This is a HAFA short sale and I'm the buyer agent.
The 2nd lien holder, an AZ credit union sent a form demanding that the buyer and the buyers agent sign "agreeing" to the buyer depositing a non-refundable earnest money deposit to be forfeited to the CU if buyer walks before 90 days.
I refused to sign because I'm the agent, not a party to the transaction, and cannot "agree" to any terms of the contract. The CU accepted that but still wanted the buyer to sign.
I argued that we had no way of knowing what else the CU would demand of the first, nor whether they would agree to the amount the first would agree to pay, and asked for some assurance that would be quid pro quo for the earnest money.
Under the new HAFA guidelines there is an aggregate cap of $6,000 for junior lien holders.
My buyer refused to sign, and again the CU said they would refuse to work the file if he didn't sign.
I argued that that there was nothing in the HAFA guidelines that allowed a junior lien holder (who is agreeing to participate in order to get some of the $6000) to require earnest money defaulted to them, and that the first holder may be quite upset if they found out what the CU was doing.
They argued that it was "policy" which could not be changed"
Originally I was talking to the listing agent, but the LM said to have me contact him directly.
Then I asked the LM to have someone in the office who could be authorized to make an exception to the policy, and he said no one could.
So I said that my buyer is refusing to sign; that we request that the file be worked, and again requested LM to escalate the "policy" exception, plus requested the listing agent to notify the first lien holder that the 2nd was holding up the works by this unreasonable demand; and since the first is required to respond within 30 days, we would await the response from the first lien holder before taking other action.
The LM came back and said he was giving us the exception out of the spirit of cooperation.
Has anyone else had this type of experience from a first or junior lien holder. What recourse is there, other than just taking the hard line like I did and refuse to allow the junior lien holders profit if a buyer has to walk.
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TN, I must be missing something. I don't see where you showed benefits for the buyer. If I saw benefits for the buyer, then I would certainly pass them on to my buyers so they can make a more educated decision on NRDs; after all it is their decision.
The Negotiator replied:
I think you are trying to understand this from the wrong point of view. You want whats best for your buyer (obviously). Agreeing to the non-refundable deposit (hereinafter “NRD”) is a term that a buyer doesn't want, so, of course you would not agree (I wouldn't either in your shoes). Put yourself in the sellers/lenders shoes. Would you want a "SERIOUS" buyer? A buyer who said "I want this house so bad, I am willing to put my money where my mouth is." I hate to say it, but, a buyer is not a "serious buyer" unless they have skin in the game. If you were the listing agent, I think you would agree with me.
In a non-short sale would the homeowner want a NRD? Of course, they want a serious buyer. In short sales, because of the approval time, buyers are walking to much because they don't have anything to lose which is causing many problems for the lender and homeowner (starting over with a new buyer). 2--4 months goes by before the deposit goes non-refundable which gives the buyer an EASY out.
This debate comes down to different points of view from different parties.
However, to speak to your point directly. If you buyer was serious about the property, why wouldn't they put up a NRD? Have you had buyers walk on short sales for some "lame" reason? I know I said I would not like this whole thing if I were in your shoes, but, I think I just talked myself out of that statement. I think I would want my buyer to sign the NRD because that tells me my buyer isn't walking for some lame BS.
Good talks...
The Negotiator, I'm still waiting for you to tell me what the benefit to my buyer is for making a non-refundable deposit.
I know the "potential" benefit to the seller/lender/listing agent. However, I really don't see the benefit to the buyer. If I could see a benefit, then I would not advise against it.
And I say potential because the buyer can elect to walk anyway, but just wait until the 90 days before declaring that he's backing out, or use another reason, such as he's researched the neighborhood or the CC&R's and find that they are unacceptable for various reasons. He may not need to wait 90 days if he gets the CC&R's early and objects to them, or finds that a sex offender lives in the block.
I educate my buyers that it can take time to get through the short sale, and as long as the listing agent has a good closing ratio, and progress is being made then there's no reason to walk. The other thing is that I always caution my buyers to look at enough houses, and check out the neighborhood and be certain that they want this house before making an offer. That way I'm fairly certain that they'll hang in there.
I obtained a legal opinion on the questions about this scenario.
Thom Colby said:
Bill -
Is this in SoCal ? WOW !
Thom Colby
Bill Travis said:
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