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.

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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. 

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Rainmaker
971,016
Sharon Alters
Your Fleming Island Relocation Agents.
Coldwell Banker Vanguard Realty

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
Rainmaker
971,016
Sharon Alters
Your Fleming Island Relocation Agents.
Coldwell Banker Vanguard Realty

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
Rainer
185,038
Beth Paterson
NMLS #342859
Reverse Mortgages SIDAC, NMLS #173899

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
Rainmaker
971,016
Sharon Alters
Your Fleming Island Relocation Agents.
Coldwell Banker Vanguard Realty

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
Rainmaker
266,932
Inna Ivchenko
Los Angeles / Valley Homes
Mannis Real Estate Group

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
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