How can I fight the demand for a cash contribution?

I'm doing a short sale for a client that has about 30k in cash.  I kind of expected the lender to request a cash contribution, which they did.  The bank wants $3000.  The issue is that this surplus of money is going to go towards college tuition for her daughter, as well as living expenses, as my client does not make enough money to cover her monthly expenses.  The hardship is that she owned this rental property with her husband and they are now divorced.  She's determined not to pay anything and will let the house go to foreclosure.  What's my recourse here?  How can I fight this with the bank?   

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Permalink Reply by Bryant Tutas on May 12, 2013 at 11:37pm

Hi Rob. Simply have the seller write a short letter countering the offer. Have them reiterate why the funds are not available. My opinion is that they will have to give the lender something. So make them an offer.

Letting the property go to foreclosure over a small amount of money makes no sense whatsoever.

The fact that this is a rental property should have placed the borrower on notice at time of listing that a cash contribution or prom note may be requested. It's quite common.

Permalink Reply by Tim and Susan Fennell on May 13, 2013 at 1:11am

Rob... what Bryant said - just counter the offer.

Personally, if I were the seller I would counter at $300. We, personally, had the same situation as your seller on a couple of our own rental properties and settled at $500. On one, the buyer paid it for us and on another, we split the $500 with the buyer.

Everything is negotiable!

Permalink Reply by Rob Olson on May 13, 2013 at 5:24pm

Thanks for your responses guys!  Some additional information for you.  The accounts that have the most money in them are actually custodial accounts.  One account for each kid's education.  Does that change things?  My client's name is on the account, but so is the kid's names.  I debated submitting those statements to the bank, but figured I should because of her name being on it as well.  Can the bank make demands from a custodial account?  I would think they would be like an IRA that banks don't ever really go after.      

Permalink Reply by Joseph Alfe on May 14, 2013 at 4:18am

This is easy. Go back to the buyer and tell them "Great news!  We are approved.  We are only 3K away" You did prepare the buyers to be ready for any "extras" to be covered, right?

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