Will my lender ask me to contribute to my short sale?
Posted by Minna Reid on Monday, November 28th, 2011 at 2:33pm.Most of the time short sales end up costing the seller nothing. Periodically though, the lender may ask the seller to contribute to the short sale in either the form of a cash contribution at closing or an unsecured promissory note payable after closing. It is impossible to predict for certain which sellers will get asked for such a contribution, however the odds of being asked to contribute increase when:
- There is private mortgage insurance on the loan
- The property is an investment property rather than an owner occupied property
- The seller has good credit and is current on all other payments
- The seller has income in excess of his/her monthly payments
- The seller has significant assets
It is not a given that you will necessarily be asked to contribute if you fall into the above groups, nor are you necessarily excluded by not qualifying into the above groups, however the odds increase when you meet the above criteria. Being asked to contribute cash or a promissory note to your short sale is not necessarily the end. With the help of an experienced CT short sale realtor, you may in fact be able to negotiate or even eliminate such demands and still be able to close your short sale.
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Share6 Responses to "Will my lender ask me to contribute to my short sale?"
[...]and credit information when making approval decisions on Connecticut short sales and asking for seller contributions much more often than before.
Some of my clients are really in tough shape financially and have[...]
Posted on Saturday, December 10th, 2011 at 1:18pm.
[...]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[...]
Posted on Saturday, December 10th, 2011 at 1:23pm.
[...]weeks long negotiaton period, eventually a settlement was reached. My client did end up with a cash contribution into the short sale, albeit for pennies on the dollar amount of the forgiven debt. Bank of America issued another FULL[...]
Posted on Saturday, December 10th, 2011 at 1:24pm.
[...]scrutiny of your financial documentation
High likelyhood of being asked to kick in to make the short sale happen
More difficult, delayed short[...]
Posted on Saturday, December 10th, 2011 at 1:30pm.
[...]Second mortgages. These are very common, but present another party that needs to approve you short sale. Second mortgages can make your short sale more complex.
PMI. Private Mortgage Insurance companies are highly likely to complicate your short sale. Your MI company will be covering any loss to your lender, and will also have to approve your short sale. MI companies tend to be more demanding than second mortgages.
Judgment liens. Every cloud on title needs to be resolved in order for clean title to pass to the buyer. Collectors for credit card companies can be very nasty to deal with and are generally very demanding. Be prepared to have to fork over cash to resolve some of these judgment liens. If you’re facing severe debt problems, it’s better to take action before your collectors do.
Lack of documentation. Haven’t filed tax returns for two years? This will be a problem. Your short selling lender will want full financial documentation in order to process your short sale application.
Unheated, unpowered home. This makes your home almost impossible to sell. Most buyers won’t pick up utilities in their name or pay your back due fees in order to have a functional home for inspections and approval. Take measures to keep your protected and sellable before moving out.
Uncooperative title holders/mortgagors. This would be the ex who is on title with you but has gone MIA or Mom who went on the mortgage with you to help you qualify. Anyone on title or mortgage will have to get on board with your efforts to short sell, or it won’t happen.
Having assets/good credit. The better off you are financially, the harder your short sale will be. You don’t have to be destitute 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 default to qualify for your short sale, current borrowers can expect more scrutiny of their financials and have a higher likelihood of being asked for a cash contribution.[...]
Posted on Monday, January 16th, 2012 at 8:27am.
[...]documents that simply cannot be provided.
Excessive cash/promissory note demands from the lender. Sometimes the lender will ask the seller to contribute cash or a promissory note at closing. These demands can be excessive upfront, but are frequently negotiable! For example, if your lender[...]
Posted on Saturday, December 10th, 2011 at 12:57pm.