Home Buying in Denver>Question Details

Kristi Maris, Home Buyer in Colorado

Short Sale - finally closed but in reviewing the closing documents I found something that is alarming.

Asked by Kristi Maris, Colorado Sun Jan 20, 2013

We put in a full price offer on a short sale in August, seller accepted offer. BPO was done and we(buyer) were told by our agent that wells fargo had sent email to seller agent saying they would approve sale for about $28K over our offer and that we had to let accept within 24 hours or they were going with a backup offer. We asked to see the email from wells as the amount they were asking was significantly over what the seller owed and was only $10K lower than BPO. They said NO. We accepted and closed last week. In reviewing closing docs the wells fargo approval states acceptable sale prices that was only $7K more than original offer. We think the seller agent said it had to be higher to cover the closing costs, etc... so the seller would not have to pay anything out of pocket at closing. Is this legal? The amount we closed at is EXACTLY the $7K approved sales price PLUS all closing costs and taxes. Is this normal in a short sale let alone legal?

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You're welcome Kristi. Glad the answer helped. Enjoy your new home!
1 vote Thank Flag Link Sun Jan 20, 2013
Kristi - you have been told numerous times on this forum to consult a lawyer, you need to do that.
1 vote Thank Flag Link Sun Jan 20, 2013
Thank you all so very much for your responses. I feel pretty comfortable that the discrepency in figures is the differnce between with the lender will net plus commisions, etc.... and I think it appears from most of the responses that it is an allowable procedure that the commissions, etc.. can be added above the lender approved figure. I feel better know nowing this.

Thank you all for your answers - it was very helpful and appreciated.
0 votes Thank Flag Link Sun Jan 20, 2013

What I'm hearing in your question is this; the amount that Wells was willing to accept (according to the acceptance letter) as a Net, was $7K over your original offer, but the Seller's Agent told you that the Sale Price needed to be $28K over your original offer for Wells to take it. I know it's not what you want to hear, but I think those were the same numbers. You see, the amount the Lender will accept is a net number AFTER all costs of sale (Seller's Closing Costs) have been subtracted. The Seller's Closing Costs include Realtor Commissions (both sides), Real Estate Taxes (past & present), past HOA Fees (if applicable), Recording Fees, Title Insurance & Title Fees, Fees unique to your local and any additions liens on the Title. These Fees must be paid. If the Seller is unable or unwilling to pay them, the Closing won't happen unless the Buyer (you) choose to cover them. It sounds as though that was what happened in your case. It's unfortunate that was not explained better by the agents involved.
Keep in mind that it's rare for the Seller to have funds to contribute to the Sale. If they did they could avoid the Short Sale and save their Credit. This is after all a form of Foreclosure and carries some hefty penalties. The deficiency the former Owner(s) could be responsible for will include all of those Closing Costs, plus any Late Fees, Attorney's Fees and Past Due Interest. The numbers get big, really fast.
To answer your question about it being Legal; I'm not a Lawyer and the advice I will give you is the same I give all my Clients; a Real Estate transaction is Binding, with Legal and Tax consequences, so consult a Lawyer and/or an Accountant for how it may impact you.
I hope this helps!

Dave Cox GRI, CNE, ASD

P.S. I agree with Faun, this is not a transaction for an inexperienced Agent.
Web Reference: http://www.coxre.com
0 votes Thank Flag Link Sun Jan 20, 2013
The short sale approval letters I receive from the various banks throughout the years all list a NET amount they will accept. This net amount is calculated after all costs including paying both the listing realtor commission and the buyer's realtor's commission and all other seller closing costs such as title insurance, HOA, water deposit, tax etc. Those items can add up and keep in mind that the banks on FHA short sales agree to a total of 6% commission that is split between the realtors. When you look at your HUD1 you got at closing it will list the net amount the bank received. That should easily explain if there are any discrepancies. Your realtor should be able to easily explain the HUD1 to you.
That being said, Faun is correct in the fact that the listing agent works for the seller's best interest and may try to get the highest amount they can for them, but usually they just go for the net the bank has asked for.
0 votes Thank Flag Link Sun Jan 20, 2013
Wow. This is EXACTLY why I advise people to stay away from short sales, but hat's beside the point. The only person I know and trust (don't pay any attorney fees if you can help it!) is Ronda Courtney, who's an expert on short sales, bank sales, etc. She works for RE/MAX in Parker. I won't give out her number without her permission, so Google her. She will help you. Good luck. Julie Montgomery, Littleton, CO http://www.jmontgomery.com
0 votes Thank Flag Link Sun Jan 20, 2013
Wow. I only person I know and trust that can answer your question is Ronda Courtney with RE/MAX in Parker, CO. I don't have her number but Google her. She'll tell you exactly where you stand. Julie Montgomery, RE/MAX Masters, Inc. Greenwood Village. http://www.jmontgomery.com Good luck!
0 votes Thank Flag Link Sun Jan 20, 2013
Good point Faun...it is very possible the lender accepted a payoff that was $7K above the buyers offer but also approved closing costs that when combined with the higher payoff amount totaled $28K more than the original offer. This could very possibly be what happened and a review of the short sale approval letter from the lender would be the answer.
0 votes Thank Flag Link Sun Jan 20, 2013
Hi Kristi, Perhaps you should speak with the Realtor for better understanding.
0 votes Thank Flag Link Sun Jan 20, 2013
Kristi, I read you second post after my first, and see that your agent has only handled two short sales in the past. Bingo! There's our answer -- or at least a partial answer. This doesn't mean your broker did anything wrong (or the seller's broker for that matter) but it's clear your broker hasn't been able to fully explain to you what was happening.

I repeat for others who may be reading this thread, it is vitally important for BUYERS and SELLERS to have a highly EXPERIENCED SHORT SALE BROKER (preferably as their Agent) for any transaction involving a SHORT SALE. Short sales carry many potential pitfalls and there are relatively few brokers who are truly qualified to participate in these transactions.
0 votes Thank Flag Link Sun Jan 20, 2013
In every short sale I have done, the bank approval letter includes an acceptable payoff amount to itself and any junior lien holders, and includes all approved closing costs. So it seems strange to me that the approval letter would have left those out to be added in after the fact. However, given that there were other offers on the property, it sounds to me like the seller's agent was doing his/her job in advocating for the seller to reduce or eliminate any deficiency or need for the seller to bring cash to closing. It might be helpful to remember that this was a short sale . . . usually, sellers who are upside down on their homes do not have any means of paying closing costs nor the deficient loan balance(s). A good short sale listing agent will solve for those problems because if they don't, there is no short sale. Instead, there may be a foreclosure sale which doesn't serve anyone.

Your question does not provide nearly enough information to be able to answer it with any certainty. Did you have a broker representing you as your Buyer's Agent? If so, have you asked your Agent what happened and what response have you received? The thing I find troubling is that you are on a public venue asking for help after you purchased a home . . . this is why it's vitally important for buyers and sellers to have an experienced short sale broker working for them in a short sale. Short sales are a completely different animal from a "normal" real estate transaction and they require a specific set of knowledge and skill. From what little I can ascertain, the seller had a good broker advocating for him/her, but perhaps your broker was less experienced or simply less informed on this particular transaction. Or perhaps you just don't clearly understand what happened. Either way, you need to go back to your own broker and ask these questions. Review the contract paperwork including your original offer and any amend/extends, counterproposals and/or secondary offer(s) you signed. If you still don't understand the answers you receive by reviewing these documents and speaking to your broker, ask to speak to your broker's manager. If you are still in the dark, you can always speak to an attorney.
0 votes Thank Flag Link Sun Jan 20, 2013
Kristi...even though this was a short sale the contract was entirely between you and the seller...the lender did not own the property. The lender agreed to a certain amount they would accept to release their lien but did not and could not dictate the sales price. The sales price that was negotiated was agreed to by both you and the seller who were the only two parties to the contract. I'm surprised the listing broker would tell your broker that Wells Fargo would only accept a payoff that was $28K higher than your offer when the amount was really only $7K but whether that would result in a legal action I don't know. I would agree with Nicci...you should consult an attorney to determine what legal recourse you have...if any.
0 votes Thank Flag Link Sun Jan 20, 2013
Okay, before everyone starts up again with the rude comments - this is forum and I thought this is where we could go to ask questions. Of course I will be consulting an attorney if I find out that it is not "standard practice" to include commissions and such over and above the approved sales amount. That is why I am here asking the question. If I am told that this is normal in short sales then of course I would not pursue this with an attorney. To everyone that is interested in providing me information if this has come up in any of your dealing, or if you are familiar with this type situation I would be very grateful receiving your input. My agent is not familiar with short sales and has only handled 2 in the past which is why I am looking here as many of you are seasoned agents. Thank you so much. Kristie
0 votes Thank Flag Link Sun Jan 20, 2013
Sounds like some information might be missing but from ONLY the information provided it sounds like something is fishy. Only issue at hand would be proving such actions took place as it will become a he said / she said case.
0 votes Thank Flag Link Sun Jan 20, 2013
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