seller wants $3000 cash to close .. isnt this illegal?
okay we are now 2 weeks from closing but the problems continue.
Seller is expecting to receive $3000 moving money even though they did not qualify for the HAFA program. They were emailed about this months ago by the negotiator (i was copied on it). They are stating they will not close without it.
isnt it illegal for me (the buyer) or the broker to agree to give them cash to close the deal?
what say you???
Replies to This Discussion
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Permalink Reply by Ben Benita on
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1) ALWAYS pre-screen EVERY Seller to avoid issues like this in the future (contact me off here to get the questionairre we use)
2) In any negotiation - NEVER hurts to ask (unless it is illegal of course)!!!
Why do you think banks ASK you guys to take %% commission?
;-)
3) In MANY short sales now, Sellers are getting cash at closing:
PNC - 1% - 3% of loan balance for their protfolio loans
Chase - 3% of loan balance for their portfolio loans
Wells Fargo - $2000 for their portfolio loans
HAFA and B of A co-op - $30000
FHA - up to $4000 I have heard (I KNOW they do up to $1000)
all the above is for "seller relocation assitance"
I think it is an issue if it is off the HUD, but, if disclosed on the HUD don't see where it should be an issue?
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Permalink Reply by Kelly W. Maynard on
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Is the Seller asking you to pay them $3000 before they will agree to close?
I would remind them that they did not qualify for HAFA therefore they will not be getting $3000 in transition money at the close.
It is not your fault that they did not qualify for HAFA. If I had Seller's that said they will not sign off on the approval notice unless they get $3000, I would have them put in writing that they are do not agree with the agreement notice and cancel the listing. They obviously don't want their home to short sale, so let it go.
If they are saying that they want you to pay them $3000 in cash at closing, well that is illegal.
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Permalink Reply by Jeff Payne on
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Kelly HAFA has nothing to do with it, many banks are giving cash to seller at closing, not just HAFA deals. It would be on the approval letter and HUD
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Permalink Reply by Keri Sweetland on
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Hi there, there is a lot of really great information and ideas here but the first question I have is...What does the short sale approval letter state? In my world, it's pretty simple...if the short sale approval letter states that the seller cannot receive funds from the transaction (most short sale approval letters say unless they are in an incentive program and even those stipulate what the seller is to receive)...then the seller cannot receive anything from the sale of their home, end of story. Any furniture sales, etc. COULD be deemed as mortgage fraud, your lender will not like or agree to this and although I have a true appreciation for creativity, personally...I would be sure to stay on the right side of the line unless you are so confident in your information and have so much money that you can afford to defend yourself SHOULD anything come down the pipeline at a later date. The reality is, you don't know how the seller got their previous mortgage, if they were honest or fraudulent, do you really want to take that risk with someone you don't know, particularly if YOUR mortgage company and the seller's mortgage company doesn't agree to this??? Now, if the listing agent "promised" his customer $3K, then that needs to come from their commission and from their brokerage to their client...let them take the liability, not you as the innocent party. And as for post occupancy agreements, I agree with Satar, get them out by closing-it's not worth the cost of time and money to evict...not to mention potential damage they could do from being angry about being evicted. These are people that; while our heart goes out to them; are often broke, desperate and irrational...this is not a good situation for you as a buyer. You need a clean slate walking in, and to NOT be involved in the seller's financial drama or a party to any arrangements implied by the listing Realtor. I understand the property is worth the $3K, but these rules are in place for a reason, and you need not cloud your transaction with participating in something that COULD BE deemed as mortgage fraud anytime in the future. Put it all in writing and keep it above board. Your lender is not going to be happy about a "furniture sale" everyone knows what it is and it is frowned upon. Just my 2 cents...You can view my page for my credentials-I have a fair amount of expertise in short sales and I have seen this many times... in my experience, it's just best to POLITELY and KINDLY steer clear and let the agent handle their agreement with their seller. And yes a kind reminder to the seller that the short sale is in their best interest may help them to get to closing. And like Brandt, I too am NOT an attorney and my advice should not be considered legal council...that's what attorney's are for! ;) Good luck & let us know how it all turns out. :)
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Permalink Reply by Debra Savittieri on
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Seller needs a Contribution not extortion and not necessarily unlawful either.? I'd personally do it to close the sale,however ***I would also disclose the contribution to be used for Seller's moving costs, thru an addendum. Hopefully the sellers Banks will approve the addendum. My hunch is-they just might approve it. TRY IT!!!! I've seen some Banks approve some crazy outrageous offers and contingencies that one would never believe they accepted! But FIRST- Ask the Sellers this. " Is a foreclosure a better opportunity for the Sellers knowing the credit score ramifications of a foreclosure? Sometimes the Sellers will rethink their strong arming for your hard earned commissions once you talk about this with them over and over again. Foreclosure or short sale, there are your only 2 options Mr & Mrs Sellers..pretty simple- tell me which works BEST for your family. Maybe the Sellers are thinking that they will get 'cash for Keys' if they foreclose-that will help them move, but they need to be reminded (by you) of the 'Long Term' Credit Affects of a foreclosure in lieu of a $3,000 cash to move. Some Seller's think it is 'financially rewarding' to live in he home for free,which they actually do save a lot of money by doing so, giving the time frame the Banks take to Foreclose and evicts' them. I had a Seller actually 'NOT show up' to sign off for her short sale 24 hours before closing! She told me this a week later- She preferred to live another 6 months for free in the home waiting for the auction process to begin again..She saved( rather made out!) 20,000 by doing this! Her Mtg payments were near $3,000 month....To be honest though- us Realtors really DO know before hand what our sellers thoughts are and if they are genuinely INTO the short sale or not...sometimes we Realtor's just are not paying attention to what our Clients tell us or what their needs are and most importantly do they have 'over expectations'. MY Seller had plans to eventually file BK (7) the entire short sale process and she did mention this to me. I was obviously NOT listening to the warning bells on this one...which rang loudly to the beat of...."Seller will never go thru with the short sale"...since a BK was enevitably going to erase her Mtg debts in the long run and her credit was about to be destroyed thru BK. Good Luck but try the addendum gig..although the rules state sellers can not benefit- you just might be surprised by the Bank giving approval. Better than doing nothing!
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Permalink Reply by arod on
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debra: thank you for your helpful advice. i'm trying to get bank to give me credit right now on inspection report. once i get that taken care of we will consider submitting the $3k moving credit. i agree it would be so much better to get it all disclosed and agreed to.i agree its better than doing nothing!
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Permalink Reply by Satar Naghshineh on
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if you put a 3k moving credit on the HUD for the lender's approval, you will put a wrench in the system. Do it outside of the HUD and closing.
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Permalink Reply by Kay VanKampen on
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I like the idea of the hot tub. That wouldn't have to be on the HUD and just between the buyer and seller.
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Permalink Reply by Robert Huntsinger on
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No RESPA issues either.
I love the 2nd lien holders that require $13k, the 1st will only allow $6k on the HUD and to close it the 2nd must get $7k outside of escrow before you get approvals to open escrow. Enjoy these short sale pigs while we have them, in 36 months they will be no more.
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I would explain to them that they do not qualify for the moving money and as a former loss mitigation guy, I would tell them to use the money they have saved from not paying the mortgage over the last year or more, as their "moving money". That might piss them off a little but hey- it's what a bank would ask them.
Roger Fountain
Former loss mitigatioon for Fortune 500 bank in Plano, Texas
Pitbull Consumer Advocates
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roger: i have a little more information now and it turns out that the shady realtor promised them $3k moving money from a bogus fee that he was charging me that i forced him to remove. this guy has created nothing but problems. i can't wait to be rid of him.
but to focus on the problem at hand, now we are at a standstill b/c the sellers feel they have been lied to (rightly so) and the realtor isnt budging. he stands to lose about $23k in commissions so he's an idiot if he doesnt make this right with them.
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