Home Buying in Minneapolis>Question Details

Jazzy, Home Buyer in Cleveland, OH

I put a bid on a short sale home. My bid was 80k the bank countered at 81k. I accepted. Now the seller wants to add 7500 to price. Can they do that?

Asked by Jazzy, Cleveland, OH Fri Mar 25, 2011

I guess the bank wants them to sign off on a 15k unsecured note. They want us to pay for half of that. The other part that sounds shady is I asked our realtor twice if she had the bank approval letter and both times she said yes. Now in this email she sent me, she said it's in the "verbiage." Our realtor is now advising use to sign a mutual retraction document. The short sale process is new to me but all of this seems suspect. Can someone please help clear this up.

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11
O my lord these answers are ridicolous! I am in Short Sales and heck I am confused on what you people are saying!

Jazzy, all I do everyday is Short Sales from the listing side so I have a pretty good idea of what is happening.
1) When a lender accepts your offer that means the investor is going to accept your purchase agreement. THEY HAVE AGREED TO PRICE ONLY. Then typically it is off to the underwriters and within 2-3weeks you get a official "payoff" from the lender that the short sale is approved.
2) HOWEVER, you need to understand the second part to the equation is TERMS between seller and their lender. In this scenario the lender agreed to price but is not willing to agree to terms unless an unsecured note is signed. Most of the time the seller SHOULD KNOW AHEAD of time if the lender is going to ask for a promissary note of the remaining balance BEFORE A FORMAL PAYOFF IS WRITTEN. I have had it happen both ways though so I am not shocked by this. TYPICALLY IN PRE-FORECLOSURE I see this more.
2) the "verbiage" part just means that in the formal payoff from the lender they are stating the terms which they wil agree to the short sale AND YES THE SELLER HAS EVERY RIGHT TO ASK YOU TO CONTRIBUTE. I honestly am thrown for a loop on why your agent won't send you the payoff letter.

Now hey Jazzy it sounds like your REAL QUESTION is whether you should walk away from this property? It says home buying in Minneapolis so if you are indeed purchasing a Short Sale in the state of Minnesota then you should absolutley not walk away if you really love this house and believe you are getting a fair price. Our state laws actually make it very easy to get deficiency judgments waived as long as the agent knows what he is doing. However the competence of the realtors involved will most likley dictate the outcome of this scenario because it is a short sale. Hope it works out for you .....

Chris Block
Direct Home Realty
651-307-7663
chris.block@dhbuyers.com
2 votes Thank Flag Link Fri Mar 25, 2011
Yes, the short sale process can be confusing, with many unpredictable twists and turns along the way. There are so many variables, the agents, the bank(s), the sellers, title, attorneys, buyers, etc. I'm a little unclear what you mean about it being in the "verbiage". What's in the verbiage, the extra $7500 from you? And, when you say retraction, does that mean you're retracting your offer? And, you say it's mutual, does that mean the sellers are wanting you to retract too?

If there's an "unsecured note", does that mean it's NOT secured against the property? If it is not secured against the property, it is not a lien against the property and, it would seem to me, cannot be demanded on the sale, if it's not a lien on the property. If it's the sellers line of credit having nothing to do with the property, I'd really want someone to tell me why I would have to pay for half of that!

As always, with matters that seem suspect, we recommend you seek legal advice from a short sale attorney who can sort this all out and explain it to you piece by piece in a way you can understand and digest. It will also shed light on who dropped the ball when explaining/disclosing all of this info to you sooner than now! I would start with asking your agent to explain to you the entire chain of events and when they knew about it. If you don't understand, make them explain it again and again and again until it makes sense to you.

Good luck! I know this is tough stuff~
1 vote Thank Flag Link Fri Mar 25, 2011
Your specific question is "Can THEY do that?" If you mean, can the seller ask for different terms once you have a signed agreement, then the answer is YES. Parties are free to open up negotiations any time, but that does not mean that you have to agree to adjusted terms, especially if you have a fully executed agreement. You may have the law on your side if you don't agree to change the terms of the contract, but if the seller refuses to show up at the closing, what will you do about it. If " THEY" means the bank, then you may not have an alternative but to go along with the adjusted terms if you want the home in question, because the bank really holds the trump cards in a short sale situation. Ultimately, this may become a legal question which might best be forwarded to an attorney. John Chrisney, RE/MAX Results.
Web Reference: http://www.chrisney.com
0 votes Thank Flag Link Fri Mar 25, 2011
Hi Jazzy,
It seems like your realtor is over their head. If you love the property you should fight a little more for it. Ask your realtor's broker to step in and lend a hand (ask the broker if he/she is experienced in short sales). The entire process should be transparent to you i.e. you should have all docs as they are sent.

It sounds like your realtor should have asked for help from his/her company earlier in the process. Good luck!
0 votes Thank Flag Link Fri Mar 25, 2011
Hi, Jazzy!
So sorry to hear you're having issues with your agent on this. It's not out of line to request that the agent's broker get involved just so you can have total transparency on the chain of events. If you know who your agent's broker is, it might be a good idea to make a phone call today and request a meeting in person. It might help clarify things for you and for your agents. Perhaps your agent just isn't saying things in such a way that makes things clear. Do you have a contract for representation with your agent? (not sure how those are worded or constructed in Ohio) If so, it's important to give the agent's company a chance to help you in the way you've hired them to do. Better to try this than to just throw out the baby with the bath water right away.

Good luck~
0 votes Thank Flag Link Fri Mar 25, 2011
There is no way to find out if the lender approved the letter unless they show you the letter or you get an authorization to release information. As far as cancelling the contract is there an expiration for your contract? If so, then you should get your money because the seller wasn't able to perform and transfer a clear title to the property.
0 votes Thank Flag Link Fri Mar 25, 2011
Hi Jazzy,

I don't know how experienced your agent is with short sales or the listing agent either, but you should have a copy of the short sale approval letter. If the agents are not familiar with short sales, then it can be quite easy to overlook the legal verbage that banks put in approval letters.

when I represent short sale sellers, part of the negotiations with the bank is for any deficiency to be waived. You should find out if the listing agent has gone back to the bank to renegotiate the deficiency because the deal could still be saved. Good luck!
0 votes Thank Flag Link Fri Mar 25, 2011
Jazzy: All short sales are "Subject To", formal Written Bank Approval. An e-mail stating that the transaction is accepted is much different than the "Formal Written Bank Approval", that must be signed by yourself and the bank representative. Unless you signed a bank addendum, contract or amendment then the bank can come back and ask for anything they want. You can accept or not accept, and the bank is not going to pressure you. It's more of a take it or leave it situation with the bank.

If you are aware of what "Recent Sold Comparables", are and feel it is still a good deal then go ahead. If you don't want to pay the extra amount then don't and see what happens. Just remember that it can go either way until everything is singed by BOTH buyer and seller.

~~~~
0 votes Thank Flag Link Fri Mar 25, 2011
I'll clear it up a little more. The listing price was 96k. We submitted a bid of 80k and the bank countered at 81k. We accepted without anymore negotiations. I'm assuming the bank wants the seller to take an unsecured note of 15k for the remainder of the balance.. (96k - 81k = 15k) I'm just guessing. The seller informed his agent that we should split that amount. Our realtor has been anything but helpful. I called our realtor, told her that we would not pay anything more than 81K and asked her whether she had the banks approval in writing. Her response was YES. I made sure to ask her again and she said she had it in her email and that she would email it to us ASAP. When I spoke to her on the phone two hours later, she now says that the bank's approval was in the "verbiage ???" so the only information she provided us was email correspondence with the seller's realtor discussing the 81k bank counteroffer. Do you think it is possible that she is withholding the bank's approval from us and is there a way to find out whether it was approved in the first place? Our agent is now saying the deal is dead in the water and we should sign a mutual retraction letter. I had to put down 2k in earnest money and have spent 90 days waiting for this process. Now I'm just suppose to walk away?
0 votes Thank Flag Link Fri Mar 25, 2011
Hi Jazzy,

It sounds like the bank wants the buyer to sign a promissory note for the deficiency, which is quite common. Most likely what the agent means by "verbiage" in the short sale approval letter is a section that says the short sale is approved on the condition that the seller signs a note to pay the bank back the difference in what they owe versus the net proceeds of the short sale. So if the seller owed $100,000, but the short sale was approved at $80,000, then the bank wants the seller to sign a note for the $20,000 difference and pay it back over a number of years. This is something that the seller and bank are going to have to work out and negotiate themselves, unless you agree to cover the $7500 as the seller has requested. If the bank refuses, there is nothing you can do.

From my short sale sales, I have had this issue come up twice, so there is nothing suspect about it, just another part of short sales.

Sincerely,


Jennifer Kirby
Kirby Fine Homes
Lic, MN, WI, FL
0 votes Thank Flag Link Fri Mar 25, 2011
An accepted offer means very little, untill you have a fully excitued contract, the price can be changed by either party.
0 votes Thank Flag Link Fri Mar 25, 2011
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