Short sale on multifamily - Owner wants 10%

Asked by Homebird, 07302 Fri Apr 24, 2009

I'm planning to buy a recently built 2-family home in Jersey City on a short sale for investment and it is a great deal based on the previous sale on the property. The problem is that the owner wants 10% cash at closing to make up for the loss of his downpayment. What do you suggest? Should I go ahead since this seems like a very good deal. Also, what are the precautions to be taken in a short sale? Do I need to do an inspection?

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6
Gina Chirico, Agent, Fairfield, NJ
Sat Apr 25, 2009
BEST ANSWER
Homebird,

I can't help but ask if this "10% cash at closing" has been written into the contract or is this a verbal request? I concur with others in that the seller cannot get receive a dime on a short sale which is why I am asking if this is in the contract or verbally? I want to know if the bank is aware that he is seeking this 10% and if so, have they approved and accepted the contract? If you do not agree on the 10% will the seller accept your offer (obviously still pending bank approval). As I am sure you are aware, a seller signing off on a short sale contract is nothing until the bank approves it.

As far as inspection, I would most certainly get a home inspection done. Obvious repairs you will have noted by visiting the property yourself, such as cracked stairs, driveway repairs, paint chippings, etc. but you need a home inspector to point at more serious issues, should any be present. I'm sure you are also aware that short sales are typically sold as is and the bank typically won't make any of the repairs (unless required to by the town should not the town not issue a temporary CO which is comon in some Morris County towns). The seller usually says they have no money and are not going to sink any additional money in a home that they are not making a profit on.


Good luck and do not agree to handing the seller 10% cash back "under the table" at or after closing.

Gina Chirico
Sales Associate
Prudential New Jersey Properties
Livingston Regional Office
973-715-1158 cell
973-992-6363 ext 116 office
Gina.Chirico@PrudentialNewJersey.com
0 votes
Andres Garcia, Agent, Hoboken, NJ
Sat Apr 25, 2009
The seller can in no way take money away from a short sale. Technically, the seller still owes the full mortgage amount and can actually have a deficiency judgment brought against him for the difference between the original mortgage amount and what the bank is getting. It is extremely unlikely that any bank would allow you to pay the seller. It's the banks money. If you provide money to the sellers without the banks knowledge you may find yourself in the middle of a mortgage fraud investigation.

Look for an agent with their Certified Distressed Property Expert designation to represent you. They have special education in dealing with distressed properties.

Andres Garcia
Sales Associate, CDPE
RE/MAX Gold Coast Realty
56 Newark Street
Hoboken, NJ 07030
Direct: 201 795-5200 x340
Andres@MileSquareRealty.com
http://www.MileSquareRealty.com
1 vote
Gina Chirico, Agent, Fairfield, NJ
Wed Apr 29, 2009
Homebird,

In response to your second question, no I've never come across this before but needless to say...not surprised by this behavior. Again, I still would not agree to it and did he ask you himself or through his agent which is really unethical, illegal and inappropriate, amongst other things to say the very least. My advice would be to walk away and not take part in his illegal scam. I wonder if he will still think that holding out for $10,000 cash is a better deal when the bank forecloses on his house.

Bottom line is that some sucker may agree to it but don't let it be you.

Thanks for the "best answer"!

Good luck.

Gina Chirico
Sales Associate
Prudential New Jersey Properties
Livingston Regional Office
973-715-1158 cell
973-992-6363 ext 116 office
Gina.Chirico@PrudentialNewJersey.com
0 votes
Homebird, Home Buyer, 07302
Wed Apr 29, 2009
Thanks for all your responses!
Gina, the seller wants the 10% through a verbal request and this will not be built into the agreement. Obviously, the seller will not accept the offer unless he gets the 10% and the bank will not know about it. I wonder how such people even think they can get away scot-free from their mortgage and also make money on it. Is this common among short sellers to make up some of the money they are losing on the house?
0 votes
Laura Gianno…, Agent, Manahawkin, NJ
Sat Apr 25, 2009
A home owner is prohibited from taking any money away from the closing table in a short sale.

There have been various questions and answers here on Trulia that outline the problems you might run into and the steps you can take to avoid them in short sales. Just seacrh for short sales in NJ in the questions and answers.

And finally, yes you should have an inspection.

Laura Giannotta
Keller Williams Atlantic Shore
0 votes
James Gordon…, Agent, Hamilton, OH
Sat Apr 25, 2009
On a short sale you normally sign a statement that the amounts shown on the HUD-1 are the only money in the transaction. If the sellers lender is alright with the seller getting 10% it would be ok. Just make sure the sellers lender knows.
As for inspections you need to do your due diligence on the property as you would on any purchase of Real Property. Good luck but this seller seems to be unrealistic in their expectations of a short sale.
Web Reference:  http://www.Find1Home.com
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