In your experience, will a bank approve a 6% closing cost concession for a buyer on a short sale or do they strictly limit it to 3%?

Asked by Lorraine Bennett, St Pete Beach, FL Fri Apr 9, 2010

I have a young couple trying to buy a home before the expiration of the First Time Home Buyer Credit. They have their down payment (3.5%) but they need the full 6% closing costs paid by the seller.

What are their options? Your feedback is appreciated!

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Spirit Messingham’s answer
Spirit Messi…, Agent, Tucson, AZ
Sun Jan 30, 2011
Every Real Estate transaction is different. Problem with the short sale, is you dont know if they bank will even approve it at the list price, as they are losing money on it at the list price, short sale. Hard to say what a bank will do, submit it and be prepared to wait up to 6 months to hear back, if you hear back from the bank at all.

Personally, I believe REO's and Estate Sales (where the seller has a lot of equity in the property) are the best deals for most of my clients, and certainly you will hear back faster than on a short sale.

Best of luck.
0 votes
Bob McClure, Other Pro, Walled Lake, MI
Sat Apr 10, 2010
hello again......the fha guideline change allowing only 3% rather than the usual 6% for seller concessions is coming this summer (2010), but an exact date has not yet been announced..until then, i would assume it can come at anytime and try to get a bottomlined p.a./ a.s.ap...as you may know..the ufmip has already changed to 2.25%...which is actually what it was some years ago....best regards....bob mcclure- first preferred mortgage- southfield, michigan.....
1 vote
Lynn Brock, Agent, Sarasota, FL
Sun Jan 30, 2011
yes the bank (depends on lender) will allow upto a 3% contribution, however, this contribution is going to the buyer. the funds will most likely be pulled from the real estate commission reducing the overall proceeds to the agents. usually the lenders have a net amount that they must secure on the transaction. this net amount may not make sense against the current market values. some lenders are more cooperative than others to work with in closing a short sale.

remember a short sale is a "mortgage transaction". it is the act of backing out of a mortgage. in the past all mortgage paperwork was handled by mortgage loan processors. these individuals were detailed oriented, understood the business and worked within deadlines. most lenders have eliminated anyone with any mortgage processing experience and replaced them with low waged individuals that have no training, no experience or understanding of the business. every once in awhile you might run across someone left over that knows how to process a loan.

lenders have shifted the mortgage loan processing to the individual homeowner. lenders also tolerate hard working real este agents with third party approval. but your hard work may not be compensated. lenders do not like short sale negotiators they will not pay them on the hud. if you use a ss negotiator find out who is paying for their services.

good luck.
Web Reference:  http://BrockRealty-Inc.com
0 votes
Xiomara Mewa, , Tampa, FL
Sun Jan 30, 2011
Lorraine,

It depends on the lender/servicer. I worked as an asset manager for a servicer, I have experience in appoving and denieding short sales. It greatly depends on who you dealing with. Private investor have different guidlines than large lenders such as BOA. Simple ask first: what are their guidlines before you submit your HUD so you dont waste your time with counter offers and unnecessay negotiations.
0 votes
Rick Scherer…, , Tampa, FL
Wed Apr 14, 2010
Lorraine,
While it may vary from lender to lender, I just had another approved short sale from Suntrust that again limited buyers closing costs to 3%. While they did not state it was policy, it was another one of several Suntrust approved short sales that limited the concessions to 3%.
I have yet to see any lender approve the full 6% closing cost and prepaid items. Best of luck, Rick

Rick Scherer & Kevin Reder, ALHS, CLHMS, P.A.
Smith & Associates Real Estate
3801 Bay to Bay Blvd
Tampa, FL 33629
813.892.7907 Direct
0 votes
Mark LeMenag…, Agent, Lake Nona Orlando, FL
Sat Apr 10, 2010
The bank could care less. All the bank cares about in these situations is how much they are going to net. How you structure the deal is unimportant to them as long as it does not jeopordize the deal.

Let's see April 9th and they are still looking at short sales? Kiss that $8,000 good bye.
0 votes
CCC, Home Owner, San Diego, CA
Fri Apr 9, 2010
I agree with Bob, ask the mortgage consultant to write on the pre approval.

I would say that 3% is the non spoken standard on Short Sale. I have seen 4% but never 6%.

Just wondering, have you seen the GFE or Estimate of loan expenses? Why 6%, is your buyer buying down the rate?

NOTE: I am not a FL Realtor.
0 votes
Alma Kee, Agent, Tampa, FL
Fri Apr 9, 2010
I think FHA guidelines were changed on April 5th and they no longer allow more than 3% closing costs. Contact the lender they have gotten preapproved with to verify.

If your buyer's are first time homebuyers qualified to get the $8k IRS tax credit, Hillsborough County Affordable Housing has a program to "lend" them up to $8k so they can use it towards their closing costs and downpayment.

Hope this helps.
0 votes
Jerry Barker, Agent, Atlantic City, NJ
Fri Apr 9, 2010
I beleive the governement has placed a limit on the maximum amount of seller consessions to 3.5% of the purchase price. I know I am the first to answer but im sure you will get some mortgage brokers chiming in with some more detailed answers.
Web Reference:  http://www.sjrates.com
0 votes
Bob McClure, Other Pro, Walled Lake, MI
Fri Apr 9, 2010
good afternoon lorraine....it depends on the bank....if their policy is 3% and that's it...i wonder why a counter adding the additional 3% to total 6% won't fly...that's usually the way we work it here....then it's just a matter of will it appraise?...i suggest that the full 6% concession request be stipulated in the pre-approval letter from your buyer's lender.. then the decision maker knows, going in, what to expect...good luck....bob mcclure- first preferred mortgage- southfield, michigan...
0 votes
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