Have a cash buyer for a short sale that was sold for half the amount owed on the property. Chase is holding out for a promissory note or cash from the seller at closing. The seller has moved out of state and was unemployed for a year before the sale.  He has found work in his new state and does not have the money to contribute to the closing.  We are supposed to close this week.  The negotiator will not budge. 

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Promissory note would be the logical answer. Most of the ones I have seen are zero interest.

Seller won't have to have money to contribute.

Steele
There doesn't seem to be much defense against a note - they are at 0%, low amount and the seller is working - if he were going downhill, a BK would wipe the note. Seems obvious, as Steele says.

Typically, I run into the cash/notes not from the investor but from the MI - and with BofA, they've been taught to gouge people by claiming MI and asking for those things when an MI is not there. I don't do as much with Chase at the moment, as I used to, but I don't think they play that game. So, it is possible that if you want to plea a case to get rid of the note, get the contact info the for MI and talk to them.

Being a different investor, it is possible that they do the same as MI's? So, talking to the investor might get you somewhere.

If the cash amount is something that the others in the transaction can cover (buyer, agents), and the seller refuses to sign a note, going that way would save the deal.

A typical note is 0% at $50/mo until paid off. I have not needed to try, but you might get them to change it to $25/mo for twice as long - less impact on the seller, less reason to object, more possibility of being paid off. (Something to bring up to the negotiator, of course.)

For the seller, this note replaces the note that he already has for a lot more (the house). Point out that he is replacing the one, where they can come after him for $XX AND the note for the mortgage continues to add interest to it! This note does not, and will be at a low monthly number. If things go bad for him, he can still do a BK and kill the note. (Uh, but don't miss a payment unless he is doing BK, that usually calls off the note at that point.)

So, if you want a minimal opportunity to get this reduced or modified, ask the negotiator who is demanding these, the MI, the investor, Chase? You want to talk to them about it. BofA illegally refuses to tell you (truth in lending criminal violation - but they don't care). I don't know what Chase would do. If they won't and you don't want to pursue that, discuss the note at lesser per/mo payoff as I mentioned above and for those reasons.
Is it a HAFA shortsale? Are you a non-deficiency judgment state? In either case, Promissory Notes are out the window. HAFA guidelines say the lien must be satisfied in full. In non-deficiency states, Promissory Notes are proving impossible to collect upon. If neither are the case, if you seller has a bankruptcy planned in the future, they can include the Promissory Note. Remember to be careful that we are not attorneys and advise them to ask one (although I am repeatedly learning and being reminded that the real estate attorneys often know less than we do regarding this!)
You can also have your seller put together a financial statement of projected expenses, including what their estimated rent will be, and new income and present that to your negotiator. If there is no room, tell your negotiator this is simply not possible or practical for this family; Fact--they CAN'T do it. If they happen to be able to afford it, then they should do it--that would be the appropriate and ethical thing for them to do considering all the rest of the obligation they are walking away from. If they can scramble up some cash, ask them to offer that in lieu of a Promissory note. I've had a bank be satisfied with actually a small amount because we supported where the funds were coming from and that that was all that was available.
HA! I love it - I overwork - make sure that my agents and sellers get the best support possible. Well, you bring up an extra step worthwhile in some circumstances that I have not yet done. Cool!

[Yeah, I have sellers who don't give the basic docs, got one now that is going to have the SS thrown out today or tomorrow for not supplying simple bank statements. So, my mind is on these jerks, not someone **actually** willing to work on a projection of expenses (sigh).] Thanks for the good point!

Joanna Durrant said:
You can also have your seller put together a financial statement of projected expenses, including what their estimated rent will be, and new income and present that to your negotiator. If there is no room, tell your negotiator this is simply not possible or practical for this family; Fact--they CAN'T do it. If they happen to be able to afford it, then they should do it--that would be the appropriate and ethical thing for them to do considering all the rest of the obligation they are walking away from. If they can scramble up some cash, ask them to offer that in lieu of a Promissory note. I've had a bank be satisfied with actually a small amount because we supported where the funds were coming from and that that was all that was available.
Thanks to all! I will pursue another financial statement from the seller to see if that will make a difference to the negotiator. Then if that doesn't work, maybe explain to the seller the other two options The negotiator said they waould accept a 0% promisory note for the remaining balance. or a lump sum of $1500 at closing. I'll let you know what happens. We are supposed to close on Friday.
Just got off the phone with the seller. He said he will not contribute anything. Nada. He feels that since they have his house, he shouldn't have to pay anymore. I told him it will kill the deal and he said he thought that might happen. He already did a financial statement and sent it to Chase three weeks ago. I was not aware of it.
If you have access to a GOOD document or article on the consequences of a foreclosure vs short sale, forward that to him. He's going to walk around with a foreclosure curse on his credit for at least 7 years. Credit Reports don't even have a reporting for a short sale--just the accumulated lates and then the status of the paid account (Paid infull-paid as agreed, paid settled, paid unrated, or paid less than owed.) He won't be buying even a car for a long time if he forecloses. It could affect his getting hired or not in certain jobs. $1500 is a reasonable amount. Sure he doesn't have his house and lost all that he put in to it, but present the scenario of the market not having dropped as much as it has and what if this were a regular sale and he had his portion of costs any way? He could be bringing $1500 ANYWAY to break even on taxes, his title policy for the Buyers, HOA fees, other closing costs of title, commissions and marketing expenses, etc., inspection item results--anything. He should contemplate that and the time urgency related with closings and that the bank is doing him a FAVOR--offering him an alternative that helps mitigate EVERYONE's losses, including his. How much commission is the bank paying? What did you offer on the mls to the Buyer Broker--hate to go there. $1500 is truly a good offer in exchange for what he is getting, especially in considering the consequences of the alternative. If he truly can't and he's not just being ornery, tell him you will go to bat for him but need to document that there is nothing there or accompany your request with a hand written letter from him to your negotiator detailing politely why he cannot. If he is just being ornery, I would start my conversation with my client that this is a moment of truth time to comtemplate and is going to have lasting consequences that may not be important to him now, but could be a year, two years, five years down the road, that I'm going to send them some information, and we will talk later after they have a chance to look over it. Email it to him if he tends to not listen and dominate your attempts to speak to him.

Jeanette Becker said:
Just got off the phone with the seller. He said he will not contribute anything. Nada. He feels that since they have his house, he shouldn't have to pay anymore. I told him it will kill the deal and he said he thought that might happen. He already did a financial statement and sent it to Chase three weeks ago. I was not aware of it.
As much as I'd be concerned about getting into the "legal advice" area with the seller here, and you are really close to asking for trouble, you remind me of some stats about the cost of a bad credit score. It doesn't take long to eat up $1500 in what you will be paying for higher interest rates. You might find something by googling it.

Personally, as a defunct (temporarily I hope) real estate investor, I realized that my excellent credit meant nothing - being a full time investor did and the bank would have made money and I would have made money if I could have just gotten a regular investment loan - lost the house to hard money lender instead. So, right now I don't care about credit - it was useless to me when it was perfect and I know how to buy houses w/o credit, when I get back to it. But, I suspect most people live by credit card - of course they shouldn't, etc...

Joanna Durrant said:
If you have access to a GOOD document or article on the consequences of a foreclosure vs short sale, forward that to him. He's going to walk around with a foreclosure curse on his credit for at least 7 years. Credit Reports don't even have a reporting for a short sale--just the accumulated lates and then the status of the paid account (Paid infull-paid as agreed, paid settled, paid unrated, or paid less than owed.) He won't be buying even a car for a long time if he forecloses. It could affect his getting hired or not in certain jobs. $1500 is a reasonable amount. Sure he doesn't have his house and lost all that he put in to it, but present the scenario of the market not having dropped as much as it has and what if this were a regular sale and he had his portion of costs any way? He could be bringing $1500 ANYWAY to break even on taxes, his title policy for the Buyers, HOA fees, other closing costs of title, commissions and marketing expenses, etc., inspection item results--anything. He should contemplate that and the time urgency related with closings and that the bank is doing him a FAVOR--offering him an alternative that helps mitigate EVERYONE's losses, including his. How much commission is the bank paying? What did you offer on the mls to the Buyer Broker--hate to go there. $1500 is truly a good offer in exchange for what he is getting, especially in considering the consequences of the alternative. If he truly can't and he's not just being ornery, tell him you will go to bat for him but need to document that there is nothing there or accompany your request with a hand written letter from him to your negotiator detailing politely why he cannot. If he is just being ornery, I would start my conversation with my client that this is a moment of truth time to comtemplate and is going to have lasting consequences that may not be important to him now, but could be a year, two years, five years down the road, that I'm going to send them some information, and we will talk later after they have a chance to look over it. Email it to him if he tends to not listen and dominate your attempts to speak to him.

Jeanette Becker said:
Just got off the phone with the seller. He said he will not contribute anything. Nada. He feels that since they have his house, he shouldn't have to pay anymore. I told him it will kill the deal and he said he thought that might happen. He already did a financial statement and sent it to Chase three weeks ago. I was not aware of it.
Closed on Friday. The deficiency is being forwarded to the collections dept.
So how did it play out in the end? I'm very interested in hearing what both sides did / did not do. Thanks!

Jeanette Becker said:
Closed on Friday. The deficiency is being forwarded to the collections dept.
The investor and/or MI company will typically ask for a promissory note based on their assessment as to whether or not the seller can afford to pay them something. It has nothing to do with the sale price or what the seller owed - it's based on their finances. If the seller made a very good income in the past, they will take that into consideration when asking for a note as well (even if they are not working now, or working for lower pay).

In your case, they probably felt that now that the seller has a job, he can afford to pay them something. By refusing to sign the promissory note, the seller left them with no choice but to either foreclose, or let the short sale happen and pursue him for the deficiency. It sounds like they went for option 2.

I find a lot of sellers take the position that this seller did. They get emotional and dig their heels in and end up screwing their credit up even worse. I understand the desire to just have it all behind you, feel sorry for yourself and get mad at the "big bad bank". But it is far better in my view to get the debt forgiveness afforded by the promissory note which is typically a fraction of what is actually owed at 0% interest. (Although I have seen lenders ask for 77% payback on a 2nd lien - that didn't work out so good).

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