Replies to This Discussion

Permalink Reply by Jan Justice on December 2, 2010 at 12:32pm

I just had one where the MI wanted a $20,000.00 promissory note and would not counter. They said pay it or we will let it go to foreclosure which is what happened. My seller had nothing to contribute and did not have a job so he did not want to sign a promissory note even though he could have gone bankrupt.

Permalink Reply by Vanessa Calhoun on December 2, 2010 at 12:35pm

It depends upon my seller's financials. If the financials read that my seller's haven't a pot to tinkle in or a window to throw it out of, then I counter back with no seller's contribution and I write a detailed explanation regarding the same. If, at the time of reviewing my seller's financials, I can detect that the investor or MI company would possibly ask for a contribution, then I've already noted my seller AND the buyer (especially, if the buyer has not offered full list price). I've had success countering if the financials can back up our position. At the very least, many of my clients opt to sign a prom note and then file for bankruptcy since it's an unsecured debt.....No, I do not advise ANYONE to do this. Most of them come to this conclusion on their own volition.

Permalink Reply by Karen Hulbert, Woodland CA on December 2, 2010 at 8:05pm

Hi Russ, I am surprised you know what the BPO came in at. I have never rec'd that info even though I have asked every time.
My feeling is they just need to ask for more $$ - after all they are still negotiating. When I get this from the negotiator I go to my seller and ask if they can contribute any amount - even $500. Then go back to the lender tell them your seller is able to borrow funds from a relative in the amount of $xxx. Let the negotiator take this back to the investor. I have never had a deal go dead when we get to this point. Good luck.

Permalink Reply by Karen Hulbert, Woodland CA on December 2, 2010 at 8:09pm

I almost forgot - I also ask my sellers at the time of listing if they are asked to put in $$ to close what are they able to do. IF they are truly in a position where they can't I make sure the SS file includes a letter and indicates this when turned in to the lender.

Permalink Reply by Darren J. De Wilde on December 9, 2010 at 4:34pm

Hi Russ,
Normally the lender/servicer/investor will require a promissory note or contribution if the income of the seller is too high - for instance if the pension is high or there are insufficient exopenses on the sellers' worksheet demonstrating that there is ample surplus for the seller to mitigate the loss of the investor. Notes and contributions normally arise in MI situations also. As all of the previous replies point out, its most crucial to justify why your seller cannot contribute or sign a note. Personally I feel that both notes and contributions defeat the point of a short sale - but on the other hand, I have come across alot of homeowners jumping on the Short sale bandwagon because they think they can get away without paying their mortgage. By introducung notes and contributions to the approval, many homeowners think twice if they do not have a genuine hardship. Second lien holders have become notorious for hammering the seller with unreasonable notes and contributions. Sometimes it comes down to you negotiating with the seller, encouraging to take the note then file BK versus the perilous road of foreclosure and the aftermath that follows anytime over the next 7-10 years of their lives. Is there any chance that the buyer and seller will split 5k each? If you can prove that the sellers income is at risk for example, due to divorce or unemployment or both, it may be more likely that the investor will consider a lower contribution or scrap the note. If the seller is unemployed and divorced already then its a case of justifying that since the seller can not afford the current mortgage hence the SS. the seller is very weary about signing a note they feel there is a chance they could default on. It is known that to default on a payment arrangement with a creditor is worse than defaulting on the original agreement. This makes it look like your seller is willing to work something out but is also intelligent and not likely to put themselves into a situation that is worse than the present one. Sorry to write a book here, Hope some of it at least gives you an idea or direction - theres nothing worse than feeling stuck. Good luck to you. Darren.

Permalink Reply by Russ Colomo on January 4, 2011 at 6:01pm

Thanks for your responses.  I countered with everything I could think of, hardship, divorce, medical bills, job loss, property value decline, etc, and asked them to waive the promissory note and cash contribution.  They came back and lowered the promissory note to $10K from $25K, or cash contribution to $5K.  Seller took the promissory note, now we're just waiting to close.   Also, I was surprised they gave me the BPO info too.  Does make it a lot easier to list when you know what it came in at.