Money After the Short Sale? Maybe.

In the vast majority of short sales, the seller does not receive any money.  The bank and perhaps some other creditors lose thousands of dollars, and so they will not permit the seller to receive any proceeds from the sale.

You may have to pay…

In some cases, the seller may be expected to pay some money at closing.  In most cases where the seller has to contribute something, the amount the seller pays is just to make up the difference on pro-rated taxes, a higher-than-expected water/sewer bill, or some other shortfall that appears at the last minute.  For example, if the mortgage lender agrees to take a minimum of $132,655.17 and the closing costs are a little higher than expected, the lender will likely be unwilling to take less than the precise amount they stated.  Therefore, the buyer, seller, real estate agents, or other parties must contribute in some way to make up the shortfall.  In some cases, the buyer will refuse to pay more, stating that they will not pay for the seller’s costs.  In such situations, the seller may have to bring some money to closing to cover extra closing costs.  Typically that amount would be fairly low, ranging from a few dollars to a couple thousand dollars.

You may even have to promise…

In some short sales, the mortgage lender may stipulate that the seller must contribute some amount of money or the lender may ask the seller to sign a promissory note to pay back some of the remaining debt.  The mortgage company must declare any such stipulations in their short sale approval letter, so the seller would know well in advance.  In most short sales these days, the mortgage company does not expect the seller to contribute any money as it may be apparent that the seller does not have any funds to give.

But, you may receive money…

In some short sales, the seller may be given some money at closing or upon post-settlement move-out.  The federal government’s Home Affordable Foreclosure Alternatives (HAFA) program provides $3,000.00 for eligible sellers.  Loans insured by the Federal Housing Administration (FHA) may grant $750.00 to $1,000.00 to the seller as a moving incentive.  Some mortgage lenders, like Bank of America and Chase Home Finance, offer to pay $3,000.00 up to $25,000.00 to sellers at closing if they cooperate with the short sale of their property.

The real benefit.

Sellers in a short sale should expect to receive no money at closing.  If they do qualify for a special short sale program, then they should be grateful to receive what little money they do.  The greater financial benefit to the seller is that they will no longer have to maintain a property they cannot afford.

For more information, contact me and see how our team of professionals can help!