Is it smart to ask for closing costs on short sale after your initial offer has been accepted?

Asked by Marie Q., Berkeley, CA Sun Feb 7, 2010

Hello. I offered asking price on a short sale and the bank just accepted (hurray!). Before my offer was accepted I acknowledged receipt of several inspections that had already been done to the property (roof, pest, etc). I am now getting a little overwhelmed with all the money that this home will require to fix but still want it. Can I ask for closing costs at this point or is it too late? Is it a "smart" move or will this just upset the bank? Will I have to prove that the home needs more repairs than what appears on the inspections (i.e. new windows as some don't close/open)? Thank you for your help!!!

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17
Todd Andrew, Agent, Berkeley, CA
Sun Feb 7, 2010
BEST ANSWER
Hi Marie,

Where are all the local agents on this one?! :-)

First of all, kudos to you for not being scared away by all the short sale naysayers out there. Buyers and I completed many short sales last year, a couple of them with FHA financing even. It involves more work and a lot of vigilance, but it is indeed possible. Second, be leery of blanket statements. Some banks are more challenging to deal with than others, but there is still a real human being on the other end -- an asset manager or loss mitigation specialist -- who may be capable of end-running corporate idiocy. Especially if yours was the only offer, or if your offer was substantially better than the runner up, you may be able to get a concession of some kind. Third, as with most things, it never hurts to ask. It doesn't really matter whether it is a credit to closing costs or a price reduction, a 3% price reduction or a 3% credit affects the net proceeds to the bank the same. I have been involved in short sales that had price reductions AND credits to closing costs... in the same deal. If you have an inspection contingency, keep in mind your objections can be not just about the physical aspects of the home, but the environment (crime, noise, congestion, etc), the permit history (most homes in Berkeley/Oakland and environs have unpermitted work), the insurability (fuses vs. breakers, galvanized plumbing vs. copper, etc.), or even the preliminary title report (which would reveal utility or other easements that may be objectionable). As long as you have not removed your "inspection" contingency (technically the "Buyer Investigation" contingency), you can get out of the contract for virtually any reason. Not that you want to get out.... but if you can't get what you need in concessions to feel comfortable with the purchase, you won't have to prove why you want out if you decide that you do.

Having said all of that, keep in mind that it is often difficult to get into a home in Berkeley, and the grass isn't always greener on the next property.

Again, kudos to you. It takes spine, tolerance for ambiguity, and perseverance to get as far as you have. You should be proud of yourself.

Best of luck,

Todd Andrew
Red Oak Realty
510.292.2013
todd@toddandrewproperties.com
0 votes
Michael Stud…, Agent, Alameda, CA
Sun Feb 7, 2010
Great question and one that I hear often from buyers in similar positions to you.

Is it smart to ask for closing costs after acceptance? You probably would have had more success if, after reviewing the disclosures, you had built in the approx cost into the price or asked for a $ credit initially. But you must try now if you're not comfortable, banks don't really get upset, they're way too big to have any emotions. :Y

Hold your ground, demand the bank respond and approve your demand.

That being said, it would help to have your Realtor help you prepare your case for the credit. As a backup plan if you don't get the credit but still want to move ahead, have your Realtor start lining up contractors or handypersons who can give advice and/or estimates on the work to be done. You may find it is not as daunting as you thought.

And heck, there's plenty of time for these kind of appts while waiting for the bank to respond!

P.S. Call Ralph or Michelle over at Frameworks (54th & MLK, Oakland) (510) 653-7075. They build beautiful wood windows to fit existing casement or double hung window frames.
1 vote
Grace Hanamo…, Agent, Cupertino, CA
Sun Feb 7, 2010
Hello Marie:

Hopefully, you are working with an experienced short sale agent in this transaction, who can advise you. An experienced short sale agent will be able to tell you his/her experience in dealing with several different banks. Some are more amenable than others to negotiations, however, typically, asking for anything AFTER the bank has approved the sale is a fruitless fight.

If the bank approving the sale is B of A, Countrywide, Chase, WaMu, then the likelihood of any success in negotiating the price or the closing costs after approval is pretty much "zero." If the bank is Wells Fargo or Wachovia or a small local bank, you may have some success. Again, your agent should be able to help you assess your possible success and recommend the best way to approach the bank.

Good luck!
Grace Morioka, SRES
Area Pro Realty
Tel (408) 426-1616
1 vote
Tomi Thomas, Agent, Oakland, CA
Wed Apr 4, 2012
It really depends on who the lender is. As stated by others below, it is typically better to do the ASK up front, as you are more likely to get concessions in the first round of negotiations. Most rarely will renegotiate, even on repairs, but you should definitely ask. If they have a line item in their internal budget for a closing costs credit, they may say yes. If no, it is unlikely that you would ever have gotten it. Try to keep in mind that the banks are already taking a huge loss on the property, including many more expenses and add on's that you know about, so if they say no to your request, step back and evaluate whether you are still getting a good deal. if so, and if it fits your budget, don't let ideas of "what they should do" spoil your enjoyment of the property. Go with the good deal, and don't worry about the rest.

Good Luck!
0 votes
, ,
Tue Nov 29, 2011
Should have asked up front. I know I have had several problems getting agents to write the closing costs into the deals, when we need that to qualify. So they have to go back to the seller and say that they need them and the deal is off without it. That gives the seller the option of taking another offer.
So I would say if you are prepared to walk if you don't get it, you have a better chance of getting it. This will open a new can of worms, can you get out without losing your deposit if you go about it like this?
Well if you need the closing costs to get the loan, and the loan is a contingency of the purchase, then yes. If you have waited too long to ask for this with this justification, and are past the period provided in the purchase agreement, then they can still keep your deposit.
0 votes
Andrea Mills, Agent, Sebring, FL
Sun Mar 13, 2011
Best case scenario would have been for your agent to provide you with a net sheet, estimating all cost associated with the sale and maybe to schedule the inspections until AFTER the short sale was approved.

Depending on the lender and the circumstances of the transaction, keep in mind that it probably took some time to get the approval and your offer has traveled to several different desks and decision makers. Now if you are asking for the lender to pay for your closing cost, your offer might have to go the same route again because your closing cost mean the bank will net even less. Depending on how long this process might take, the bank might also lose additional net money in taxes, HOA, utilities, insurance etc. Might be that it doesn't make that much difference to them but it might also be that they do not have this much wiggle room to make it work.

Speak with your agent about this or whomever negotiated the deal on your behalf.
0 votes
America Foy, Agent, Berkeley, CA
Sun Mar 13, 2011
Hi Marie,

It's always best to ask for closing costs up front. When a lender negotiates a short sale all of the costs of the transaction are taken into account and approved prior to the short pay price being approved. Asking for closing costs now could irritate the negotiator and extend the close of escrow date.

That being said I suggest you ask your agent to ask for closing costs--you may get them, you may get a portion of them covered or you may get nothing--all the negotiator can say is "no"
Web Reference:  http://www.americafoy.com
0 votes
Gilbert Rich…, , Santa Clara County, CA
Tue Mar 2, 2010
This depends on the negotiation skill of your realtor. If they are a go getter and know how to manuever with the bank your chances are pretty good, if they don't then you need to have a sit down, express your concerns and see what you could do.

The good news is there are remodel/rehabilitation loans available in your area. If you would like the information e-mail me at grichards@theloansource.com and I will forward the information for you to give to your loan officer.
0 votes
Liz Stevens, , Berkeley, CA
Mon Feb 8, 2010
I think you are getting the picture. Consider the bank like the Wizard of Oz - making decisions from behind a screen of power, based on bottom line benefit to them. They want AsIs offers, and accept the ones that qualify on both dollar value to them as well as simplicity and AsIs form. If you got an acceptance on a Berkeley property, as Todd Andrews has said, below, did you get the property for a good price? Remember, your mortgage will be probably 30 years, so, without knowing the details of your closing costs, think about them spread out over thirty years - think about the fact that you bought in Berkeley and I hope for a fair price, and remember that while most of California lost about 20-30% value in equity over the past two years, Berkeley lost about 15%. Welcome to Berkeley, we all feel lucky to live here. All the best. Liz
0 votes
Pamela Oettel, Agent, Berkeley, CA
Sun Feb 7, 2010
Hi Marie,

Congragutulations on the approval! That is a major step. I am sure you waited a long time to hear this approval, and probably saw many homes online while waiting to hear this good news, and you still like the home you just got the approval on. I agree with the agents that have already commented that asking for a credit may possibly back fire at this point. Typically, when a bank approves a short sale, that is it. A considerable amount of time has been spent reviewing this sale, and further delay may result in the property going to auction. Remember it is all about the bottom dollar.

In addition to this, I think that because you acknowledged receipt of the inspections for roof and pest, your offer amount should have taken this information into account. Also, keep in mind that your lender may require certain types of repairs to be completed before close of escrow, and some sellers/banks will not allow work to be done on the property while they own it. The sellers/banks may not want to assume the liability for work being done to the property while they still own it.

Best of luck to you.

Pam Oettel
Keller Williams Bay Area
Berkeley, CA
510-703-8636
0 votes
Annie Nguyen, Agent, Fremont, CA
Sun Feb 7, 2010
Hi Marie

You can only ask for the closing cost credit from the lender when your offer was submitted. Once the bank approves your offer there is no more request done. For the inspection, most of the time when you buy short sale property it often sells AS IS unless you put your offer is contingent on home inspection. When the bank send the seller the approval there will be no asking. If you do they will require you to submit the new offer and they will start the process of approval again. May be you should ask your agent to do homeworks of some properties before making any offers to help you to avoid some pitfalls from repairs later on. Good luck.
0 votes
Jane Grant, Agent, Aguanga, CA
Sun Feb 7, 2010
One possibility is to get a relative to "gift" you some of the closing cost money if you really think you cannot afford it now. Check with your Realtor and your Lender.

Good Luck!
^^^^^
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Web Reference:  http://www.soreal.biz
0 votes
Sylvia Barry,…, Agent, Marin, CA
Sun Feb 7, 2010
Hi Marie:

I agree with the agents below that have short sale experience.

Short sales are quite different from regular sales. When your offer was accepted by the seller, it still has to be approved by the lenders, and THAT takes a long time (as you have probably experienced).

When that short sale was approved by the lenders, it had gone through several phases behind the scene, and it was approved with all costs considered. Asking for more closing costs now will send the short sale back to the lenders to be approved; which depends on how close the property is to be auctioned off and the lenders you are dealing with, you may or may not succeed.

You will definitely want to provide proof to support the request, both the inspection reports and the estimates. The other tricky part is that now that you are asking for closing costs for repairs, your own lender might ask the repairs to be performed prior to closing, which, in a short sale situation is impossible.

So, get good advise from your Realtor, whom, I hope has solid short sale experience to explain and work through the scenario with you.

Good luck!
Sylvia Barry
Marin, Sonoma, S.F. Bay Area
Frank Howard Allen Realtors
(415) 717-0293
Web Reference:  http://www.SylviaBarryRE.com
0 votes
Anna M Brocco, Agent, Williston Park, NY
Sun Feb 7, 2010
Probably too late in the game for closing costs--remember, the bank wants to get as much money back as possible-- what is your agent suggesting--he/she is your best source of advice.
0 votes
Adrian Hunti…, Agent, SAN FRANCISCO, CA
Sun Feb 7, 2010
Marie,

You need to have your Agent call the Listing Agent. Once your offer is accepted and signed by all parties, and all parties receive copy, you are in contract for the terms agreed upon. That being said, you can ask to amend the terms, but the lender is not obligated to accept. If you are going to ask for the credit, you need to raise your previous offer amount to equal to the credit.

Best of Luck!
0 votes
Dianne Hicks, Agent, Rancho Bernardo, CA
Sun Feb 7, 2010
Marie
Congats on your approval. Now for the reality of home owning. I think asking for closing cost and this point will be a battle that you more than likely won' t win. Were there many things that were not visable to you in the inspection report?
I think a better statagy would be asking for x amount of dollars as a credit for repairs due to unforeseen number of items that came out of the inspection. It is worth a shot but brace yourself for them to deny as many banks don't want to give a dime more than they need to.

Best of Luck!!!
0 votes
Kamal Randha…, Agent, El Sobrante, CA
Sun Feb 7, 2010
Hello Marie,

Having done many short sales, I can assure you asking for closing costs after acceptance will not work. Most banks want a clean offer to begin with as well. However, this does not mean you can not negotiate. The banks do not get "mad". They just care about the bottom dollar. Instead of asking for closing costs back, maybe you can ask for a reduction in price..this is where those reports you have will help you renegotiate. I hope you are working with an experienced Realtor who is looking out for your interest. Good luck to you and wish you luck in your new home!!

Kamal Randhawa
Broker
510-932-1066
0 votes
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