Q: I’m not sure what to do. We are buying a home that is a short sale. I have an executed contract in my hand that was signed by the seller. But the lender on the short sale now wants to come in and change the terms of our deal. They were willing to take less to close the deal. Now they want more.
Can they get away with this? My Realtor and the attorney at the title office are telling the bank that they can’t change the terms but the bank doesn’t seem to care. It’s as if the person at the bank got word from a higher up that he could not allow the sale at the original sales price and now has to change the deal.
So what do we do? If we really want this house are we stuck paying more? Is a contract not a contract? Do we just say forget it and maybe they won’t try to stick us with this extra money? We really want this house but we don’t want to pay more.
A: You’re the short sale buyer in this transaction. A short sale in residential real estate is a situation in which a buyer comes to the table and offers a certain amount of money for a home. However, that sum is not enough to allow the seller to pay the expenses of the sale and to also pay off the lender. Since the seller is short funds to close, the sale is called a short sale.
But just because a seller accepts your offer to purchase a home that is going to be a short sale does not mean that the lender must accept the offer. Once the seller has an offer in hand, the seller then goes to his or her lender and asks them to approve the short sale at the amount listed in the contract.
The lender usually requests a closing statement that estimates all of the closing costs relating to the short sale to determine the exact amount the bank will receive from the sale. The bank will also request information from the seller to determine whether they should or should not approve the short sale. However, the short sale process can take some time. In some cases, depending on the bank, a short sale can take three to six months, or longer.
The seller of the short sale gets his or her approval for the sale when he or she receives a letter from the bank outlining the terms the bank is willing to accept for the short sale. For the most part, the payoff or demand letter from the bank should say that the bank is willing to accept a certain sum of money upon the sale of the property on or before a certain date.
Some short sale lenders will try to add additional provisions to the terms of the approval for the short sale. But the bare minimum that you would need to finalize the short sale process is a letter that tells the closing agent or title company that upon the payment of a certain amount, the short sale lender will release its lien (the mortgage or trust deed) on the property.
From your letter it appears that your seller may not have received an approval from the short sale lender for your deal or that the lender reconsidered what they are willing to accept for the short sale.
Your terms with the seller should remain firm. If you can’t get the home for the price you want, you should consider walking away from the deal. If the short sale lender wants more money, it may be that the lender believes that the seller has the ability to come up with that money. If that’s the case, the additional funds should come from the seller and not from you.
Given these choices, you’ll have to decide whether the house is right for you and whether you are willing to pay more for the home.
Only you can decide what to do. You can see if the seller is willing to put some more money into the deal. In some cases, the real estate brokers are willing to cut their commission to save the deal rather than have to start the process all over, the seller can find the money to make the deal go, or you can come up with the money to get the home.
You should know that it’s not unusual for lenders to look at the closing costs and other fees and then try to get more money out of the deal by pressuring the buyer, seller, title company and real estate agents. The solutions for each deal tend to be unique and vary according to the extent of the short sale, the personalities involved and how eager or desperate the parties to the transactions are to get the deal closed.