I'm in the process of buying an REO from Chase. After waiting a month and a half they have finally gotten their contract to me. In the contract, they have crossed out all of the normal fees that the seller usually pays (doc fees, title insurance, title search, etc) and shifted them over to the buyer (me). Obviously, this has a significant impact on the profitability of the deal and has me considering just backing out.
So a couple of questions:
- Is this a normal part of buying a REO, where the bank shifts all the normal sellers costs over to the buyer? ie, is it something that you should just bake into your financial analysis when you buy one of these?
- If anyone else has been in this situation, did you get the bank to back down and take their share of the costs? Or is this just a bank "policy" and something they will not move on?
And to make it better, they are playing games right in the Christmas vacation time period!
Thanks for your help!!
Getting them to back down depends on the lender. All you can do is try and push back. Some will some won't. I have a short sale thats been in contract two years. Why I haven't cancelled is because its entertaining. I offered $80K, they countered at $149K and shoved all closing costs on top. FMV was around $120K rehabbed. Now they are down to $130K and the market is sliding back towards me, so they backed off and are willing to pay fees. It is just as much a play for them to net the best they can like it is you to grind them down as far as you can. My team decided this week to finally cancel. Ultimately because we don't care if we get the deal unless it fits our wheel house. Right now it doesn't. If the lender changes their tune it may. Its really just cat and mouse sometimes.
Good luck, but put Christmas first.
Typically banks will want the buyer to pick up most of the fees even the ones the seller generally pays. Dragging their feet is the norm probably just to see if you are seriously looking to close or if you will back out. If you feel its a good profit to be had you can always counter and decreasing your purchase price by the amount of fees that you now have to pick up. You are dealing with a big bank and they aren't as small investor friendly as the small banks.
Generally in south Florida I see the banks paying the normal seller fees. Fannie and Freddie however won't pay the 0.7% Doc Stamps, but otherwise they pay the normal seller costs.
@Mark Bosworth Most of the investors I close for are being stuck with paying the normal seller costs depending on the lender. Definitely shop around for good prices when it comes to title companies. Someone that doesn't charge all of those junk fees and doesn't stick you with the full settlement charge. I have been seeing a lot of my clients doing a double closing if there isn't any restrictions and having their end buyer reimburse them for their front side closing costs. I am in Florida so if you have any questions please feel free to shoot me any email anytime.
I run into a similar question a lot and it usually is a misinterpretation on the buyer. When it says 'usual closing costs typically paid by the seller', in all my cases they were actually referring to not paying buyer closing costs that were typically paid by the seller. For instance, if the seller typically pays title insurance on behalf of the buyer in your area .. the seller will not be paying that. The seller will usually pay their own costs, and the buyer pays their own. Check with your attorney and/or the banks attorney.
You left out some key data points. Are you a realtor submitted a contract offer to Chase? I bought one from Chase through a very experienced realtor who knew how Chase conducted themselves, so I fully expected them to tilt all the fees my way. If your realtor submitted the contract putting fees on their side of the ledger, it could have made the process more difficult for the lender. Consider that the contract you sent goes to the company negotiating for the lender, and then must get lender approval. Having that contract right is key to a successful process.
The purchase I did with Chase went nearly seamless after they accepted our bid...I think it was 45 days from acceptance to close, and they closed perfectly on time.
We used the standard Florida real estate contract. Chase just went through and crossed out all of the "seller pays" items. The deal fell apart on the inspection because of hidden defects. I learned not to assume the lender will pick up any closing costs.
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