Thursday, July 2, 2009

Why Short Sale Lenders Want Promissory Notes

Why would a short sale lender ask for a promissory note or cash contribution from the seller? The emails below, from Bank of America negotiators, will show you exactly why:

EXAMPLE 1: Santa Rosa Beach Florida Short Sale
"Please be advised, that before we discuss the closing costs you have to talk to the sellers regarding contribution to mitigate the loss.
The reasons:
* FICO in the high 700, never late on any account, continue to make payments on all credit cards
* good deposits
* good income on tax returns
Requested contribution: Promissory note of 12,000, payable in 8 years, 125 per month, 0 interest."

EXAMPLE 2: Destin Florida Short Sale
"Seller is currently paying off a car at 453.00 per month and several credit cards paid on time, Seller is getting deposits of 3000 and 2500 every other weeks on her bank accounts. I'm sure she can afford 333.33 per month.
The note is 0% interest for 5 years at 333.33 per month. There is no way we are releasing the liens debts over 684K without the seller contribution."

Both of these examples show how financial information is scrutinized by the short sale lender. Apparently, good credit, few delinquencies and regular income make the seller a candidate for contributing to the shortfall. In other cases, the lender, servicer, or mortgage insurance company may request a contribution due to its loss amount or policy. It is best to prepare your seller in advance.

It's Wendy!
Wendy Rulnick, Broker, CRP, CRS, GRI, ABR Rulnick Realty, Inc.
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