If you are buying a short sale and are contributing to 2nd lender, does the contribution amount have to be included in the GFE? My broker just completed and submitted my gfe and I realize it doesn't incllude contributions.

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This is an excellent question!! I wish I knew the answer :) Hopefully one of our lender or title company members will be able to answer it. I'm going to send it off to my closer as well.

No it does not go on the GFE.  It is part of the purchase price that goes on the GFE but nothing more. 

 

Jeff. The cash contribution from the Buyer would not be part of the purchase. If it were part of the purchase the short sale lender would want it. Now it could be a POC item on the buyer side or it could be in the 100s under the "Gross amount due from buyer" section and then placed in the 330s on the seller side under m" Gross amount due to seller". But it's not a part of the purchase price.

The last one I did the buyer contributed $10,000. The HUD is attached.

But the question is would this have to be on the buyer's GFE? My guess is since this is in the 100s on the HUD the answer is no.

Attachments:

It would be interesting to see the entire HUD. I don't understand how the foreclosing lender got more than the contract price.

The 10 k was brought to closing by the buyer on line 104. It was credited to the seller on line 404. then it was just added to eh mortgage payoff.  This was a Suntrust deal. The buyer was also using financing with 20% down. Both lenders approved the HUD.

The lender received more than the purchase price because the total closing costs were less than $10,000.

Maybe I picked the wrong week to stop doing drugs! ;)

In your short sale, the foreclosing lender required a cash contribution from seller for 10k? And the buyer paid for that cash contribution? If that is the case, then it would make sense.

 

Yes. The buyer is paying on behalf of the seller. The exact same scenario Sandy is asking about.

The credit in section 400 threw me off. Same concept as Sandy but a different scenario. In Sandy's scenario, she is making a cash contribution to the 2nd lien holder. I am assuming the first is giving the 2nd something below what the 2nd is willing to accept.Thus, Sandy must make up the difference.

The way you handled your short sale took balls. If I was Suntrust and saw that the buyer was willing to pay an extra 10k, I would increase the purchase price by 10k and still require the seller to make a 10k contribution.

The key in Bryant's situation is why was the $10,000 required?

If it was an appraisal issue then the bank just wants to get its net to meet investor requirements and move on. Which is what I'm guessing was the deal because they allowed the buyer to just pay the extra and move on.

If it was a situation where they believed the seller was sheltering the $10,000 and could pay it ... then your scenario would have been more likely.

Hi Toby. The short sale was an investment property and the sellers were current on payments. The 10k cash contribution was to buy a full waiver of deficiency. Suntrust didn't care who paid the money so we asked the buyer. He  wouldn't pay it so we placed the property back on the market with paying the 10k a requirement of the buyer. We found a buyer in 2 days willing to pay it.

It was all fully disclosed in the contract and on the HUD. All parties were happy.

If it is an appraisal issue, then the purchase price needs to be adjusted. Chances are that the foreclosing lender saw some assets or income and that's why they asked for seller contribution.

@Bryant - It makes no sense to me why they allow the buyer to contribute to a request they make from the borrower! I guess whatever they can do to squeeze more money out of this, they will do.  ;)

Hey can you help me on my post regarding BofA approval letter? Just got one and it doesn't look right.

Thanks Bryant and Jeff for your response.  I am also contributing 10k as a cash contribution to the 2nd lender.  It is not part of the purchase price.  And it looks like my GFE only lists the amount being financed.  I woke up in the middle of the night in a panic when I realized that I don't see the closing costs on the GFE to include the contribution.  Isn't the contribution part of the settlement due at closing?  My broker says we can't be off more than 10% of the GFE at closing but perhaps he means title and other escrow charges.  Does the GFE need to match the HUD? How would my lender know how much cash I'll need at closing to verify I have enough funds during underwriting. I just need confirmation because I can't contact my broker until Monday and I'm nervous!  Thanks in advance for your expert feedback.

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