Short Sale Closing Costs

I’m told that for the most part in the area of Georgia where our ‘underwater’ house is located, the seller pays the bulk of the closing costs regardless of whether it’s a short sale or not. These costs are paid in certified funds - no credit cards or personal checks as I understand it.

If people don’t have the money to pay their mortgage and have to sell their house short, where do they come up w/ the certified funds to pay the thousands in closing costs? When I asked the real estate company that manages the rental of our house their only response was, “I really couldn’t tell you.” Hunh? :confused:

Please shed some light on this, experienced folks. It seems the more I learn about real estate the stranger things seem.

Let me be the first to say it; you need to speak to a lawyer (I am not one). I would not expect the management company to have any particular expertise on this subject.

Having said that, I suspect that this is a negotiable item. You can sell your house based on the buyer paying the closing costs (I would expect this condition to be reflected in the asking price). However, in a short sale, the bank holding the mortgage (s) has the final say on the price and conditions of the sale. You need to negotiate with the bank first, and I don’t believe they are under any obligation to allow you to proceed with a short sale. At the very least, you need a lawyer to help in this negotiation (how do you pay the lawyer? I really couldn’t tell you).

Has the bank agreed to a short sale?

Good luck.

I appreciate your caution, but we aren’t in the process of a short sale. This is a hypothetical situation based on what our real estate company has told us (and the internet has backed up in most instances I’ve read about). Yes, closing costs are negotiable but the instance where the buyer pays them is extremely rare.

Likewise, the FHFA has a new regulation that will take effect November 1st wherein a military member (that’s us) who has a PCS that moves them away from their underwater home (also us) which is financed via Fannie Mae or Freddie Mac (also us) cannot be held liable by their mortgage holder for the difference in the selling price and the amount of the mortgage. It doesn’t appear to cover closing costs, however, which is why I was looking for people’s experiences; we may pursue a short sale in future but not likely soon.

Hope that clarifies things!

Georgia is a non-recourse state, meaning anyone can walk away from their home and mortgage and the lender can not seek a deficiency judgement. Quite likely this only applies to a purchase money loan, and if you have a home equity loan or line of credit you could get stuck on that. I’d recommend talking to a lawyer to know your obligations and exposure.

With a short sale you’re somewhat removed from the process. You’re not getting any proceeds from the sale, so you don’t care what the home sells for and you don’t want to throw good money after bad. It’s also a very long process. Someone sees the home, they make an offer, you accept it, it goes to the bank, and somewhere between 3-12 months later they might respond to it.

If you’re leaving the state, you might do better to explain your situation to the bank and ask for a deed-in-lieu.

In our instance they also wouldn’t be able to put anything negative on our credit report either (‘Settled for less than amount owed’, for example), but that’s neither here nor there.

Where do people come up w/ closing costs when they already don’t have money for their mortgage? Do they borrow it from family? Do they save it up in anticipation? Do they take out a cash advance on their credit cards? Or are they expected to roll it into the deficiency?

bumped by the Bumpist