Our counter offer from the lender on a short sale came in 4 weeks: asking 6K more and for a 5K "cash contribution"...what is this?

Asked by Laura, Sullivan, MO Thu Apr 14, 2011

We're already paying our own closing costs and down payment, and now they're asking for a 5K "cash contribution" on top of that. Is this standard? Are they just trying to see if we're serious buyers?

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9
Alice Leeper, Agent, Columbia, MO
Thu Apr 14, 2011
Laura -
Has your buyer's agent seen the document from the bank? It's important that you see the actual communication from the bank. I think you are right in your assessment that the seller doesn't have the money and is not willing to sign a promissary note. In the long run, the bank cares about the bank's bottom line on this particular transaction. They don't care who comes up with the money or how.

Be sure that you talk with your lender to get your question about what's allowable in an FHA transaction answered. Your best friends in this kind of a transaction are your agent, your lender, and the title company.
Web Reference:  http://www.ShowMeHouses.com
1 vote
Dallas Texas, Agent, Dallas, TN
Thu Apr 14, 2011
Your buyers agent representing you is the professional direct all your questions to . No professional can render an opinion UNLESS all documents are reviewed.

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1 vote
Alice Leeper, Agent, Columbia, MO
Thu Apr 14, 2011
Laura -
Typically in a short sale, when a bank asks for a "cash contribution", the question is being directed to the seller. They are basically asking the seller to cough up $5,000 in cash to get this deal done.

If a bank want more money from the buyer, they will ask for a increase in the offer price on the home. I assume that's what you meant by "asking 6k more" - that the bank raised the price on you.
Web Reference:  http://www.ShowMeHouses.com
1 vote
Laura, Home Buyer, Sullivan, MO
Thu Apr 14, 2011
You are all so helpful! Yes, our agent has looked over the paperwork, and our lender is reviewing it now. They actually gave us 2 weeks to respond, so I want to make sure we cover all our bases. At any rate, our FHA loan won't allow us to pay the 5K cash contribution, even if we wanted to. So, we're going to counter w/o it and hope for the best! Thanks for all the feedback!
0 votes
Terri Vellios, Agent, Campbell, CA
Thu Apr 14, 2011
It sounds like bank wants the house sale price increased by an additional $6,000, and they also want an addition $5,000 towards the Seller's loan payoff. The bank wants to minimize their loss. Your agent is your best ally and they should be processing this for you. If you are not in a position nor desire to pay more plus contribution, communicate this to your agent and come up with a response. It's possible that the bank has not put it in writing.

All the best to you.
Web Reference:  http://www.terrivellios.com
0 votes
Laura, Home Buyer, Sullivan, MO
Thu Apr 14, 2011
Some of these are very helpful, thank you all! Alice - the bank is asking us as the buyer for the cash contribution, not the seller. So it sounds to me the seller doesn't have it. I've also been seeing FHA loans won't allow the borrower to pay a cash contribution, is this the case? If so, why would the bank (knowing what type of loan we're getting) ask us?
0 votes
Nathan Wolf, Agent, Charlotte, NC
Thu Apr 14, 2011
Cash contributions sometimes refer to "pre-payments" to pay off a second mortgage or other liens. I had this happen to a client in September. They had a fully accepted offer on the short sale, signed by the bank and ready to close. But THE DAY OF CLOSING the attorney did a final update and found that there was a newly recorded lien from HUD for $14,000. And the only way to close was for the buyer to bring a cash contribution to pay off the lien.

Since some payments must be made prior to closing to clear title, by example outstanding H.O.A. dues, and cannot be released prior to that, then if the Seller and the Bank are unwilling to pay these to clear title, the only way for them to be cleared is for the Buyer to make a "cash contribution". You could ask for a reduction in the sales price, to counter the cash contribution. But you should definitely find out what this will be used for, and preferably write your check to YOUR closing attorney to handle the money. Don't make the check to the seller, the seller's bank, or the seller's agent or attorney.

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0 votes
Pat & Steve…, Agent, Westlake, OH
Thu Apr 14, 2011
Each short sale is different. It appears that the lender wants you to add another $5,000 to your down payment. The lender probably wants to be sure you can afford to buy the home, before it spends more time processing the short sale.
0 votes
Janet Sebile, Agent, Garland, TX
Thu Apr 14, 2011
A bank doesn't test buyers. They always assume that if an offer is being made, the person(s) wants the house. The bank is only after one thing - more money and that is what they are testing to see if they can get. I am not sure what the "5K cash contribution" is refering to. If you have a real estate consultant have them review the counter offer with you to see exactly what the bank is asking/offering so you can decide your next move.
Web Reference:  http://www.tezentoteam.com
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