To make a long story short:  I am buying a short sale home. The house was selling for $359,900,  I made an offer for 330,000. The bank countered by $5,000.  I accepted the counter. After waiting over a month, the bank accepted the offer and said they will approve the sell.  Yesterday, my agent called me and said that the listing agent informed her that I have to also pay an extra $5,264.00 for a Mortgage Insurance Contribution that must be paid before closing, which is the end of December.  I assume this came from the bank.  Since I really want the house, It looks like I will have to bite the bullet and fork up the extra money.

Would someone please explain to me what is the purpose of the buyer having to pay a Mortgage Insurance Contribution. What the heck is this!

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Please keep in mind, not all short sales are great deals in reality.

AMEN, not all short sales are great deals, that is up to the buyer to decide and is no different than an equity sale.

Brent you are spot on.  Everyone needs to remember that there is no approval unless it is in writing.

Richard, I'm a fan but on this one Smitty and Brent are spot on. Soooooo many times the file is packaged up with an accepted offer then sent off to investor and MI. Obviously the negotiators job is to mitigate as much loss for there client however they must report back any and all counters from both investor and MI.

I have to disagree with you as I believe buyers have been the ones abusing and taking advantage of this current niche of real estate. It's largely due to a lack of knoledge from proessional buyers agents as well as the perception that since this may take long they have the ability to write up offers and walk when they want. If collectively as a profession we buttoned up our deals and locked in ready, willing and able buyers I promise more transactions would close, more sellers would be saved from foreclosure and more agents would get paid.

Also whyis the agents commission even an option for paying what's asked from the sellers MI company? Do we ask the attorney to give up half of his retainer when his client racks up another charge? Do we ask the accountant to pay a portion of a balance when he ends up owing taxes? How about asking our doctor to pay from his salary because the insurance won't cover!

I mean why is this even a question. Let's not forget what everybody else seemed to miss in this thread. The buyer said the home is listed at $359,900. She offered $330,000 bank countered with $5000 and she accepted. Now MI asked "the seller" for a contribution of $5264 and since the seller doesn't have it the buyers willing to pay in order to get the home she loves. So it seems she's in for $340,264. If in fact the home is really worth the $359,900 isn't she still getting "a deal" ??

Good morning Eric and, great to have you back in the discussion board.  Okay, here are a couple of key questions:

  • Since the buyer have no input in the negotiations, why should he/she pay for additional cost later, unless they deperately want the property?
  • If the negotiators are skilled at their game, then why can't there be simultaneous discussion involving this cost early on, in addition to approx. projected cost given to buyer at that time.  All industries use estimates.
  • I agree with Smitty to never show your hand on your highest price, that's the reason I have a drop dead pricing.
  • If the negotiator is very skilled then, why can't he/she spread this costs within the transaction?  This is done in other major industries.  This is accomplished by partnering using percentages or benefit analysis.
  • Lastly, I don't agree with others who are saying buyers should carry this cost. What written universal industry standards have been established that dictate this? Has NAR established anything in writing as such?  Are there any local or state regulations stating this?

Also, just because the home above listed for $359,900 doesn't mean that it is actually worth that price in the market.  That's 2 different things.  The home, when actually appraised may only be worth $330,000 what she offered originally.

Here in Tempe, AZ about less than 5% of the homes sale for there listed values.  It very rare.  Then, what if the home don't appraise.......who's going to pay the difference?

I am just jumping in, because, Richard,  I think you are missing ONE BIG THING- This short sale was not approved when agent came back with MI counter. It was still negotiated and I do not know buyer's agent in this particular deal, but I always tell my buyers that until they have written approval in hand, anything can happen. Also- as to price of $359,900, in short sale situations I rarely see listings being overpriced- usually we have problem with prices being too low and banks not approving offers ( well, actually now, when I am looking at this problem- that was the case. If bank countered with $5000 more ( not MI- Bank), that means that this property was appraised at a lot more than offered price.     And for Juanita- our buyer :)- if you like this house and you know you are still "getting a deal"- there is nothing weird about all this, just make sure you get approval in writing before you pay. 

Hi Anna,

Regarding, "in short sale situations I rarely see listings being overpriced", my agent and I have seen this happen pretty often here.  I guess it all depend on owner, debt, LA and geographic locations and time as well.

Regarding, "If bank countered with $5000 more ( not MI- Bank), that means that this property was appraised at a lot more than offered price.", I don't necessarily agree with that, do you know the appraised value.  It may also depend on other varibles, including amount of debt owed, etc.

Regarding whether or not Juanita still think she is getting a deal, as they say, "beauty is in the eye of the beholder", and I've said in some of my other posts on this site that if buyer wants it bad enough, then the $5000 may not matter.  Some people don't mind paying more, regardless.  I do, unless I get value for it.

Hello Richard,

First - I have never, ever seen bank making counter based on debt owed. Value, value, value ( right now)- that is what they are looking for.  Do not get me wrong- they may ask for note to be signed, cash at closing from seller ( that is what probably happened with MI in this situation), but again- never counter offer of the sale price based on debt owed.  Regarding "overpricing listings", I am sure you see "a lot "of those. I work ( or do not work) with a lot of buyers that call me about short sale listings priced at ( lets say $150,000) and say that they want to offer $100,000. Because " We pay cash, so we want to have a deal". Usually after 5 lost deals they "wake up", but of course every market is different and maybe in some areas prices are still going down....  Most importantly- I think the worst advice comes usually from somebody who has no idea how short sales are negotiated. Yes- I am sorry- I am talking about you. And coming with the air of authority like " I know what I am talking about". Buying few short sales does not make anybody an expert. I have been negotiating short sales since 2007 ( Florida in area that was hit first and hardest). And I still say- I am not sure. Things change, rules change- especially in short sales. I am sorry if my reply seems rude- this is not my intention. It is just so frustrating to deal with difficult banks, MI, negotiators and we ( agents) would like to have at least public that understands at least a little bit of this hassle.           

Hello Anna,

 

I'm sure you're a great person.  Please don't take the comments below personal, they are not an attack on you nor, never was meant to be:

1st of all, I have to ask, why the hostility?  In just about all of my comments I do state that I'm strictly a buyer and not an agent.  Furthermore, I state that my opinion is from my perspective.  To my knowledge, this forum is open to all comments including sellers, agents, negotiators, attorneys and buyers alike.  My comments are strictly my opinion and, yours are yours alone as well.  No one has to take any of our advice.  It's perfectly okay to disagree, but don't take it personal.  That'll eventually get your blood pressure elevated. Furthermore, this is not the season for it.  :)

2nd - I can't agree that negotiating short sales for 4 years make a person an expert.  I recently got out of nasty transaction here, where 3 agents didn't have a clue as to what was going on within a short sale, even though one advertised himself as a expert on their corporate web site.  I didn't get fustrated because the deal fell through but, it was how it failed.  Without going into details, the end result was all 3 were fired and 2 of the 3 are now in hot water with the owner.  This is partly the reason for me being in this forum, to better educate myself to avoid such disasters again.

3rd - I've worked in not just 1, but in 2 professions for 25-plus very successful years and still learn something new from time to time.  While some may consider my experience an expert, I don't because the body of knowledge, parameters, applications, technology, and outcome desired will change whether I like it or not.  It's up to me to learn and adjust.  I take them as a new challenge.

4th - For me, my opinions and judgement used in the past has kept me above water on all my properties, unlike millions out there.  Whereas, my viewpoints may not be perfect for all professions or disciplines, they are fact based opinions on my experience and has made me money.

Lastly - chill out and enjoy the holidays.  :)

Good advice here Anna, especially about overpriced listings.  An overpriced listing is most likely always going to be a listing until it expires.   We too, most of the time have to get the listings priced below FMV (what we think is FMV) in order to get offers.  We also see too many that are priced too low and never close because they get rejected.

 

Paid in cash before the closing.

I have a serious problem with this part of the sellers MI demand.

This means that these funds WILL NOT be on the Final HUD.

I would find out WHO the MI company is? If it is PMI they are now in receivership and this may explain things as well as what they are demanding might be illegal.

Ask for a copy of the written short sale approval review it and identify if there is any reference to this MI demand.

If not.

You could counter offer the MI company with a $1,000 paid at closing and on the Final HUD1.

Hi SE Davis,

Would you please explain why it might be illegal for the MI company to be asking for a contribution if they are in receivership?  I have a BofA transaction that is with the MI company now and the property is located in AZ, which probably means the MI company is PMI.  Thanks.

Requiring payment before the closing, that condition not being part of the short sale approval and the obvious end game of that disbursement not being on the final HUD1 is what I believe may be illegal.

Referencing PMI was pure speculation and their being in recievership does not prevent them from requesting a contribution "as long as it is paid at closing" and is on the Final HUD1. 

I've closed many BAC short sales with MI and they are very upfront about everything so far.

 

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