I had a conversation with a Buyer’s Agent last week about a proposed offer on one of my short sale listings. She indicated that the buyers were planning on asking for a seller contribution toward closing costs. That, in itself, was not the issue. The issue was that the amount they were planning on asking for was more than this servicer/investor will approve. Further, when I told her that she argued with me that she “knew” that 3.5% was acceptable.
Now, you have to understand that in a short sale situation, the owner of the property cannot sell the property for enough to pay off their loan(s) and so they must convince their lender(s) to accept less than they owe. This is the “short” in short sale. Therefore, any seller costs in the sale reduce an already reduced payoff.
That is not to say that the lien holder will never approve a seller contribution toward buyer closing costs. They will do it. However, there are limits to the amount they will approve.
Three percent seems to be the unwritten ceiling for this particular seller cost. And in some situations, it is less. For instance, in a Freddie Mac HAFA Short Sale, the total allowable amount for seller closing costs (excluding commission and seller relocation assistance) is 3% of the sale price. So, if there are other seller costs (which, of course, there are) such as State Transfer Tax, property taxes, fee to prepare the deed, recording costs, etc. they must be subtracted from the 3% to arrive at the amount that might be left over to fund a contribution toward buyer closing costs.
Getting back to my adamant Buyer’s Agent, it finally came to light that she was confusing the incentives that Fannie Mae is currently offering out to try to divest themselves of their REO (Foreclosure) inventory with what is acceptable to a servicer and investor being asked to accept a short payoff.
Apples and oranges my friends. While I can understand that the average person on the street might not understand the difference, an agent who is going to attempt to sell a short sale certainly should. .
Sadly, this was the third incident in as many weeks where it became apparent to me that the agent I was dealing with on one of my short sale listings was completely lost.
Uneducated agents do the buyers they are working with a huge disservice, setting them up for disappointment, frustration and failure.
For accurate information about the difference between a short sale and a foreclosure or selling or buying real estate in Southern New Hampshire or Northern Massachusetts (including short sales and the Fannie Mae Homepath Program) you can contact me at (603) 490-5344.