Question Details

Sean Casey,  in 30317

Are seller paid closing costs allowed on an FHA short sale?

Asked by Sean Casey, 30317 Mon Oct 6, 2008

I am working with a client who is trying to purchase an FHA short sale. We have a verbal agreement from FHA on price and most terms, however, the representative is now stating that the Seller (thier borrower) can not committ to any seller-paid closing costs. We even attempted to raise the agreed purchase price to incorporate the closing costs, but again a no go. It does not make sense that there would be such policy in place. If anyone could point me in the right direction to find an answer on this it would be appreciated.

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In a typical situation, buyers going FHA can get upto 3% paid in closing costs from the seller.
0 votes Thank Flag Link Tue Aug 11, 2009
I too am on both ends of this, as far as having a buyer and seller dealing with the same issues...I was told basically that HUD guidelines say that an FHA-FHA deal may only allow up to 1% of the total loan amount for closing costs on a short sale...again, making no sense since if the home foreclosed, we all know you would be able to ask HUD for all closing costs to be would be so nice if their were some real guidelines that banks had to use to dictate short sales, it would make everyones lives easier and certainly it would allow Real Estate agents to stop roaming around looking and looking for answers to questions that should already be we all could be on the same page with the same information, for every short sale!
0 votes Thank Flag Link Thu Apr 23, 2009
Unfortunately, what banks and government organizations do doesn't always make sense. I am currently also representing a buyer who has written an offer on a FHA short sale. We received the same answer. I have been spending some time over the last week researching the guidelines and today I was finally able to contact someone at the FHA servicing department. Indeed, the guidlines will not allow the seller to pay any closing costs, even if the sale price is increased. There does not seem to be any way around this guideline. So we are currently looking at other options to come up with closing costs such as borrowing against a car, 401K, etc. With the high number of foreclosures, you would think they would be happy to pay some closing costs so they don't have to take the house. Doesn't make sense to me.
0 votes Thank Flag Link Fri Nov 21, 2008
Hey Sean,

Short Banks are the ones making the rules. Typically, sellers (the borrower) approve the offer, and then forward the offer to their bank. The banks dictate the terms they'll take...your buyers either agree, or don't. Most of the banks I've tried to work out "bank paid closing costs"...I get a "no go" regardless. Not sure why, and have never gotten a straight answer to "Why."

I'm not sure even if it matters it FHA...or anything else.

0 votes Thank Flag Link Sun Oct 12, 2008
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