Homeowners getting up to 30,000 to do a short sale!!

Short Sales Questions 80 Replies

I focus on commercial and haven't completed a residential short sale in about 4 years.

Me and my other broker friends I have been talking to recently are mentioning they are completing residential short sales on the HAFA program where the bank is paying the home owner up to 30,000 on the Hud-1 to move!!

It depends on the bank and the ones mentioned so far are BOA and Chase.

Has anyone else have this happen on their deals???

Medium allworldrealtyJoel Owens, All World Realty | [email protected] | 678‑779‑2798 | http://www.AWcommercial.com | Podcast Guest on Show #47

Coincidentally I just spoke with a guy yesterday who mentioned that he was offered $3,000 by his bank to move out, so he "rushed" to find a new place and move out in 12 days. Then, once he was out, the bank refused to pay him.

I've heard as much as $20-30k from a presentation given to our brokerage office by a short sale attorney. But I haven't seen anything like that yet.

Medium webuynjrealestate bbbIbrahim Hughes, We Buy NJ Real Estate LLC | http://www.WeBuyNJRealEstate.com

$3000 is pretty standard for HAFA qualified sellers.

@Kyle J. - I wonder if your friend moved out too soon...to be qualified for the HAFA incentives, you need to be occupying the home at the time of the sale.

I've also heard the story about a bank paying $30,000 to a seller to move out during a short sale. This came directly from an attorney at the largest closing firm in the nation, so I trust that it's probably the truth. I don't know the details of the sale though...

Medium lishproplogoJ Scott, Lish Properties, LLC | [email protected] | http://www.123flip.com | Podcast Guest on Show #10

Kyle,

Cash for keys or a DIL (deed in lieu) is a different animal.

With cash for keys you have to leave the property in broom swept condition and they give you the check after you leave. If the cash for keys is not enough to cover moving and deposits and rents will be higher where you are moving too then many times it makes sense to decline the money and wait for eviction or foreclosure.

You come out far better getting the months or free living and then move and leave the trash for the bank.

With the short sale the seller is signing documents and receiving the funds right away.If they do not receive the funds then the short sale doesn't close.

HAFA offers up to 3,000 in relocation assistance but the lenders are actually offering money on top of that to move up to 30,000.

The most I have heard of so far is a broker friend had a buyer call that just sold their house on a short sale and the bank gave them 20,000 on the Hud-1 at closing.The buyer was wanting to know if they could purchase a new house today.

My thought would be no unless you are putting down with an owner finance type deal or you could wait up to 18 months and then I have seen FHA do a loan after a short sale.

Medium allworldrealtyJoel Owens, All World Realty | [email protected] | 678‑779‑2798 | http://www.AWcommercial.com | Podcast Guest on Show #47

J,

What I am curious about is where these large amounts are occurring??

I have seen other brokers I talk to that mention these big amounts in California or New York or Virginia.

I would imagine that the mortgages are larger but I think HAFA has a limit in the 700's range on qualifying.

If the lender foreclosure process is long I can see offering the big amount.I have heard Wells Fargo only offering up to 5,000 so far.

Medium allworldrealtyJoel Owens, All World Realty | [email protected] | 678‑779‑2798 | http://www.AWcommercial.com | Podcast Guest on Show #47

I don't know any more about the guy's story than what he told me. He wasn't a personal friend...just a guy I met the one time. (I bought his stainless steel refrigerator from him that he didn't need in the apartment he moved to -- which I'm putting in a new rental I should be closing on tomorrow.)

Just bought a short sale, Chase owned the loan. Started offer at $7,000 their realtor told me to offer $12,100, I did and they accepted. At closing, the homeowner walked away with a $10,000 check and Chase got a few pennies even though they were owed over $40,000 on the place still! I wonder what is the incentive the banks to do this?

Originally posted by Brad McGuirk:
Just bought a short sale, Chase owned the loan. Started offer at $7,000 their realtor told me to offer $12,100, I did and they accepted. At closing, the homeowner walked away with a $10,000 check and Chase got a few pennies even though they were owed over $40,000 on the place still! I wonder what is the incentive the banks to do this?

That's the settlement money they're giving away to "help" people. I've even seen stories where they're giving more than $30k for shorts on *investor* mortgages, fully disclosed as such. According to the agents involved, it's often a last-minute, unrequested giveaway, tacked onto the HUD-1. There are a couple of threads about it on the short sale superstars board.

Just plain disgusting, IMHO.

Hi Joel, HAFA payouts to homeowners are between $1500-$3000 based on whether it's a gse or non gse loan. The larger payouts are servicer incentives. We have gotten large payouts from Chase and BOA. $20,000-$30,000.

BOA just announced today a pre-PNS program where they would pay homeowners large incentives to sell if they qualify as long as it wasn't already under contract.

Oh, and these payouts were in MA and NH

Joel is completely correct in his distinctions between cash for keys and a deed in lieu. I own a short sale negotiation firm based in Florida and along with Chase and BofA, Wells Fargo has offered clients of mine up to $10,000 to complete a short sale.

I've found that although HAFA seems to max out at $3,000 the amount the bank will actually pay is negotiable just like every other aspect of a short sale. Ask for the most money possible.

These large incentives are only for specific loans. Not all qualify for them. Chase offers large amounts for some loans that were originally owned by Washington Mutual. They actually sent letters to those that qualified. Bank of America has been testing a program with large incentives in Florida, but you only qualify if the loan is owned by Bank of America, not if they are servicing for an investor.

@Daniel Doran , Welcome to BP!

Are these amounts generally offered arising from default? Or when a seller approaches the lender with a performing loan?

I have fallen behind on this issue and have not looked at the HAFA.....

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com

The last sellers I got an incentive for got $23,000 at closing and were 3 years behind on mortgage payments.

Almost sounds like it pays to not pay ...

Yep. Depending on your lender.

Originally posted by Jackie Patterson:
These large incentives are only for specific loans. Not all qualify for them. Chase offers large amounts for some loans that were originally owned by Washington Mutual. They actually sent letters to those that qualified. Bank of America has been testing a program with large incentives in Florida, but you only qualify if the loan is owned by Bank of America, not if they are servicing for an investor.

Jackie is correct. I know Wells Fargo offers $5k if they denied your loan mod. Otherwise, it's only $3k. In a recent meeting with Chase representatives, they mentioned that they will offer up to $45k on a certain loan now. Look for that in the mail if you're currently in default.

Yep. It pays to not pay Steve. Great line. :)

Hi Bill,

Thanks for the warm welcome!

I know there are many companies/attorneys who have no problem getting people who are not delinquent on their loans amazing short sale offers, I just have not found it to be that easy in my practice.

I've found the longer the delinquency the easier it is to get the bank to bend. Also, the amount of the loan plays a big factor. I had a client with an property mortgaged through Suntrust. The original loan amount was $2.2M. We approached them with a buyer willing to pay $1.8. They refused and countered with $2.0M. Well this scenario went on for a year and they eventually accepted an offer of $1.1M from the 5th buyer we sent them. So in essence they cost themselves a years worth of taxes on the property and $700,000 in a payoff.

No one ever said these banks were smart.

I now have some personal experience in this matter that I can share...

Today, we received short sale approval on property we are trying to purchase. The buyer owes about $150K, the house will be worth about $170K after we rehab it, and our offer was for $95K, which I believe is about fair market value.

The bank (Chase) approved our purchase price of $95K, approved 6% commission to the agents, and then approved a $20,000 payment to the sellers to move out of the house. Ultimately, the bank is willing to accept a final payoff amount of $67K.

This pissed my wife off so badly that she's refusing to complete the purchase at $95K. She doesn't like the fact that the sellers may make more money off this deal than we will... :)

Ultimately, we sent the sellers an amendment today asking for $8K off the purchase price to complete the deal -- from stories I've heard, I have a feeling the bank will be more likely to drop their payoff amount than they will be to drop the amount they're offing the sellers -- though it's possible they'll just not approve the new deal, which would be somewhat amusing.

Medium lishproplogoJ Scott, Lish Properties, LLC | [email protected] | http://www.123flip.com | Podcast Guest on Show #10

2 family that i bought chase paid the seller 15K

@jscott
I'm curious if the sellers are going to allow you to reduce the price into Chase by $9000? I'm also curious if you do that, are you going to have to go for re-approval because that affects the NET of the sale? I don't see how the sellers getting $20,000 affected your purchase price point? Granted, you or I or anybody may not LIKE it, but how does us not liking it allow us to renegotiate the price?

Originally posted by Maryann L.:
@jscott
I'm curious if the sellers are going to allow you to reduce the price into Chase by $9000? I'm also curious if you do that, are you going to have to go for re-approval because that affects the NET of the sale? I don't see how the sellers getting $20,000 affected your purchase price point? Granted, you or I or anybody may not LIKE it, but how does us not liking it allow us to renegotiate the price?

Answers to your questions:

- I'm guessing the sellers are going to do whatever we ask, as they won't get anything if we don't buy the property (it was listed as a short sale for a LONG time before we came along and made an offer, and it's scheduled to go to foreclosure the first week of September). I'm sure they'd rather get $12K than nothing;

- Yes, I imagine this will have to be submitted to the bank for re-approval and the approval letter specifically states the current purchase price and the $20K to the sellers. Whether they would consider taking the $8K reduction we're asking for from the sellers or whether they would consider reducing their payoff amount, I have no idea; maybe neither, but we're going to try;

- The $20K doesn't affect our purchase price. That said, we made the $95K offer when the listing agent told us that the bank wouldn't accept less; this was a decent (but not great) deal for us at that price. Had we known that the bank was willing to take $20K less in pay-off, we wouldn't have offered $95K -- we would have offered less.

- You said:

"...how does us not liking it allow us to renegotiate the price?"

Me not liking it DOESN'T allow me to renegotiate the price. My due diligence contingency allows me to renegotiate the price. And my due diligence has turned up the fact that the bank is willing to leave more on the table than I previously thought, and therefore I want a better deal. It's that simple. No fancy justification about why I'm entitled to more or why the sellers are entitled to less -- my justification is that I think I can get a better deal while still allowing the sellers to get a VERY fair deal, so I'm going to try to do it.

Medium lishproplogoJ Scott, Lish Properties, LLC | [email protected] | http://www.123flip.com | Podcast Guest on Show #10

The sellers could also get mad and file BK and then wait until later in the year to list as a short sale again.

It will be interesting to see how this plays out.Do the sellers know you are a cash buyer??

If I was struggling as a seller and I saw a buyer paying all cash and was taking 8k from me I wouldn't be a happy camper.

Everybody looks at things through a different filter based on how it affects them.

The listing broker might have known they could get it done at the price they told you and with the time left to foreclosure they were trying to protect the sellers.

I understand your point about leaving money on the table.Seeing how the bank sees your request and proceeds will be informative.

Medium allworldrealtyJoel Owens, All World Realty | [email protected] | 678‑779‑2798 | http://www.AWcommercial.com | Podcast Guest on Show #47

@Jscott
Again, typically when a contract is renegotiated, an ISSUE is found with the property or maybe the title has a flaw. You're reasoning is you didn't like the seller getting that amount of money at closing. Does your purchase contract have an "I don't like the seller getting money" contingency? Due diligence doesn't pertain to a seller incentive. That is an agreement between the seller and their mortgage company, which you are now inserting yourself into. How long is your due diligence period? Is it for the entire transaction? Usually you have a period to conduct your diligence and I would assume by the time approval is issued, it has expired.

It's called a "seller incentive" not a buyer incentive - I get that you want the property at a lower price. BELIEVE me. We all want deals that work for us, but you're reasoning for renegotiating is very interesting. You signed a contract for a particular purchase price, and could put in whatever contingency you wanted at the beginning. NOW at approval time, you figure, "hey, let's just throw the P&S to the wayside, we don't like the terms the seller is getting?"

If I was the seller I'd be B.S. you were holding up my closing for this. I also wonder if you could be sued for breach of contract. Most lenders give 30-45 days to close, and if I were the seller I'd say NO WAY to giving up $8,000 of my $20,000 because the buyer didn't like that I got it. I'd say close and stay to the terms of the agreement you signed or hit the road, and the next buyer will have a nice easy path with little wait for approval because you've already done the hard work for them.

Originally posted by Maryann L.:
Does your purchase contract have an "I don't like the seller getting money" contingency?

It absolutely 100% does. It's called a "Due Diligence Contingency," and it gives me the option to renegotiate or back out of the deal for any reason whatsoever. In fact, I don't have to have a reason, I can back out for no reason at all.

That's the way a due diligence contingency works.

Here is specifically what my state contract says:

Contract is Option Contract. For and in consideration of the additional payment of Ten Dollars ($10)..., Seller does hereby grant Buyer the option of terminating this Agreement, for any reason, for a _____ day period from the Binding Agreement Date ("Due Diligence Period"). This agreement shall be an option contract until the Due Diligence Period has ended without Buyer terminating the same.

Pretty clear on the issue...


Due diligence doesn't pertain to a seller incentive.

It pertains to ANYTHING I want it to pertain to. Again, that's what a due diligence contingency is. See the legal verbiage above.


How long is your due diligence period? Is it for the entire transaction? Usually you have a period to conduct your diligence and I would assume by the time approval is issued, it has expired.

For short sales, I include a stipulation that extends the due diligence period to 7 days after short sale approval is received in writing from the bank.

For what it's worth, my RE attorney is a partner at the largest closing firm in the nation, and this is the way the firm recommends writing due diligence contingencies for short sales.


You signed a contract for a particular purchase price, and could put in whatever contingency you wanted at the beginning. NOW at approval time, you figure, "hey, let's just throw the P&S to the wayside, we don't like the terms the seller is getting?"

What are you talking about? I'm 100% abiding by the P&S I signed. It gives me the right to renegotiate or back out of the deal for up to 7 days after I receive indication of short sale approval -- I'm still within that 7 days.


I also wonder if you could be sued for breach of contract.

I haven't breached any contract. As of today, my contract is still an option contract, as the due diligence period hasn't expired.

That said, the sellers don't have to accept my revised offer. They can say exactly what you suggested, "F*** off, we're not going to give up $8000 of our $20,000."

They have every right to do that and to try to find another buyer for their property before it forecloses next month (something they weren't able to do previously, even though the price we offered was pre-approved by the bank). If they find another buyer, they save $8000. If they don't, they lose $12,000.

We'll see if they're greedy enough to take the risk of losing the money. I'm guessing no, but we'll see -- I haven't yet heard back from the agent.

Medium lishproplogoJ Scott, Lish Properties, LLC | [email protected] | http://www.123flip.com | Podcast Guest on Show #10