Getting money from a short sale?

Question

Hey bp. I have a question that I am unsure about. Can a homeowner get money out of a short sale? I have heard different things and am confused. A short sale I am dealing with the bank told my seller that any money they would receive would come from the buyer, so she is asking me how much money she can get. I am really confused and would like to relay accurate information and would like a very thorough answer. Thanks

J Scott · Answer

When a lender approves a short sale, they do it in writing on a letter called the "short sale approval letter."  This letter indicates all the terms and conditions of the sale and includes things like:

- The buyer's name (so nobody else can buy it)
- The purchase price
- The net amount to the lender (how much the lender will get from the sale after all fees and commissions)
- How much commission the agents will get
- The timeframe to close (normally, this is a "must close before" date)
- All the other terms and conditions

The other terms and conditions generally include a provision that says that the seller isn't allowed to make any money off the sale (other than what the bank might provide) and then will sometimes say that the buyer can't resell for some period of time as well.  Then there are things about the deal must be an arms-length transaction and a bunch of other stuff.

Anyway, this letter must be signed by buyer, seller and both agents and therefore anything in that letter must be adhered to, including the part about the seller not getting any money.

So, read the letter and you'll know specifically what is and isn't allowed for that deal.  Every letter will be a little different.

Will Sifert · Answer

Again, I am new to short sales. Would it be illegal for me to give the seller say $3,000 if he turns the key over to me, moves all of his stuff (including junk out) leaves the house clean, doesn't destroy it on his way out and moves out on time???    If they did all of the above it would be more than worth it to me to spend a couple thousands not to mention I would like to help them out/move.

Will Sifert · Answer

Correct me if I am wrong, but if there is equity in the house then it would likely be a regular sale and not a short sale?

As to the question of the buyer not being able to give the seller money, is that illegal?  I am new to short sales but if the bank can reduce the price enough that I can make some money off of it then I would have no problem helping the seller with moving costs especially if the bank doesn't give him any money.

Luis A. · Answer

Just last week I saw another example of a home owner getting money from the bank in a short sale. This person got $13k at closing from the bank, not the buyer.

I have now seen this several times in short sales. I don't understand why but it's happening. Many of the cases I have seen have been specifically with a Chase owned mortgage...

Bill Gulley · Answer

Amber Butler, Steve wasn't digging at you at all, LOL, it's my reputation to jump in and try to keep people from getting into trouble, that's all.

You're getting good advice from this bunch. All I would add is talk to your broker. Sometimes it's how you ask a question as to the response you get....the bank said they won't "pay" the seller, but will they allow her to receive any of the proceeds and take less? While it sounds like the same thing, it's not. Good luck!

LOL Steve Babiak  :)

Amber Butler · Answer

Thanks all. That clears it up for me.

Wayne Brooks · Answer

Amber, most banks STRICTLY PROHIBIT the seller from receiving any money from the buyer.  Not to say it's not done (buying a stove for $3,000).  Sellers should be thankful they're walking away from a huge debt.  Some do legitimately need some moving help.  More importantly, if you and the seller are trying to do a short sale by yourselves, 99% it won't happen, even if the Lender doesn't require it to be listed on MLS (95% do require it).

J Scott · Answer

This hasn't been my experience.  Most lenders will not allow a seller to walk away with cash in hand unless it came from the lender as part of the approval agreement.

Jon Holdman · Answer

Easy folks, lets try to help Amber Butler with whats going on.

Equity and a short sale don't go together.  Either they have equity or they want to do a short sale.  Both cannot be true.

Joel Owens · Answer

I can tell you I do have experience and that the first thing is to get the ATR signed so that you can speak directly to the lender.

If you are not listing the property for sale then the info should come from the listing broker and they should have an ATR signed from the seller with the lender or servicer.

It's not that sellers lie in that so much they only remember some things and forget others.Not having one document can waste months of time with a short sale.

Maybe what you are referring to the buyers is that a bank will allow a buyer to pay for a sellers moving costs or relo costs as a line item on the Hud-1.AGAIN you can't know what the bank is talking about unless your ear is on the phone and they are talking to you.

They will not do that without an ATR form for sharing details.

So anything you are hearing second hand is a waste of time.