Short Sale CASE STUDY: 020

Putting Out Fires

I have mentioned before how important it is to have great members on your team when it comes to handling short sales.  Of course this is true with regular real estate transactions too.  But short sales can be particularly tricky because of all the extra documentation a complications that can arise from them.

The escrow officer is use is a rock star.

More than 2 weeks prior to this file needing to close she was preparing the transaction to look for anything that could prevent us from closing and was able to find an issue with the sellers relocation incentive.

There was a curious entry on the approval letter that showed -$250 as a line item and she didn’t understand where this was coming from.  After some exploring and discussion with the banks negotiator, we were told that the seller needed to bring in $250 at closing in order for the transaction to go through.

This was obviously a shock to me because I was under the impression (based on the Approval to Participate) that the seller was getting at least $750 to help them move.

As it turns out, FHA would only pay up to $1500 towards the 2nd lien but would allow $2500.  I had the 2nd approved at $2500.  I discussed this in a previous post but didn’t realize that it takes $1500 from FHA and the $1000 relocation fund from the seller.  And because we hadn’t closed this within 90 days of being approved to participate the seller was now only eligible for $750. (Remember this is our 3rd buyer).  This is why they wanted the seller to bring in $250.  $1500 from FHA + $750 seller relocation funds means that we only had $2250 available the 2nd.

A shortage of $250.

Here’s where it really sucks…

When I first heard from the negotiator that FHA would only pay the $1500 towards the 2nd lien, I decided I would try to negotiate that lien down to $1500.  I really wanted the seller to get that relocation money.

A few emails later I had a new approval letter from the 2nd lien for $1500!

So why does that suck?

Because after I submitted that to the negotiator for him to adjust the approval letter he told me that they would pay “up to” $1500 and that they were now only going to pay $750 and the sellers $750 would cover the rest…

In trying to get the seller some extra money, I ended up saving the bank 750 bucks.

Yuck.

I did manage to prevent the seller from having to bring in the $250 to cover the shortage, but still, that’s pretty lame.

One More Bump in the Road

With all the numbers figured out, we are almost ready to close.  Seller has been packing up and cleaning out the house, paperwork is in order, no loan docs or appraisal needed since the buyer is paying cash…

Or is he?

More about that twist in the next post.

Stay tuned.

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