So when negotiating these transactions, the bank may agree to it or may not depending on the offer and the liens outstanding. I have had deals where the bank has agreed to paying closing costs and others where they have taken those funds away to pay the second mortgage.
The key is know what your getting into before you sign on the dotted line.
First Weber Group
Certified Distressed Property Expert
The seller must accept the offer. But, the seller is not the one who will actually be covering the transactional expenses to close the transaction. There may be the rare transaction where the seller brings some money to closing, but in most short sales, the seller brings no money to closing. All transactional expenses, attorney fees, Realtor fees, outstanding taxes, sewer bills, transfer taxes, etc are generally paid from the proceeds, which then reduces the net amount received by the bank. Therefore, it is the bank that will be covering your closing costs, or not, depending upon their decision.
Property Value (per Bank's due diligence through appraisals, BPO's, AVM's) - ?? Unknown
Sale Price 275,000
Loan Balance 300,000
Transactional fees paid from proceeds - 25,000
Net Proceeds to Bank - 250,000 on a 300,000 loan. The bank's decision to approve a sale depends upon the anticipated Net Proceeds compared to both the Loan Balance and the Property Value (per the banks due diligence.)
Some banks may have policies against paying any buyer closing costs in a short sale. Yes, the seller is the current homeowner, but it is the bank who will actually be covering your closing costs since it reduces the net proceeds they receive.
The closer the anticipated net proceeds approaches the market value (as determined by bank's research), the greater likelihood of an approval.
There is one more layer of decision makers. Frequently, a bank is the servicer of the loan, but the actual loan is owned by an investor. When the loan is owned by an investor, the bank's representative will remain the contact, and present the offers to the investor for approval.
Also many banks are not taking anything less than BPO price or the appraised value. Check the new FDIC rules.
I am sorry but we have to be careful what we tell people here or it makes things much more difficult for them.
However, I'm trying to recall where I heard this, but I think some banks and even Fannie Mae are now restricting the amount of funds a seller can refund in closing costs, if they allow it at all. Does anyone else know what I might be thinking about?
Another thing to keep in mind is that the seller is already in financial straits, otherwise they wouldn't be doing a short sale. So don't be surprised if they aren't willing to negotiate on this point.
Best of luck and I hope it works out for you!
You say you think you can come to agreement on the price, but price is not the only consideration. If you ask the bank to pay closing costs the NET price is reduced. Soâ€¦you havenâ€™t gotten agreement on the price.
If you are asking for a lot of closing costs I think you should be prepared for the bank not to agree to pay as much as you would like. So if you truly need to have all of your closing costs paid for you may want to reconsider a short sale.
I would say if you can afford to pay the closing costs yourself, you should try to pay them to keep from complicating the negotiations. The bank will likely want more money since assisting in closing costs cuts into what they receive if you add the closing cost on top of the agreed price they may or not allow it.
If you need the assistance because of negotiating the price, then ask your Realtor to check to see if the value is there and if they think it will appraise. The bank likely knows the current market value and is requiring that amount. When you go for your loan, your bank will want the property to appraise for the contract price including the closing costs.