Short sales usually close without lender making repairs
Q. My husband and I signed a contract to purchase a house. This is a short sale. Our real estate agent warned us this could take a while. We waited until the seller’s mortgage company approved the contract to do our home inspection. This took four months.
We then did the inspection and it revealed numerous problems with the property, including major problems with the roof and furnace. As we knew the seller didn’t have any money, we asked for a credit so that we could make the repairs ourselves. This was submitted to the bank and the bank said it would not offer any money toward repairs. We had to take the property as it was or walk away from the deal.
This seems very unfair. We waited four months for the bank to make up it’s mind whether or not to accept our offer and then it won’t offer any money to fix the property. Some of the problems, the furnace in particular, have serious safety issues.
Now we don’t know what to do. We have been given estimates of $8,000 to $12,000 to get the property to a point where we can safely live in it. Is there any way to put pressure on the bank to help us out with these repairs?
A. No. In a short sale, all the proceeds from the sale, after deducting the customary costs and expenses of the sale, go to the lender. Accordingly, any additional costs, such as repairs, would come out of the lender’s pocket because in a short sale it is agreeing to take less than it is owed on the original mortgage.
It is the lender’s prerogative as to whether or not it will spend any of these sale proceeds on repairs.
You need to add the cost of the repairs to your purchase price and determine if this is still a good deal for your family. If you are truly unhappy with the way this deal has evolved, walk away.
If the property is in as bad a shape as you say, the seller and lender will have the same problems with any future prospective purchasers. Maybe you can come back in a month and the lender will be more receptive to a sales price reduction.
Q. My father owned a condominium in the same town where I live. He died about two months ago. Somehow, his mortgage company got my name and now I am getting constant calls and letters regarding his unpaid mortgage.
I have talked to a real estate agent and it appears he owes about what the condo is worth. The agent suggested a short sale but I really don’t want to deal with all that. Can’t I just give the property back to the bank?
A. What you are suggesting is a deed in lieu of foreclosure. Presuming there is no equity in the property, it is the quickest and easiest method of resolving all matters involving the property.
Contact the mortgage company and ask to speak to someone in loss mitigation or someone who handles deeds in lieu. Indicate to them your father has passed away, no further payments will be forthcoming and you wish to tender the property back to the lender.
One issue that may come up is whether or not your dad had any money or other property in his name at the time of his death. If he did, the lender may elect to go after those funds to satisfy the obligation on his mortgage.
The lender will probably also ask if an estate has been opened. If it has, the presumption would be your father did own assets at the time of his death. The estate documents actually disclose the estimated value of the decedent’s real and personal estate.
You can worry about these issues in the event they arise. For starters, just tell them there’s no money and you want to tender the property back. See where it goes from there.
Ÿ Send your questions to Attorney Tom Resnick, 345 N. Quentin Road, Palatine, IL 60067, by email to tdr100@hotmail.com or call (847) 359-8983.