SHORT SALE in PROBATE

12 Replies

I am in negotiations with a personal representative of an estate to purchase a home owned by the estate. It would be a short sale.

I know standard policy of a short sale is that seller cannot be allotted any funds by seller or agents. Is the situation any different if the seller is not the owner of the home? Considering that they were not the ones that defaulted on their mortgage, would lenders allow a payment to personal rep for their efforts in transacting the sale (considering rep would not benefit in any other way by doing a short sale)

Or would bank provide any funds to seller for their part in selling the home?

It seems the bank would encourage the rep to sell home any way they could.

Bottom line is: What would be the benefit of a personal rep to sell a house via short sale?


Any feed back is appreciated. 

There’s  next to no benefit for the seller unless they need to get rid of the house to clear out the estate or somehow they are so personally vested in the dead person not having a foreclosure (which does happen). They’re not gonna get any money out of it. If somebody is living in the property that person may receive a few thousand dollars in relocation assistance but that’s probably a longshot and no guarantees.

My question is:

In a short sale the owner in default cannot be provided any funds from buyer. It is illegal. But in this situation being that the personal rep is not the owner, and did not default, could I provide funds to him in order to convonce him to go through thr trouble of a short sale?

@Sean Dougherty Overall, you're correct. The seller cannot take monetary proceeds from the short sale, however, sometimes the bank will allow for relocation funds; my short sale negotiator is often able to provide a small amount if it has been the seller's primary residence. It depends on the situation and the servicer/investor of the note.

Whether the PR can be monetarily compensated or not is better left to an attorney (or ask the servicer/investor how they handle those situations). However, your statement was: "Bottom line is: What would be the benefit of a personal rep to sell a house via short sale?"

If the personal representative is truly looking out for the best interests of the estate, which ought to be assumed, then they should view the short sale as a better alternative to a foreclosure. In other words, they should act as if they were the seller themselves. Would they advocate the estate gets foreclosed upon?

It is not illegal to get funds from a short sale if the bank allows it. I've had two SPS sales this year which allowed 10K to a homeowner. Freddie Fannie and FHA all allow 3K in moving expenses. You won't know until you talk to the bank.

Thanks for the replies. I think tho the point of my question has not been addressed. Can I (the buyer) provide funds to the personal rep (seller) without even informing the bank? Given that they are not the legal owners or party who defaulted, there should not be any restriction for them to receive funds from buyer on the side of the deal. 

Anyone?

Typically ANY funds that exchange related to the short sale must be disclosed. Now whether you disclose it and they say it can't be paid and you do it outside of closing??? well, I would ask a title attorney. My motto is DISCLOSE DISCLOSE DISCLOSE, even if they don't allow it. If you pay the PR outside of closing, and it comes back to bite you, you at least have a trail that you tried to disclose it. I feel it's almost like the BANK is committing fraud at that point. You tried to disclose a fee that was in connection to a sale and they told you to take it off the HUD. To be honest though talk to a title attorney. I also know investors who don't disclose but say they are buying personal property from the sale. I don't condone it, but I know it's done.

@Sean Dougherty Servicer may give occupant relocation depending on the type of loan. Is the estate solvent? If so, the benefit is to get rid of the property on behalf of the estate. The benefit is to do the right thing for the family legacy and not let it sit there until it's foreclosed on. What if someone breaks in and hurts them self? The quickest way to often solve the problem is to sell it. 

If its a reverse mortgage no ones getting relocation funds.  If its a standard loan, then it would be the same as if the owner was alive .. eligible to occupants.  Either way the bank is going to tell you what they want to give and you have very little say.  When they want to give $5k for relocation, you must take it.

Originally posted by @Sean Dougherty :

My question is:

In a short sale the owner in default cannot be provided any funds from buyer. It is illegal. But in this situation being that the personal rep is not the owner, and did not default, could I provide funds to him in order to convonce him to go through thr trouble of a short sale?

The negotiator would be on the seller side of the HUD so, just because you are offering to pay the fee directly, doesn't mean its not a cost offsetting benefit to the seller. If you offer to do it outside of closing and have to sign anything stating nothing is POC, you might get yourself into trouble. It's only illegal if you fail to disclose.

 

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