Closing Costs on a Short Sale (square footage, foreclosure, 1%, negotiation)
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We are putting in an offer on a short sale this week. The asking price is $94,000, and we are prepared to offer that amount. However, we'd like to ask the bank to cover some of the closing costs (3% of the selling price). We are going with the listing agent, which I know isn't always the best course of action, but he's shown us several houses, so is "our" agent as well as the listing agent. He said that closing costs would be around $3,000, and our mortgage broker says closer to $4,500.
We're in Florida... does anyone know where the discrepancy is coming from, and which would be more likely to be accurate? We are doing an FHA loan with 3.5% down.
Some of your closing costs will be specific to the value of the property, some will be specific to the lender/title company etc that you opted to work with. I'd be inclined to lean towards your mortgage brokers estimate, as they will be more in tune with their fees (of course) and any escrows/prepaids etc.
No telling what the bank may agree to. My most recent short sale transaction, the bank only agreed to 1% in CC..
I've never seen a seller pay anything out of their pocket in a short sale (except for one instance where the seller signed a promissory note to the bank)
As part of the short sale approval, the bank will typically agree to a percentage/amount of the buyers closing costs, along with the sellers closing cost, any past due HOA association dues, any amount to pay towards a junior lien, realtor commissions etc
I doesn't make sense to me. By "paying" closing cost, past due and all that actually means bank will see less than selling price amount.
Let me try to ask the same question using some numbers...
First, short sale is a transaction when bank agrees on lower debt amount + $$ (at the closing or promisary note) or not.
If the house was listed for 100K and sold, bank didn't see all 100K - bank will get 90K after paying realtors $$ and closing cost. And even less than that if bank has to pay whatever is past due.
If someone's mortgage is 150K and back get's only 90K, 60K is up for negotiation.
If bank is paying everything and getting less $$ than original loan amount, why bank is interested in doing short sale at all?
3% is really pushing it especially in the short sale.
Maybe a foreclosure where Freddie/fannie is involved they may give you 3%.
Really closing cost (in most circumstances) are 1% of closing costs. People try to ask for 3% because the other 2% is really the prepaid real estate taxes and homeowners insurance that's required. So most people asking for 3% are trying to get a year's free property taxes/insurance paid.
It doesn't hurt to ask but remember the banks have already calculated their overall lost already.
because the current homeowner may not be paying the mortgage at all, the bank receiving 90,000 is better than nothing.
How it's better if bank can foreclose on that property, sell it for the same 90K and go after remaining $$? Sure bank will save some money on some expenses, but still... it doesn't make sense why they will let someone go debt free...
How it's better if bank can foreclose on that property, sell it for the same 90K and go after remaining $$? Sure bank will save some money on some expenses, but still... it doesn't make sense why they will let someone go debt free...
It's very complicated these days with short sales. The bottom line for the banks is often hidden because of kickbacks (yeah, I know the government doesn't like to use the word, kickbacks). But banks get "credits" from the government for successfully approving short sales.
I looked at the comps last year of these 2 homes sold in my neighborhood. Same builder, same square footage. The foreclosure sold for 10% more than the short sale. Than you asked yourself...why?
Duh, it's caused the bank with the short sale received credits for the short sale. So what sucks for comps is there is no way of knowing what exact "credits" banks receive in a short sale. Because there is no way a short sale should sell for less than a foreclosure? Right?
Think about it. There is millions and probably billions of kickbacks the government is giving back to lenders to make it "look good" that they are approving more short sales.
From personal experience, closing costs was about $10K for me on a condo that was $225K. We actually paid another grand on top of that too, in order to cover property taxes the sellers couldn't afford to pay in their final quarter. The place was originally bought for $350K and the sellers mortgage amount left was $355K lol...this was all back in August 2011.
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