Home Selling in 32828>Question Details

Ann Adams Re…, Real Estate Pro in Chandler, AZ

Freddie Mac is asking for 20K on a short sale from our seller. If we foreclose the seller pays nothing. What can we do?

Asked by Ann Adams Realty Top 2% Team, Chandler, AZ Wed Jun 15, 2011

Help the community by answering this question:


Negotiate. Freddie Mac is "fishing". Make them a counter offer of whatever the BUYER is willing to pay...say $2000. Resend financials and reargue the fact that your seller cannot make payments on a note and cannot come up with any cash. Most lenders will allow the buyer to make the contribution as long as they are getting some more money. Most buyers buying a short sale are getting a property 15-20% below market anyway and don't want to lose the house, so they'll come up with it. Hope this helps!
0 votes Thank Flag Link Wed Jun 15, 2011
Hi Ann,

I see this is your first question here. Welcome to Trulia. You have posted your question in Orlando, Florida, but i see you are from Arizona. If you want local advice try the Pro-2-Pro section in you local area.

Cheers, Mark
2 votes Thank Flag Link Wed Jun 15, 2011
I agree with Gerard. Typically the Seller is not allowed to contribute their personal funds to close the deal. I have only seen this happen when the bank finds out the sellers has large amounts of liquid assets or has been renting out their primary residence and collecting the rent without paying the mortgage. Even then, in most cases the shortsales were just flat out denied. The Seller may want to hire an attorney to handle those final negotiations and get the deficiency judgement waived if the shortsale negotiator is not able to. There may be some inconsistencies or errors in the paperwork that they can find.
2 votes Thank Flag Link Wed Jun 15, 2011

Is the lender looking for the $20,000 in exchange for a waiver of any future deficiency judgement? Not knowing the entire story it sounds like this may be in fact what is going on and it happens all the time. They need to carefully review their options with the proper financial counsel as a short sale without a waiver of deficiency may in fact come back to bite the seller at some point in the future. Many times the payment required (and this is negotiable) is the absolute best thing a seller can do for their financial future.

If the bank forecloses the sellers obligation to pay does not disappear and the bank has years to go after them for the note and accrued penalties and interest. Again, if a waiver of future claims costs $20,000 it may be in fact the best money they ever spent.

I hope this information is helpful but if you need anything additional please do not hesitate to give me a call.

Always at Your Service,

Tom Priester e-PRO
"Results Driven Real Estate"

Keller Williams Realty
561 308-0175
Web Reference: http://www.tompriester.com
1 vote Thank Flag Link Thu Jun 16, 2011
Hello Ann,

You asked:

Freddie Mac is asking for 20K on a short sale from our seller. If we foreclose the seller pays nothing. What can we do?

Ann Adams
Tempe, AZ

Hello Ann from Tempe, With that little of info…. Let’s break it down:

Freddie Mac is asking for 20K on a short sale from our seller.
1. Is it an investment or primary property?
2. $20K cash contribution or prom note?

If we foreclose the seller pays nothing.
1. You don’t foreclose, servicing lender does.
2. Seller pays nothing until, the 1099A which will be issued will affect seller's tax liability
3. If AZ is a recourse state…then collections can hang around for that many years
4. Foreclosure scoring has heavy impact on FICO scoring and credit reports

What can we do?
1. Seller hired you in good faith to sell and negotiate his property and defaulted mortgage.
2. If you are not sure, what to do, go to your brokerage, meet with some of the ‘seasoned’ agents who do shorts…and last but not least.
3. Negotiate

Good luck!

Need More Information? Please visit us @ http://topvaluesinorlando.com/

Mike Luzzo
Certified Distressed Property Expert
Reach me direct @ (407) 222-4545 or e:mail mike@topvaluegroup.com
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1 vote Thank Flag Link Thu Jun 16, 2011
Hi Ann,

I recently closed a loan on a short sale and Bank of America required the seller to sign an unsecured note for $15,000 with repayment terms spread over 5 years.

So, basically, the seller had 2 options, foreclosure or short sale on Bank of America's terms and from my understanding the bank was not willing to budge.

Best regards,
Elva Wormley
Cobalt Financial Corporation
1 vote Thank Flag Link Wed Jun 15, 2011
Freddie Mac shouldn't be asking for anything on a short sale, the reason for the short sale is that the seller is in financial duress and has no available cash for any kind of payment, never mind a 20K one, if your seller had that, i think they would have just paid the mortgage and would not be in this situation.
1 vote Thank Flag Link Wed Jun 15, 2011
It sounds like investor do not want to sell because maybe they are better off claiming insurance, but the way we handle this is to go back to negotiator and tell him or her that seller does not have any funds to cover this debt and therefore the reason for short selling the home. We have this situation happened several times in the past and we have been able to significantly reduced the amount.

The last resort that we used is that we ask buyer to bring funds to closing or else we sell to someone that is willing to do so. When you inform a buyer that you are forced to sell to someone else, most times they bring the funds to the table.

Feel free to contact me should you have any questions.

Javier Rodríguez
HouseStar Realty Group Inc.
Real Estate Broker
Lic: BK703443
Certified SFR Short Sale and Foreclosure Resource

O: 407.429.5243 | P: 407.301.3401 | F: 407.373.0064 | eFax: 407.264.6260
0 votes Thank Flag Link Tue Jun 28, 2011
In Florida we are a "recourse" state so if a lender forecloses on a property they can go after the Seller for 100% of their loss, including late fees, attorney fees, court costs, etc.

It may be in a seller's best interest to pay money at closing or agree to a promissory note.

Hope this helps, I see you're in AZ so you may not have the same foreclosure laws.

Oh and if this is NOT the seller's primary residence and he is forgiven any loss by the lender, he may end up with a significant tax liability. The lender will send a 1099 to the IRS for the amount of the loan forgiveness and the seller may have to include it as ordinary income. On a primary residence there may be an exemption for the 1099 "income"

All the best,
0 votes Thank Flag Link Thu Jun 16, 2011
Negotiate. You should be able to work through a $20K difference. If you need help, give me a call.

Eli Givoni, Director
Short Sale Department, LLC
Serving all 50 states

MARS Disclosure for General Commercial Communications
Short Sale Department, LLC is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit.
0 votes Thank Flag Link Wed Jun 15, 2011
What can “we” do?

The seller can just say “no”. The lender cannot get blood from a turnip.
The seller can offer to sign a note for $20,000 at zero interest for 10-20 years.
The seller can come up with the cash.
The seller can offer to pay a lesser amount.
There may be other options…I just can’t think of any.
Negotiations go on until you reach an agreement or the bank pulls the plug and denies the short sale. The lender may want $20K but will not get that by foreclosing.

Does the seller have the cash? (Do not answer that question in this public forum.) Is the lender asking for that contribution because the seller has the cash or is the lender taking a shot in the dark?
0 votes Thank Flag Link Wed Jun 15, 2011
we have completed 50 short sale in the pat 6 months. It is not unusual for the note holder to try and get an unsecured note signed that is paid over time or a smaller lump sum at closing.
Basically the decision is your sellers. Does he want a foreclosure on his record or is he prepared to sign a note or bring money to closing. There is nothing to stop you going back to the note holder with a counter proposition. So, sit down with thh seller. Discuss all the options and ask him for his decision
0 votes Thank Flag Link Wed Jun 15, 2011
I would keep going back to the negotiator and if they refuse to budge escalate the file to their supervisor. Don't automatically take their word the first time - keep trying! Also contact Freddie Mac. Sometimes putting in a call to Fannie or Freddie can smooth the road and/or expedite things.

Best of luck,

Web Reference: http://www.mysharphomes.com
0 votes Thank Flag Link Wed Jun 15, 2011
if they had the 20,000 they could make the payments. so coming from the seller isn't the option.

The negotiator needs to get harder with the secondary. they will get ZERO with a foreclosure. often the primary will allow 3000 and a max of 5000 for the secondary... they need to take it and be happy. If they refuse unfortunately the bank will probably need to foreclose and force a BK for your seller. You may check into getting an attorney to do your negotiations. I have one here in this area that is good at getting the job done. Attorneys can also charge for services like us and get poaid, even for the mitigations.

Good luck
Ken Anderson
Orlando fl
0 votes Thank Flag Link Wed Jun 15, 2011
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