Bank says Seller owes $10K, seller can't pay... now what?!

Hello!!..

My husband and I are on a journey that involves a 9 month short sale with BofA that is just about (hopefully) to close.  We got word back from the bank that the seller needs to come up with 10K in cash and then our offer has been accepted.  The seller does NOT have this 10K in cash (if she did, prob would not be interested in the short sale) and we have agreed to come up with 8K if she comes up with the 2K.  Now what happens with this 8K?? Is this just a lost cash to my husband and me and we have to look at it as it is a good deal with the 8K?? I hate to think that I just gave her the 8K with no tax benefits or ANYTHING coming back to me for it.  Please help...

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Permalink Reply by Bryant Tutas on July 1, 2010 at 10:48am
Hi Jess. The 8k would go on your side of the closing statement as a contribution towards the mtg payoff. MY guess is that you could write it off as a closing costs but you will need to speak to your accountant about this. It's not going to the seller it's going to BofA. If the deal still works for you then go for it.
Permalink Reply by Kimberley Kelly on July 2, 2010 at 1:15am
I'm with Bryant. Buyers forget that the main thing they are getting with a Short Sale is an extremely well priced home! If that 8K is applied to the purchase price, I bet you are still below comps in the neighborhood..take the deal!
Permalink Reply by Pacita C Dimacali on July 14, 2010 at 8:07am
Please remember that as a condition of approving short sales, sellers do not receive proceeds from the sale.

In a recent transaction, the negotiators also asked for contributions towards payoff -- they asked for the contribution from buyers, sellers and even agents in terms of reduced commission. The buyers came up with the contribution especially since they knew that they're buying the property for significantly less than market value based on comps. They were getting a very good deal. Additionally, their tax basis was based on purchase price, not including their contribution. So that, too was a factor that made them feel right about making that contribution.

Do check with your CPA about how to treat that contribution. It may be considered as part of your closing costs.

Good luck.

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