Home Buying in Phoenix>Question Details

Joanie, Renter in 85042

Buyer waited 6 months for 1st & 2nd approval on a short sale. Now, the seller wants $3k or he will let it go to foreclosure. Can I use a cure?

Asked by Joanie, 85042 Sat Jun 23, 2012


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Loren Hoboy’s answer
From my experience, I strongly suspect that both the SS 1st and SS 2nd have a clause in their Short Sale approval letters that prohibits the Seller from receiving any cash. I will assume the Seller's agent is ethical and will not perjure him/or herself. The $3000, if paid, must go through Escrow and be shown on the HUD-1 as begin paid to one of the lien holders.

This kind of request for extra money usually comes because the 2nd lien holder is demanding that they be paid an additional $3000 or they won't agree to release the property and issue an approval letter. The Seller does not or cannot reach in their pocket to pay the $3000 , so they go to the Buyer and ask for more. Alternatively, they let it go in to foreclosure.

I would get further clarification from the Seller's Agent about the facts of this case sicne yu got a different explaination. Your Buyer's agent, if experienced in Short Sales, should be familiar with this problem. It happens all the time when a 2nd lien or HOA lien is in place. You can also seek legal advice from a short sale real estate attorney.

So, if the 2nd lien holder wants an extra $3000 and you agree, have the seller's agent give you a new HUD-1 showing what is proposed (who gets paid what). If you agree, you would draw up an addendum to increase the price $3000. Your lender will still require the home appraise.

Given the limited number of houses on the market, and my assumption the house is now worth more than your offer in this rising market, you might be best to bit the bullet if you can afford it. Otherwise you would need to cancel the contract and get your earnest money back.
Loren Hoboy-Realtor
Central AZ Real Estate
Your Local Expert
Web Reference: http://centralazhomes.com
1 vote Thank Flag Link Sat Jun 23, 2012
Whats stopping the buyer from buying it at the trustee sale? There are ways to accomplish this even if they need financing. Karma...they just might get a better deal!
0 votes Thank Flag Link Fri Jun 29, 2012
It is the seller's choice if he doesn't want to accept the terms of the bank's approal letter. It is time to start looking for a new home if the seller and the bank cannot agree.
0 votes Thank Flag Link Mon Jun 25, 2012
It is not uncommon for the 2nd lienholder to request this in a short sale. You should be contacting your agent to find out if the lender asked for this in addition to where you stand in all this since the terms of your contract govern how this will all play out and no one in this public forum has that info. Good luck.....
0 votes Thank Flag Link Mon Jun 25, 2012
My take is somebody wants this to go to Trustee Sale (and maybe did offer the Seller $$ to encourage this) and believes they can be the buyer at the sale. That would be quite the crap shoot if true!
0 votes Thank Flag Link Sat Jun 23, 2012
By the way, where is your Buyer's agent in this mess?
0 votes Thank Flag Link Sat Jun 23, 2012
You should not be talking to the seller directly. Have you Buyer's agent talk to the Seller's agent. It should be the seller's agent that that educates the seller. If not have your agent contact the Seller's Broker to get to the bottom of who said what to whom. If you need a lawyer recommendation, please email me. At a minimum, your agent should issue a 3 day cure notice. If your agent does not know what to do, go to his broker for help.

You can get legal advice for probably $300 and maybe a letter from your lawyer to the seller to set them straight. If it is the seller asking for money outside closing that is a clear breach of contract and you may be entitled to damages which might be enough to get the seller pointed back in the right direction.

If the seller heard stories that he will be paid to do a foreclosure, I would assume he got it wrong. He might have qualified for "moving expenses" to do a short sale, but not a foreclosure. Again, this is for his Selling agent or Selling Broker to straighten him out.

Loren Hoboy
0 votes Thank Flag Link Sat Jun 23, 2012
You might be well served to have the buyer get an Arizona attorney that is well versed with Arizona Real Estate/Mortgage law.

Just the mention of an attorney might make the sellers agent and or seller think twice regarding this proposed action.
0 votes Thank Flag Link Sat Jun 23, 2012
The information provided in the previous responses covers much of what can and should happen. One more point; you have a legal contract with the seller for a set price. It is not appropriate or legal to change the terms of the accepted contract, especially if the lenders agreed to the terms. The seller is basically extorting you, which is a crime and would also be subject to penalties from the lenders since they don't allow any direct compensation to the seller. You might want to seek appropriate legal counsel to determine how to best put pressure on the seller to perform, in addition to the cure.
0 votes Thank Flag Link Sat Jun 23, 2012
Loren Hoboy hit the nail on the head in terms of what may have occurred, & what can & cannot be done, legally.

How did you receive this information that the the seller wants an extra $3,000 in their pocket? Your agent or direct from the seller? I doubt the seller's agent contacted you directly.

All the best,
0 votes Thank Flag Link Sat Jun 23, 2012
Joanie says: No, it's the SELLER that wants the $3k. The Arms Length agreement says there can be no transaction between the buyer & seller; he has people telling him they will give him cash to go to foreclosure!
0 votes Thank Flag Link Sat Jun 23, 2012
It is not uncommon for the bank to come back and say that they have to net more. This could be the case with this. Speak to your agent and get some clarity on the matter. The seller cannot receive money from the sale of his home if he is selling it as a short sale.

Some banks do offer money through different programs that would give the seller $3000 to move. I have a short sale client that is going to get $3000 to move and another $25,000 from their bank to do the short sale. But money from you to the seller is not allowed.

Best Regards,


Ron & Brenda Cunningham
West USA Realty

** Recognized in the Phoenix Business Journal as "One of the Top 50 Realtors in the Valley" **
0 votes Thank Flag Link Sat Jun 23, 2012
Is the seller asking for the $3K or the seller's 1st or 2nd lender asking for a $3K contribution?

It is not uncommon for a 2nd lien holder to ask for additional cash above what the 1st lien hold is offering the 2nd. Sometimes the 2nd will require it comes from the seller. In other cases the 2nd won't care where it comes from. If this is the case and you are getting a good deal, $3K is not much for a buyer contribution. Just make sure it is paid at closing and is on the settlement statement disclosing it to all parties involved.

Talk to your agent to get all the details on the $3K and make sure you are clear who is requiring or asking for it.
0 votes Thank Flag Link Sat Jun 23, 2012
That is absolutely not allowed and constitutes mortgage fraud. By providing the $3,000 you are no longer an "arms length" transaction. I would argue the $3K is an inducement for the Seller to perform and an indication the listing agent and buyer agent conspired to keep the purchase price low; knowing the value was higher.
So when the FBI comes to talk to you, make sure the Buyer Broker and Seller's Broker are in the same room. That will she us taxpayers money because the FBI agents will not have to make as many trips.
So if it were I? I'd tell the Seller to stick it where the sun don't shine and make sure he understands you will place his "offer" on notice with the Seller's lender. Or the Attorney Generals office. His choice.
I think the Seller will come around to your way of thinking.
0 votes Thank Flag Link Sat Jun 23, 2012
Legally the seller can't make any money on a short sale and you probably don't want to be part of fraud. Maybe they were counting on getting some money from the bank for moving and it didn't happen, so now they are looking to the buyer. It is up to the seller to accept the bank approval so not sure you have any recourse if they decide to just let it go to foreclosure. What does the listing agent say? You can send a cure for them to perform, but they can pull out after approval is they don't like the terms so not sure that will accomplish anything. Hard to believe the seller will just let it go after all this time. Let this be between the buyer and the seller. Might be worth it if they are getting a good price.
0 votes Thank Flag Link Sat Jun 23, 2012
All I can say is "Wow"...seller just wants to walk away with $3k? The lender will allow this cashback on a HUD? Otherwise, wouldn't it be a "nondisclosed" side arrangement and violate an "Arm's Length" that had to be signed by the bank?
0 votes Thank Flag Link Sat Jun 23, 2012
I'm not a lawyer but it sounds like they have you over a barrel.
I would say if the buyer wants the house and if it has been 6 months the house has gone up by at least 20% do the math and if it works in the buyers favor pay the $3,000.
0 votes Thank Flag Link Sat Jun 23, 2012
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