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Regular Visitor
Nicole_R
Posts: 5
Registered: ‎01-25-2013
0

Short Sale addendum

Hello

 

Early this week I submitted an offer on a short sale home. Today I received an email from my agent and attached to the email was a Supplemental Short Sale Addendum. I really love this home, and I would be willing to consider this, but I want to make sure that this addendum is legal and why my agent, lawyer and mortgage company wouldn’t have ever seen an addendum like this before. I could really use some advice to help me make an informed decision; as well as explain to me what exactly this is saying and who it favors, me the buyer, or the seller. I would really appreciate any and all feedback I can get before I consider signing this addendum.

                                           

Below are her comments in the email

 

I received the attached from the listing agent. I ran it by your lawyer and she says this is an ambiguous addendum and it's not clear who pays what. It looks like you will pay an additional $2,000 for the company who is coordinating the sale with the bank. Then there could be 3% additional and $1,000 additional. I also forwarded it to your mortgage company as I don't think this will fly with FHA. They haven’t had a chance to get back to me yet. My advice is not to pursue this home.

 

My response to my agent:

 

Have you seen any kind of addendum like this before?

Would you be able to reach out to the listing agent to get more information on the addendum?

If I should continue my pursuit of this home and accept their terms, would I be able to lower my offer; that way the costs might come out the same as if I did offer the listing price?

Will my lawyer be looking for more information on this addendum or a way around it? I would like all the facts before making my decision.

 

Agents response:

 

I have never seen this before.  Your lawyer never saw it before.  Your mortgage company never saw it before.  Your mortgage company says it's ok from a lender standpoint.


The Agent will not have anymore information on this addendum as it's prepared by the 3rd party who coordinates the sale.  She has to give us what they tell her to give us.


If you want to make a lower offer, you can do so.   Then they can decide whether or not to accept the offer.

There isn't any research that your lawyer can do.  If this is their requirement, then you either sign it or not.  If you sign it and they accept your offer, then we see what other paperwork they send.  I'm sure there will be more requirements since there are two lenders involved.  There may be more "addendums" for you to sign.  Every bank is different and they each have their own criteria - when a third party is involved, they have their criteria as well.  This home has 2 banks (BofA and Green Tree Financial) and a 3rd party involved in a short sale.  There are no rules for short sales except those dictated by the banks.  I wish I could give you a logical answer to all of this, but unfortunately, I cannot.  Just let me know what you want me to do.

 

Below is the Short Sale Addendum received:

 

 SUPPLEMENTAL

SHORT SALE ADDENDUM TO

MULTI-BOARD RESIDENTIAL REAL ESTATE CONTRACT 5.0

SELLER(S): Omitted names to protect privacy

BUYER(S):

 

This Addendum is attached to and made part of a certain real estate contract (hereinafter “the Contract”) between the above captioned Parties for the property commonly known as :

(Omitted address to protect privacy) and the parties agree as follows:

 

1. While the basic terms and conditions of the short sale contract need to be approved by the seller’s lender (hereinafter referred to as “Lender”), this addendum is made part to the contract for the above parties.

 

2. In addition to paying the agreed upon purchase price for the subject property, Buyers agree to pay the following sums at closing:

 

  • $2000 flat fee to Illinois Distressed Property Solutions (IDPS,LLC) at closing as consideration for the costs not paid by the seller and expenses and efforts they have expended to submit, process, monitor, expedite and negotiate the lender(s)' approval of this hort sale and to present a clear title and transfer and resolve all outstanding liens. This fee will be paid on the buyers side of the HUD at closing. This will be disclosed to the buyers lender, upfront. There will be a 3% closing cost credit added to the contract. Any amount granted by payoff lender up to the flat fee will go towards this fee. If no credit is granted, a $1000 to IDPS will be due at closing.
  • This fee is only payable upon the successful closing of the property to the buyers.
  • There may be seller title charges of $200 not approved by payoff lender which will be offset by additional credits or reduced from this fee.
  • This is an AS-IS Purchase. No survey or other inspections will be paid by seller. Taxes will be prorated at 100% unless approved by the Lender though every effort will be made to get a higher proration.
  • This contract is contingent upon approvals by the Lender(s) and attorneys.

 

The Parties have executed this Supplemental Short Sale Addendum this __________ day of ________________________ 2013.

 

________________________________ __________________________________

Buyer Seller

________________________________ __________________________________

Buyer Seller

 

Redfin Preferred Lender
Erik_Johansson
Posts: 145
Registered: ‎03-03-2009
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Re: Short Sale addendum

Nicole_R,

 

Illinois Distressed Property Solutions (IDPS,LLC) has been contracted to facilitate the transaction. There is a cost for their involvement and the document in question outlines their proposed compensation and explains how the costs are divided.

 

What to do:

 

Consult with your agent and your attorney.

 

If it turns out in the end that all of the fee's associated with this agreement become your responsibility how much $ would you be responsible for?

 

Then decide that if in this "worse case" scenario" you would be willing and able to pay them.

 

Willing: Are you willing and to bear the full cost and still feel good about the whole deal?

Able: Do you have the ability to add the fees if applicable without impacting your ability to get the loan?

 

If yes, than move ahead.

 

If not, then you will have to reconsider your options and decide whether or not you want to move forward with this home under these circumstances.

 

Hope this helps,

 

 

Erik Johansson | Redfin Preferred Lender
See all my reviews
Regular Contributor
DISGUSTED1
Posts: 72
Registered: ‎07-17-2011
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Re: Short Sale addendum

Illinois Distressed Property Solutions (IDPS,LLC) has been contracted to facilitate the transaction. There is a cost for their involvement and the document in question outlines their proposed compensation and explains how the costs are divided.

 

 

LOL  Welcome to Chicago...

Regular Contributor
MarkusAIC
Posts: 84
Registered: ‎02-02-2010
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Re: Short Sale addendum

It sounds like the company is trying to turn this into a 'regular' transaction commission schedule in a round about way. Under a traditional, regular, non-REO deal there would be a +/- 5% commission split between both agent sides.

From what agents have told me, in REO deals banks are usually paying a low flat fee to deal coordinators rather than a traditional commission rate. So sounds like these guys are trying to make up for that.

If it were me and I really wanted the house, I would try to get my attorney to amend the addendum so the costs are definite. As it is, you aren't quite sure what the costs will be. It sounds like how much you end up paying will be dependant on how much or how little the banks screws IDPS.

Good luck and don't skimp on the inspection. REO's tend to have a fair amount of post purchase costs.

"The Code is not a ceiling to reach, but a floor to work up from"
Regular Visitor
Nicole_R
Posts: 5
Registered: ‎01-25-2013
0

Re: Short Sale addendum

**** UPDATE ****

 

The sellers accepted my offer and my attorney is already requesting additional information on this addendum as to what is going to be expected of me to pay. Once I have more information, I'll have my attorney see what she can do, if anything, to amend the addendum. Thank you all for your feedback, I'll keep you updated. I hope this information might help someone else in my position. 

Regular Visitor
Nicole_R
Posts: 5
Registered: ‎01-25-2013
0

Re: Short Sale addendum

**** UPDATE ****

 

The sellers attorney apparently didn't agree with the document my attorney sent. They crossed almost all of the bulletpoints out and modified the document with their own stipulations. First one being, they wanted the inspection done within 5 days from the date they wrote on the document and wanted it completed before short sale approval. Luckily the inspection seemed to go very well, I'll get the official write up from the inspector in a couple of days. 

Regular Contributor
joe_creole
Posts: 64
Registered: ‎04-27-2011
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Re: Short Sale addendum

If your agent, attorney and mortgage company have never seen an addendum like this before, that should send up a solid red flag. I'm just a small time investor and I've seen this many times. It makes you wonder if your chosen "professionals" are really green with short sales or just want to dummy up so you complete the sale and they get paid. I suspect it's probably both.

A seller in distress will often seek out advice from a "foreclosure specialist" which in this case looks to be Illinois Distressed Property Solutions, LLC. These so called foreclosure specialists are nothing more than investors - and I use that term very loosely - who promise the owner a quick sale through their vast experience with short sales and an elusive network of eager investors they have at their disposal. In reality, the "specialist" will be working a deal with the bank for the lowest price on their own behalf while shopping the property around for the highest buyer.  And the highest offers usually do not come from wholesale investors - they come from naive retail buyers - the ones with all those professionals helping them. The seller usually doesn't have a clue about the specialist's methods or motives and follows his directions blindly - he just wants to get out from under the property.

These outfits are ruthless and will use every trick they know to extract maximum profit for themselves. For example, if they happen to say they have a counter offer I would ask for the counter offer to be put in writing on the lender's letterhead and notarized. And that goes for every counter offer. If they really are working on their own behalf they won't comply. Also, if they happen to find a buyer willing to pay more then they could reply the lender rejected your offer which nullifies the contract.They will insist you complete your inspections immediately and create lots of demands for your attorney to increase the amount you have invested and deter you from cancelling the contract.

 

The first time I dealt with one of these outfits was back in 2007. I made a decent offer on a TH which I liked that would have made the seller whole. This REMAX agent, however, was running his own game and I ended up walking away from the deal. I found out from another attorney who knew him how these guys operate. On his linked-in bio he claims to be founder of River North Home Solutions.  The president of Illinois Distressed Property Solutions has an interesting bio on linked-in as well. Apparently he is a former employee of River North Home Solutions. I guess it's a small world after all.

 

If I were you, I would start looking for another house.

Regular Visitor
Nicole_R
Posts: 5
Registered: ‎01-25-2013
0

Re: Short Sale addendum

Thank you Joe for your feedback. I did some research on my own after receiving the above addendum, I talked to my agent the next day and informed them what I had found out about this addendum. They told me that they are aware of some agents who are starting to use these type of companies for short sales. Apparently they don't want to do the leg work themselves, so they hire this third party company to do it for them, and if the seller chooses not to incur the fees from the third party, then it's on the buyer to pay the fees, if they want the house bad enough.

Regular Contributor
joe_creole
Posts: 64
Registered: ‎04-27-2011
0

Re: Short Sale addendum

Let me get this straight - your realtor told you that the listing agent contracted with a company to do the work in which the owner hired the LA to do. And since the LA or seller won't pay the additional fees they're passing the costs off onto you.(Nice!) In your first post, your realtor said the LA could not provide any more information than what's on the addendum because it's a 3rd party sitution - strange behavior for a company that supposedly works for you.

I think it all boils down to who that 3rd party is really working for. If you are paying the fees they should be working for YOU! Unfortunately, 3rd parties in short sale transactions are working for themselves. They will negotiate a deal with the lender(s) on their own behalf, acquire the property  and sell it back to you for a profit. As for those fees, I'm sure part if it is kicked back to the listing agent for finding the opportunity.

Since the property has multiple liens, a 3rd party may be the way to go if you really want that home. As long as you don't have any objections to paying substantially more than the 3rd party paid. They are pros at short sale negotiations and could net 60-70K on your transaction. The last double closing I ran across in the county recorders office showed a net 141K to the "facilitator".