Forum

Buyer of Short Sale - Asked to pay BoA Letter of Approval

Posted by Christina G on March 10, 2011 at 9:09am in Short Sale Discussions

I am a first time home buyer and have placed a bid on a short sale.  The lender on the sellers end is Bank of America, and I suppose they are accepting my offer, but I was asked if I would be willing pay $1000 for a 'letter of approval' because the seller 'doesn't have the money'. 

 

I've tried researching online what exactly this letter is, and why the heck it would cost $1000.  I am willing to pay for it, if BoA is going to accept my offer and not counter-offer; although from what I understand it's the seller's responsibility, and if they aren't able to pay it the home would go into foreclosure. 

 

Input?

You need to be a member of Short Sale Superstars to add comments!

Join Short Sale Superstars

Email me when people reply –
Follow

Replies

  • Debbie Dunham March 13, 2011 at 2:36am
    We are the sellers and are 'supposed' to go to closing this week on a short sale with Bank of America.  We were told we would not be bringing a penny to closing and in fact, that we would be receiving $1000 at closing as an incentive fee to participate.  This whole process started in September and once the ball was rolling, things seemed to have gone very smooth. Now we are just having trouble actually getting to the table to close.  There apparently is a document that the new mortgage lender requires before a 'clear to close' is issued that they want B of A to sign first and visa versa.  

    Good luck on yours!
  • Barbara J. Rice March 13, 2011 at 2:31am

    Congratulations on your decision to buy a home Christina!

    IF BofA is willing to accept the $1,000 from you and not the Seller, you won't have to pay until close of escrow so there shouldn't be a worry about getting a refund.

    And I'll caution about getting too creative to make this work. You don't want to accidentally end up in a situation that could be considered fraud. Once you've figured out a way to make this happen, if the "work out" doesn't show on the HUD you should consult an attorney.

     

  • Christina G March 11, 2011 at 3:27am

    Thanks everybody!   I guess the best thing, since I'm willing to pay it if that means the deal will go through, is to hopefully have something signed saying that if the deal falls though I can be refunded.. I've already paid $1000 down when I signed the contract for my offer, and that is refundable.

     

    Hopefully it all works out!  I'm so excited to be a homeowner!  Thanks again everybody!  I just wasn't sure if this was something normal or ridiculous or what the heck it was.

  • Bill Travis March 11, 2011 at 12:44am

    It sounds like the lender or investor is just needing another $1,000 to meet their desired net. Many times the seller does not have the money to contribute. You say that you're willing to pay the $1,000 and still have a good deal, so just advise your agent that you will be willing to contribute $1,000 to have the deal approved. He'll notify the lender and it will be noted on the HUD-1 Settlement statement.

    Once I had a lender want a $10,000 note from my seller, and he refused. It was a good deal for the buyer and he was willing to pay the $10k. The bank said they had to have a note from the seller. So we had the buyer sign an agreement to pay the note off in escrow and that served as instructions for the escrow company. The buyer then signed the note. At escrow the buyer paid the note off. All's well that ends well. Everyone was happy.

  • Wendy Rulnick March 10, 2011 at 1:30pm

    Christina - If Bank of America sayd you, the buyer, can contribute $1000 on the seller's behalf, it is still not a guaranty the short sale will be approved.  The short sale with terms may still have to be presented to the investor for final decision.  Hopefully - that will be soon for you.

    Christina G said:

    I know that I'm quite confused about this, as I am a first time home buyer..  You're right, the bank wants the contribution to come from the seller, not from me, but if the seller isn't willing to fork out $1000 (they say they don't have it, and maybe they don't, the property is/was an investment home for them), can I pay this?  I mean, if I'm spending $115,000 on a home, another $1000 isn't going to make or break the deal ya know..

     

    To my understanding, this $1000 is what BoA is asking for to do the Letter of Approval.  Does this mean that they're accepting my offer?

  • Krystal Lee Whaley March 10, 2011 at 11:09am
    Sounds to me it is out of pocket $ that is needed on the approval letter in order to make the deal work. This could be an HOA, other lien they refuse to pay, or even a processing fee. Regardless get it in writing, but if it is just 1000 dollars in order to get your approval. I would pay it. Better than losing a deal you waited on several months over that little extra money.
  • Smitty March 10, 2011 at 11:00am
    This makes no sense.  Get whatever it is they want in writing.  I've never heard of such a thing. 
  • Christina G March 10, 2011 at 10:08am

    I know that I'm quite confused about this, as I am a first time home buyer..  You're right, the bank wants the contribution to come from the seller, not from me, but if the seller isn't willing to fork out $1000 (they say they don't have it, and maybe they don't, the property is/was an investment home for them), can I pay this?  I mean, if I'm spending $115,000 on a home, another $1000 isn't going to make or break the deal ya know..

     

    To my understanding, this $1000 is what BoA is asking for to do the Letter of Approval.  Does this mean that they're accepting my offer?

  • Wendy Rulnick March 10, 2011 at 9:58am
    Christina - I don't think this was explained properly to you.  Ask your agent if they mean the seller cannot come up with a "cash contribution" to satisfy the investor's requirement.  Or is it for something else?  Also, some investors will not accept a cash contribution from the buyer - it needs to be from the seller. Have your agent ask (and have them join our site). 
This reply was deleted.
********************************** like buttons ************************