WHY WON'T THE BANK PAY MY CLOSING COSTS FOR A SHORT SALE?

By
Real Estate Agent with Coldwell Banker Vanguard Realty

WHY WON'T THE BANK PAY MY CLOSING COSTS FOR A SHORT SALE?

When you write an offer on a short sale, the bank is losing thousands and sometimes hundreds of thousands of dollars. The only thing the bank cares about is their net - how much money they are receiving after all the costs are deducted from the sale. Very often, this doesn't include any room for paying closing costs.

Astute buyers and their agents will offer to increase the offer to pay closing costs, but the bank sees this as more money they could put in their pockets to help cover their loss. They only want to pay the traditional Seller closing costs and any lender-required costs that the Buyer can't pay for with certain loans, such as VA and FHA.

Bank Policies

Some banks have a policy that they will not pay buyer closing costs no matter what. Even if the buyer is willing to add it to their net. Even if the house will appraise. They just don't want to do it.

Why did the bank pay my friend's closing costs?

Some banks don't have a policy against paying buyer closing costs and sometimes the loss isn't so great, so the bank is willing to pay some buyer closing costs as long as the net works out for them. Also, be sure your friend was buying a short sale, not a foreclosure. Banks are much more willing to pay closing costs for a foreclosure.

Some surprises aren't fun.

There was a contract on a short sale and the offer was submitted with a closing costs request. The buyers waited almost 90 days for the answer from the bank. After waiting three months, they were told the bank wouldn't pay closing costs. That was not a fun surprise. Fortunately, the lender could roll the closing costs into their loan for an increased interest rate. But what if that were not possible?

If you can gamble on closing costs, then go ahead and ask. But don't be surprised and have a Plan B in case the banks says No.

Posted by

 

-------------------------------------------------------------------------------

About the Author: Sharon Alters works with her husband, Frank. They are in the top 5% real estate agents for production in the Jacksonville Florida area, specializing in Military and Corporate Relocation in the Fleming Island, Orange Park, St. Johns, St. Augustine and Beaches areas. Their local knowledge can help Relocating Buyers find the perfect lifestyle, whether it is a Castle on the Ocean, or a Cottage in the Country. 

Call/text 904-673-2308 or sharon@teamalters.com

More information about houses for sale and area news/events

Serving 

           Jacksonville * Fleming Island * Orange Park * St. Johns * St. Augustine * Ponte Vedra

If Original Photography, All Rights Reserved. 

Subscribe to my blog - Orange Park Realtor, Fleming Island   Realtor

Connect with us on FacebookFollow us on TwitterVisit Our Profile On ActiveRainLinkedInYou Tube

Google + Fleming Island FL Real EstatePinterest

 

Topic:
Home Buying
Groups:
Sharing Information of Short Sales
Advice for Buyers
Short Sales Pre Foreclosures Bankruptcy and More!
Active Rain Newbies
Short Sales and Forclosures ONLY
Tags:
short sale answers

Anonymous
Post a Comment
Spam prevention

Accessibility option: listen to a question and answer it!

To submit the form,
drag the tshirt to the circle on the side.

Type below the answer to what you hear. Numbers or words, lowercase:

Spam prevention

Accessibility option: listen to a question and answer it!

To submit the form,
drag the music-note to the circle on the side.

Type below the answer to what you hear. Numbers or words, lowercase:

Show All Comments
Ambassador
1,461,656
Karen Kruschka
RE/MAX Real Estate Connections - Manassas, VA
- "My Experience Isn't Expensive - It's PRICELESS"

Sharon  I always warn my buyers another definition of short sale is surprise

September 17, 2012 06:36 AM #15
Rainmaker
565,302
Than Maynard
Coldwell Banker Heart of Oklahoma - Purcell, OK
Broker - Licensed to List & Sell - 405-990-8862

They should understand what a short sale is before making an offer. I explain it the same way, "If you offer enough they will PROBABLY pay CCs. But all they care about is the net!"

September 17, 2012 06:49 AM #16
Rainmaker
1,236,394
Richie Alan Naggar Author PEARLS SERIES of books
People first then business! Ran Right Realty Riverside, Ca - Riverside, CA
on LIFE and LOVE plus Real Estate too!

Everyone assumes they have nothing to lose by asking for the closing costs....Thus the ploy which can drag out the transaction

September 17, 2012 06:50 AM #17
Ambassador
495,115
Brian Schulman
Coldwell Banker Select Professionals, Lancaster PA - Lancaster, PA
Lancaster County PA RealEstate Expert 717-951-5552

Frank & Sharon, thanks for the insight.  Short-sale banks are really being short-sighted by refusing to consider closing costs.  They could be losing qualified prospects and wasting time waiting for another offer.

September 17, 2012 07:01 AM #18
Rainmaker
548,739
Gary Frimann
Eagle Ridge Realty / Signature Homes & Estates - Gilroy, CA
California Broker and REALTOR

Best bet is to not count on the banks paying those costs.  Sometimes, I think people get the short sale process and buying an REO confused, especially when Fannie and Freddie offer incentives, like paying for closing costs to more their properties.

September 17, 2012 07:34 AM #19
Rainmaker
238,745
Vanessa Saunders MBA MIMC CIPS FIABCI
Global Property Systems Real Estate - Nyack, NY
From Manhattan to the Catskills of New York

Great information. Short sales and closing costs are a complicated business.

September 17, 2012 07:35 AM #20
Ambassador
742,806
Jerry Newman
Green Home Realty, 210-789-4216,www.Selling-SanAntonioHomes.com - San Antonio, TX
Texas REALTOR, San Antonio Military Relocation

Hi Frank and Sharon. Thanks for pointing out why closings costs may not be paid for Short Sales. It always best to have a Plan B as you have suggested if the buyers need closings costs.

September 17, 2012 07:58 AM #21
Rainmaker
73,388
Chicago Real Estate
Goran Utvic | Chicagoland Brokers Inc, Chicago IL 60656 - Chicago, IL
Goran Utvic

Excellent information Frank And Sharon. To wait the 90 or so days just to get your short sale offer rejected because the buyer wants closing costs paid would really stink!

September 17, 2012 08:05 AM #22
Rainmaker
250,845
Bruce Kunz
Bruce Kunz @ Veltri & Associates, 866-483-5874 x464 - Howell, NJ
REALTOR®, Howell NJ Homes for Sale

I still think it is amazing how many people expect another to pay for their stuff.
Housing is one of the only situations where the financing party will give money away (dare say none of us would!) and yet it is still not enough. Sure, ask for "it", but Plan B should be to get over it and move on toward closing.
If you can't afford to buy the home, how exactly do you expect to stay there?
Bruce

 

September 17, 2012 08:12 AM #23
Rainer
158,919
Glenn Freezman
Family Abstract, Inc. - Horsham, PA

Many of the short sales banks have already been in full due to the mortgage insurance we as Amercians allowed them to take for pennies on a dollar.  The banks have no incentive to move property that they have already been made whole on.  That what the "MIP" insurance did for the lender, it paid the borrowers debt in full, using the money it guaranteed from the government.... AKA ME AND YOU!!

September 17, 2012 08:14 AM #24
Rainmaker
682,719
Gene Mundt
www.genemundt.com - Joliet, IL
Mortgage Lender - Chicago/Chicagoland Mortgages

Frank and Sharon:  You do a good job explaining that there are no hard and fast rules regarding real estate transactions anymore.  One cannot compare one transaction to another.  It's simply impossible these days.  Exactly why it's imperative to work with true professionals that can advice and advocate for you throughout the entire process.  Congrats on the Feature!

Gene

September 17, 2012 10:01 AM #25
Rainmaker
1,267,258
Carla Muss-Jacobs, Principal Broker/Owner
BuyersAgentPortland.com | (503) 810-7192 Portland Metro Exclusive Buyers Agent | 100% Buyer Representation ~ 100% o... - Portland, OR
Buyer Focused ~ Buyer Results

Oh this was one is a good one Frank/Sharon!  I have the conversation with buyers all the time that the seller may accept the offer WITH seller contributed closing costs . . . in a short sale scenario it's probably NOT going to fly with the lender -- for the reasons you state!!

September 17, 2012 12:44 PM #26
Rainmaker
668,731
Pamela Seley, REALTOR®
REALTY EXECUTIVES OTF - Temecula, CA
Menifee Lakes California Real Estate

In my opinion, it's a waste of time asking for buyer's closing costs on a short sale. It just disappoints the buyer when they find out 4 months later the seller's lender won't pay their closing costs. Go figure. Buyers should be prepared to pay their own way when buying a short sale. 

September 17, 2012 01:21 PM #27
Rainmaker
198,779
Barb Merrill
Cactus Mountain Properties, LLC - Tempe, AZ
GRI, Associate Broker

Very good explanation!  Most banks are held hostage to the investor that backed the loan.  It never hurts to ask for the closing costs to be paid.  Just go into it not expecting to receive.  If it gets approved, count it as a gift!

September 17, 2012 02:19 PM #28
Rainmaker
973,783
Sharon Alters
Coldwell Banker Vanguard Realty - Fleming Island, FL
Your Fleming Island Relocation Agents.

Debbie, we have Buyers who are choosing new construction over any resale home just because they need to have their closing costs paid.

Ginnie, there are some instances where the servicer for the investor will and is able to pay closing costs, but it should be a bonus, not a necessity. Yes, some can roll it into the loan, so the deal can still go through if the buyer  can afford the payment.

September 17, 2012 05:04 PM #29
Rainmaker
973,783
Sharon Alters
Coldwell Banker Vanguard Realty - Fleming Island, FL
Your Fleming Island Relocation Agents.

Chuck, there is no set pattern that's for sure. It's the wild wild west when it comes to short sales.

Michael, that is true, but rules and policies can change mid-stream and banks can be sold mid-stream. There are no guarantees.

Rich, oh my - just goes to show you there is no way to predict what they will do.

Corrine, short sales are for people who are fairly strong financially, not for those who can barely afford inspections, etc.

Harry, exactly!

Karen, I love it! Will remember this definition for the next short sale buyers.

Than, yes they understand, but they still want to ask.

Richie, yes it will drag out the tranaction if the bank doesn't agree to the terms of the HUD-1 sent to them.

Brian, yes, it is costing them money to hold the house and the closing costs might even it out.

Gary, most buyers don't even know what a short sale really is, so they are likely to confuse the incentives as well.

September 17, 2012 05:59 PM #30
Rainmaker
973,783
Sharon Alters
Coldwell Banker Vanguard Realty - Fleming Island, FL
Your Fleming Island Relocation Agents.

Vanessa, short sales are not for the faint-hearted.

Jerry, Plan B is a must with short sales.

Goran, it was not fun, but we did have a Plan B.

Bruce, I find that many young buyers want to spend their liquid cash on improving the house.

Glenn, this is a little known truth, and why the PMI companies can stop the deal by not agreeing to an amount that is offered.

Gene, yes it takes a creative negotiator to bring it to the closing table.

Carla, it seems many of us have thesd discussions, as we should, and sometimes it works and sometimes it doesn't.

Pamela, agreed. But try to tell that to some buyers. They think they are the exception.

Barb, getting closing costs is a gift for sure, but not a definite. The banks are servicers and they must answer to the invester.

September 17, 2012 06:39 PM #31
Rainer
198,810
Beth Paterson
Reverse Mortgages SIDAC, NMLS #173899 - Saint Paul, MN
NMLS #342859

Providing buyers "worst case" scenarios so they can have a plan B is great customer service and pays off in the end.  And it never hurts to ask because you have a 50% chance of getting a yes, but one needs to be prepared for the no too.  Great advice!

 

September 17, 2012 08:10 PM #32
Rainmaker
973,783
Sharon Alters
Coldwell Banker Vanguard Realty - Fleming Island, FL
Your Fleming Island Relocation Agents.

Beth, thanks! Plan B works in pretty much any situation, but it's a must in short sales!

Sharon

September 18, 2012 07:49 PM #33
Rainmaker
319,465
Inna Ivchenko
Mannis Real Estate Group - Calabasas, CA
Los Angeles / Valley Homes

Lenders are in the business to make money, not spend it. The lender is already likely taking a bath on the sellers’ loan, and will be unwilling to pay for much in the way of closing costs. This is important to note because if the preliminary HUD arrives and it shows the “seller” paying closing costs that the lender won’t allow, the whole transaction is at risk. Even the purchase agreement is between the seller and the buyer, the lender must approve all terms. These include closing costs. Typical closing costs a lender will NOT pay include:

  • Title evidence
  • Utility bills
  • Repairs (don’t even ask!)
  • Well/septic tests
  • Home inspection report
  • More than 3 percent of the buyer’s closing costs( here in CA we don't ever see that they pay)
  • Appraisal re-inspection
  • Courier or wire fees
  • Recording service fees

 

April 12, 2014 05:28 PM #34
Anonymous
Post a Comment
Spam prevention

Accessibility option: listen to a question and answer it!

To submit the form,
drag the cat to the circle on the side.

Type below the answer to what you hear. Numbers or words, lowercase:

Show All Comments
Rainmaker
973,783

Sharon Alters

Your Fleming Island Relocation Agents.
Want to put our experience to work for you?
*
*
*
Spam prevention

Accessibility option: listen to a question and answer it!

To submit the form,
drag the clip to the circle on the side.

Type below the answer to what you hear. Numbers or words, lowercase:

Additional Information