Cash Contributions and Promissory Notes In The Short Sale Industry
January 20, 2011 / /
http://shortsalepowerhour.com
Cash contributions and promissory requests are becoming the norm in the short sale industry.
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About the Authors
Kevin Kauffman & Fred Weaver
Kevin and Fred the founders of Group 46:10. Over the last 10 years Kevin and Fred, and their team have closed tens of millions in real estate all over the country and have created some of the best training for agents in the market. Kevin and Fred are also highly sought after teachers whose work has helped agents all over the country build their own next level real estate business.
I’ve not done a short sale yet, but have learned a lot from your presentations. Thanks for helping me understand a bit about how to crush it.
OMG! I’m dealing with a GMAC second that’s just a nightmare. I should say GMAC is the servicer but the investor is ETrade. Anyhow the long and short of it is that the 2nd wanted 5K instead of the 3k the 1st was going to give them, we had to go back to the 1st after they approved the ss and the 1st in fact re-did a BPO & has verbally apprvd it, today I get a msg from GMAC now asking for 6300 and will release all deficiencies etc. Where are they coming up with this number from? It’s not like the value increased of the property????
As for Cash Contribution – I had two deals this past DEC – where Cash cntrbn was necessary (1 was an invstr, the othr Strtg Dflt) – either way the home owners were ok with it and in return they got a pretty clean slate from all lien holders regarding clearing the deficiency etc. In both those cases their were 2 loans.
oh and on the cash contribution – we went back and forth several times to renegotiate both the terms and the amounts down.
Hi guys, met you in Nashville last year. Love the Pwr Hr daily. Mostly servicers asking for promissory notes and cash…and higher offer prices….we turn them down immediately. Mostly Fannie transactions..not asked for either cash or notes. The seconds are the challenge on this front more often. We are doing a great job though of keeping offers on the table at 90% or more than what we know or feel the bank is using as a valuation.
I am really bummed that I can’t see you guys tomorrow in Arizona. Probably see you in VA in a couple months!
Also, just had LBPS approval (Fannie and 2nd, and insurance)on a deal and LBPS’s postponement debt. didn’t get the news to the foreclosing attorney in time and they foreclosed. LBPS won’t give me the time of day and I went directly to Fannie and can’t get a return call…..
Hi,
My last 3 with BofA have asked for a promisory note and cash contribution. One I got them to remove the promissory note and my client was ok paying the $1000 cash contribution. The other I got the promissory note reduced from $20,000 to $10,000 and the cash contribution from $10,000 to $1000. My client was happy with that. I agree with you all about saying no to the initial counter for cash or a promissory note.
Hey Kevin & Fred. Looking forward to seeing you tomorrow! Kevin, please remember you promised to save me a seat. 🙂 My flight from Vegas gets in at 8:05 a.m.
On the topic of cash contributions and promissory notes … I have two files in the past week that had requests. The first is a job transfer situation and the homeowner is current on the mortgage. 1st and 2nd liens are BofA. 1st lien requested $5K cash contribution BECAUSE he is current and has a good FICO score. What kind of craziness is that??? The homeowner declined to pay the $5K, nego sent the file to mgmt, and as of yesterday it had gone to MI for their review (2nd lien) where I presume we will get another request for cash.
The other file (Wells Fargo only lien) is an out-of-work teacher with medical problems related to a car accident. She has no job, very little money and MI requested a $20K promissory note. We will decline. She has suggested bankruptcy as an option.
Nevada is a recourse state and lien holders have 6 months to 6 years for recourse, depending on the situation.
Thanks for noting the trend. It’s better to be prepared for the request and have a planned course of action than to think it’s pay up or else.
Sent email to WF this morning saying the homeowner could not pay a $20K prom note. JUST got their response:
“The file has been removed and the short sale application declined. The Borrower will receive a letter within a few days informing her of this decision.”
Any thoughts or is this really done?
Yes, our last two GSE approvals involved cash contributions or promissory note requests. The servicer gave us a BS answer so I called the investor and spoke to a friend to provide insight.
In North Carolina, most mortgages here are eligible for deficiencies. The info I got from my source at Fannie said it’s based on the borrowers ability to pay. This makes sense as both clients were employed.
Hey Guys,
I am in a recourse state (NV) so it is a little harder for us but I would say we are experiencing the same thing. 2 years ago we almost never were asked for a cash contribution or a note, now I would say on over 60% of our files one or the other (or both) are requested. We have still been fairly successful fighting them off but it lengthens the process and makes it more likely to loose a buyer.
See you guys in AZ tomorrow!
@Barbara Rice,
Hi Barbara, I think I am on the same flight as you are from Vegas, contact me if you want and we can share a cab to the event and trade short sale war stories, maybe we can figure something out on your Wells file. My email is [email protected]
An update to my WF file … YES, it has been deleted from their system and even if I re-initiate to negotiate with the mortgage insurance company it will be denied. The MI wants a $20K prom note, period!
Seller is meeting with a lawyer next week.
I’m seeing Promissory notes and/or cash contributions on almost every file in the last 3 months. Today, $110,000 promissory note requested by the PMI company on a 160k deficiency difference. Ouch! It is a bonafide hardship and the home was sold at market value.
Just got to view your video today. I saw this recently on a file with MI. The investor doesn’t care since they get their money either way and will agree to the SS so the decision rests entirely with the MI company. The MI company doesn’t want to be out one red cent. I researched their criteria for short sale approvals and you guys are spot on. If the client shows as little as a $200 cash flow monthly they will demand a no interest promissory note and will probably demand your client pay some of the closing costs. I wasn’t able to see the clients financials, but they told me they weren’t given any advice on how to fill out the paperwork.
This happened on a file that was not mine but belonged to another agent. The borrower asked me to take a look at it since he thought he was being shafted. The negotiation was handled by a third party negotiation company (who by the way mucked up the entire deal, don’t get me started!) Add in a real estate agent who doesn’t have a clue and the client loses. By the time I took a look at the situation it was too late. Seven months had passed. The borrower had to agree to the promissory note and closing costs or go to foreclosure. The MI company wasn’t out anything! (Of course they would have been had it gone to foreclosure!)
I agree with you that the client needs to put EVERY EXPENSE they can on the financials since that is what lenders and MI companies are now scrutinizing.
I think we need to look really closely at the power the MI companies have in negotiations. Even if it becomes an REO the MI company still has the final say as to whether they will accept an offer.
Keep up the good work. I love you guys!
Danielle
Hi guys in reference to cash contributions, I just closed a short sale with bank of america, at the biggining they wantes 8000 and after a couple of nos they settled for 250. I feel like I did pretty good with that negotiation. What do you think?
no comment! jk, same here. The longer you are willing to fight the lower they go.
I’m in Westlake Village CA. WFB just asked for a contribution of $234,000 which was 50% of deficiency! Seller said NO WAY.
Chase first and Chase second. The second loan was $250,000 and they were getting just $8500 from the 1st but asked my seller to contribute $40,000. He did it because they agreed not to go after him!
I have an HSBC 1st of $320k that they are asking for an $8k contribution (or $20k 10yr 0 interest note) and a Chase 2nd of $55k that they are asking for $15k note. This is in WA state where we are a Non-Judical Foreclosure State.
And I meant to add that this is a Freddie Mac loan…
The request for cash and promissory note is getting ridiculous. We always say NO at first because the homeowner is usually not able anyway. One of my shortsales was approved by the 1st and we were pushing and waiting for the 2nd to get paperwork when the BPO expired. Had to start over and now the 1st is asking for $19k on the promissory note in order to approve or $7k more from the buyer. CRAZY! Escalated like crazy and this is where we are with pending sale date 2/18. The Negotiators egos are sometimes out of control.
And I meant to add that we are a Deficiency State, Tennessee. 1st BofA and 2nd Suntrust.
Hey Fred–
–great to see you and your partner enjoying great success!!! You still at theWord of Faith church??? I’m DB now for a company at Power and south leg of 202. Had a SS with Wells as servicer—I could not get them to drop contribution and had a buyer that wanted home so we did it. Can’t even remember who–thinking it was Bryan Memmott of Brown & Memmott at a seminar said Fannie is implementing a contribution request with every SS as of 2011.