorable to investors than cash and therefore you will likely end up paying more this way. Cash is king. You may significantly reduce the face value of the contribution by offering a lesser cash amount if asked for a note.
There are also several things you want to avoid doing during your short sale in order to minimize these requests.
Once in a blue moon, a lender will not budge at all on a contribution. In these cases it is best to consider your settlement options. All in all, requests for contributions are generally pennies on the dollar versus the amount of the whole debt and are sometimes your best option going forward, especially in a deficiency state like CT.
Minna Reid is a CT Licensed Real Estate Broker Associate with CG Real Estate, specializing in short sales, serving the Central CT including, but not limited to; Avon, Berlin, Bristol, Cheshire, Cromwell, Farmington, Glastonbury, Hamden, Meriden, Middlefield, Middletown, Newington, New Britain, North Branford, North Haven, Plainville, Portland, Prospect, Rocky Hill, Southington, Wallingford, West Hartford, Wethersfield and Wolcott.
Blog Tags
Print
Share5 Responses to "Short sales - dealing with a request for cash contribution"
[...]waiver.
My client wisely chose to contribute to get a full release on the loans.
The amount of the contribution was renegotiated to a lesser amount and a month later this Chase short sale CLOSED with my client never missing a[...]
Posted on Friday, March 9th, 2012 at 8:37am.
[...]demanded a very large note in order to approve the short sale. Several more weeks passed as we fought the contribution request and at the end of the day agreement was reached on terms.
A month later this Bank of America short[...]
Posted on Monday, April 30th, 2012 at 8:43am.
[...]financial situation – getting full debt forgiveness may or may not involve some type of cash contribution or a note (usually pennies on the dollar vs the original debt).
Once a CT short sale has been approved[...]
Posted on Friday, May 4th, 2012 at 8:11am.
[...]secure a new buyer. Our second approval with GMAC was also fast…but this time GMAC demanded a seller contribution which we negotiated down to $1,000.
All seemed well as we moved towards closing…UNTIL…the buyers appraisal unexpectedly[...]
Posted on Thursday, October 4th, 2012 at 8:37am.
[...]to get a short sale approved, but the more you have – the higher the odds that you will be required to contribute to your short sale.
Being current on your payments. While most investors do not have a requirement that you be in[...]
Posted on Monday, January 16th, 2012 at 8:27am.