Is it normal for the 1st lender of a short sale to ask the buyer to pay the difference to the 2nd lender?

Asked by Msbuckeye2u, Dayton, OH Tue Oct 15, 2013

We were supposed to close a cash deal on a Short Sale home we have been waiting for months for and now they are saying we can't close because the 1st lender will only pay the 2nd lender 8percent and there is still a balance on $1,700 left and they are asking if we are willing to pay this to close but are they saying this because this is a cash offer and they figure we have it? We don't know what to do at this point and the 1st mortgage is with Ocwen and the 2nd is Citibank

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Jason Opland, Agent, Westerville, OH
Tue Oct 15, 2013
As Robert has indicated if you have a buyer's agent versed in short sales they should be advising you on this issue. That said, who is negotiating the short sale for the seller... the listing agent, title company, a third party?

If the second is a purchase money mortgage and the property goes to foreclosure, Citi would only receives what's left over after the back taxes are paid, and the first lien holder is paid off... likely little to nothing.

Has the Ocwen been informed of Citi's demand? Even if you agree to provide the additional $1,700, Ocwen could refuse to allow these funds to be allocated to Citi and insist their payoff be limited to the 8%. If you were my client, I would advise you to draft a letter indicating the current offer was your highest and best and that you've been informed Ocwen has capped the payoff at 8% and as such even if you wanted to provide the additional funds you would not be permitted to do so. Sign and date this and have the listing agent provide this to the negotiator for Citi. If this didn't work I would reach out to some of our executive level contacts with the bank. Good luck!

Jason Opland
Better Homes and Gardens Real Estate
1 vote
Brenda Keck, Agent, Westervile, OH
Fri Oct 18, 2013
2nd knows how much 1st will pay, listing agent needs to get with program and close the deal.
0 votes
James Deskins, Agent, Worthington, OH
Tue Oct 15, 2013
I would tell them to pound sand. Are they going to let you walk away if you say no? Let them fight it out.
0 votes
Eric Chang, Agent, Columbus, OH
Tue Oct 15, 2013
I'd be surprised if the bank walks away over that small of an amount. I'd recommend verbally telling them you won't pay any of it. If the property is worth it to you, you can always agree to pay it at the last minute.

You're Realtor should be advising you on this. I hope you have a Buyer's agent who is versed in short sales. They should be able to negotiate this for you pretty easily. If you don't have a Realtor and you're doing it yourself, the bank may hold tighter to their guns as they know you don't do this everyday and aren't as familiar with industry standards, etc.
0 votes
Tim Moore, Agent, Kitty Hawk, NC
Tue Oct 15, 2013
Welcome to short sales. This is somewhat common as the two banks both are losing money and neither wants to lose any more so they are getting tough. Let your agent tell you your options, you have some but might not like them. All short sales are long and frustrating and cash don't much matter to a bank losing money.
0 votes
Priyanshu (P…, , Columbus, OH
Tue Oct 15, 2013
If you buy a property with liens attached to it you are assuming the debt and are responsible for the debt. Buying a property is a complex process and you should always use a licensed REALTOR who knows what to look for and is trained to negotiate.
0 votes
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