Need Advice on Short Sale Situation QUICKLY - Last Minute Notification of Denied Seller Assist - Municipal Employees Credit Union NY

I represent the Buyer in a short sale in NJ, which has been going on since Feb '12.  My buyer offered the list price, but requested a 6% assist.  There have been some ups and downs, but we were finally notified that the bank had accepted the short sale in late July.  The third-party negotiator that was hired by the seller has been less than communicative, unless pushed for information.  We were initially set to close the end of August, but the underwriter for my buyer’s mortgage co. wanted some additional conditions met, so at the last minute a request to change the closing date was submitted.  We were told Fannie Mae needed to approve the extension, etc.  My buyer proceeded to work on the conditions submitted.

 

Fast forward to two days ago, Fannie Mae and the credit union had agreed to an extension.  The mortgage was approved and the prelim HUD-1 without the Buyer charges was sent over to the 3rd party negotiator to submit to Municipal Employees Credit Union for approval.  At this time, he stated to the title co. that the 6% seller's assist should not be on the HUD-1, since it was rejected 3 or several months ago his story wavers on this point.)  This information was never shared with me or my buyer, heck, the listing agent didn't know about it.  Also, he stated that it was on the prelim HUD-1 that was sent out prior to the closing that was to take place in Aug, but that HUD-1 was not shared with me, as the title co wasn't going to send it out to all parties without the mortgage co numbers.  His contention is that since it wasn't on the Aug prelim HUD-1 (which I never saw), that constitutes notification that the bank rejected the seller's assist and I am now "stalling".  There is no need to stall as the mortgage is approved, pending verification of the seller's assist, which was written up in the contract.  He contacted his attorney and informed everyone that his attorney advised that the listing agent/office can seek recourse through the local Assoc. of Realtors or civil means. 

 

One, if no notification of the banks rejection of the seller assist was provided in a timely manner, although it is clearly requested in the contract (which was signed by seller, buyer and both agents); the deal technically would be dead.  Correct?

 

Two, I worry about where my buyer falls in this, as they have spent money on lender and township repairs, HI, survey, etc.  Not to mention the deposit that is currently held in escrow. 

 

Any advice is greatly appreciated.  To my knowledge, the negotiator is not affiliated in any way with the credit union.

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Sounds like the negotiator for the seller dropped the ball on this one. And the listing agent should have never had the seller accept an offer with 6% seller concessions. The chance of that flying on a short sale are slim to none. You too should have told your buyer that 6% in closing costs assistance ain't going to happen with a short sale. EVER.

Probably not much you can do now. Unless the buyer comes up with some money to pay closing costs this deal probably ain't happening.

For the future know that a buyer needing 6% in costs can't buy a short sale.

The short sale addendum to the contract probably covers the seller and their agent.

Bryant,

Thanks for the reply and info.  No harm in trying to get 6% and I did advise my buyer that may not happen.  But the problem here is, the listing agent, nor I, were notified that there was not going to be any seller assist until two days ago.  To top it off, the negotiator has stated that they make take legal action against my buyer if the deal doesn't close.  In NJ, if there is a change to the contract, which denial of the seller assist would be, then it needs to be communicated as soon as possible, not several months later.

I am at a loss how they can proceed with any legal action if they did not notify in a timely manner in the first place.

Jay, Actually there is harm. The harm is that it's setting an unrealistic expectation. If you would have asked for 3% the lender would have approved it and we wouldn't be having this conversation.

Having said that I seriously doubt the buyer is obligated to close since the terms and conditions were changes.

The fact that the negotiator is threatening legal action is a clue that that particular negotiator is clueless.

Jay,

I own a very successful 3rd party negotiating firm that has closed over 1500 short sales nationwide.  We do not get paid a penny until these deals close so we work dilligently on getting them to the table.  Occcasionaly we have a deal that goes astray and after 6 years I have never sued, nor have I threatend to sue anyone.  We are here to assist not make peoples lives miserable.  I suggest that can that negotiating firm.  There are quality companies out there that are honest and dependable.

 

Good Luck,

 

Nick Curcio

Great advice Bryant.  6% aint gonna happen.  How would the buyer have ever needed 6% anyway, rarely does it go over 3.5% in my area.

Assuming your purchase contract called for 6% concessions to buyer(unrealistic, I agree), and it was of course denied, your buyer certainly has no obligation to close.  Something smells though. You said "the HUD without the buyer charges was sent over to the 3rd party negotiator".  The 3rd party negotiator SHOULD be the one who structures the HUD, in order to get the deal done.  If you haven't seen the HUD, it may have concessions going to the buyer and those funds are being used for the 3rd party fee.  Does the 3rd party negotiator have a fee agreement with anyone?  Is it the title co. doing it for "free"?

going in the newsletter

I never have seen over 3% of seller contributions to the buyer in my area.

There has been some GREAT  feedback here by others and I've added a few of my thoughts;

1) If the Seller Concession was removed from HUD and then submitted to the lender - WHO removed it, and, When and Why - without making all the parties aware?

2) Did the Seller and Buyer sign an Addendum changing the terms of the transaction (and, removing the Seller Concession)?

3) Why wasn't the Listing Agent aware of that the structure of the deal changed as to how it was submitted to the lender?

4) Have you been provided a copy of the Short Sale Approval Letter from the Lender - at the time it was approved?  That would have shown you EXACTLY what was, and was not, approved.

Unless your Buyer can come up with the $$ and really wants this house, it's not happening (and never would have with 6% - but we've already beat that dead horse).

If that's the case, your Buyer needs to get out of this transaction and get their deposit back ASAP.

Is the 3rd party Negotiator Licensed with the State AND, do they carry E&O Insurance?  If no one gave instructions to the 3rd Party Negotiator to change the transaction, then it is still in its original form and I believe the Negotiator now has a "problem". Ask for their E&O information.......... that will be interesting!

Good luck!

I agree with Bryant. The listing agent should never had the seller agree to the 6%. I also would have explained to my buyer that it would not get approved and suggest looking at other properties and not to make an offer on this property. Short sale agents need to work the numbers to make sure the deal will close. Sounds like both agents need more training on understanding Short Sales.

This deal will not close unless buyers comes up with some $$$. This deal appears dead and shame on both agents for not following their fiduciary duty to their clients!

Firstly, the fact that the listing agent even discussed a 6% seller paid concession shows they know little about short sales. Listing agents should never accept anything higher than 3% (1% on an FHA short sale) and even then I set the expectation with the buyer's agent and buyer that it can be trimmed or cut at any time.

As far as litigation is concerned, in the case of changed terms it seems unlikely an attorney would take this case on contingency and if the sellers are doing a short sale, where would the attorney's fees come from?

Jay I suggest a bit more education about short sales before you make other offers. No offense intended. I just think we should all pursue as much knowledge as possible to best serve our clients.

With a variance request from HUD on an FHA PFS, 3% in Seller Concessions is quite doable if the minimum net tiered proceeds is still being met.

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