Question
What happens when a seller accepts an offer for his house that is less than the mortgage?
Me and the Seller negotiated through our respective agents and agreed on a price. It turns out though that the seller accepted this price even though it was less than his mortgage,, without consulting his lender first of the "short sale". This is the information my agent told me. He also said that it is up to the lender now to decide whether to take the offer and lose the $14000 difference. The seller is on the virge of foreclosure apparently. All of this has been said to me by my agent but it sounds fishy to me. Can anyone verify this procedure or elaborate? Much thanx in advance.
3 weeks ago - 4 answers
Best Answer
Chosen by Asker
Whether or not the bank agrees to the short sale is of no concern to you because it is not a contingency of the contract. If the bank says no, the seller simply has to bring the $14k difference (plus closing costs including commissions) to the closing table. The above is true, but as i think about it you do have a contingency on your sales contract that would give the seller a legal way out of the contract because the agreed upon price was for the house free of liens and a mortgage is a lien. And if it can't be resolved, your lender won't lend you the money and you can't buy the house. But if the deal goes sour for this reason you can sue and easily win all the expenses you have already incurred in the sale process (inspection fees, appraisal, etc)
Source(s)
Realtor
by linkus86
3 weeks ago
Asker's Rating: 
Other Answers
Yes, the seller sounds like he really got ahead of himself. He should have gone to the lender first before accepting your offer. Really, all you can do now is sit back and wait to see what the seller's lender says. If they accept the terms of the short sale, you'll be getting a new house. If not, you have to start looking for another property.
by The CPA Guy- 3 weeks ago
Lenders do not automatically give authorization for a short sale. If the borrower has the finances to make the payments and is in a recourse state, it is unlikely that the lender will authorize a short sale. Final approval of a short sale is unlikely if the lender or investors believe that they can get a better deal by foreclosing. If the lender is only the servicing agent for mortgage, the lender will have to determine if the investor(s) in the mortgage may be willing to accept a short sale. If there are more than one mortgage on the home and the mortgages are owned by different lenders, a short sale becomes less likely. If the mortgage(s) have been securitized (grouped with other mortgages and bonds issued), it is unlikely that the lender would be able to get the approval of all the bondholders (could be 1000s and any one could reject the short sale. Because of the complexity of the short sale final approval process from investors, the lender generally requires the home to be sold as is with little or no preconditions allowed. Even when a short sale is authorized in advance, it usually takes 3-6 months to get final approval after an offer is made. Even then, more than 1/2 of the short sales fall through.
by Mike- 3 weeks ago
What are the terms of your contract? The contract will determine "what happens." Unless a term of your agreement made the sale "up to the lender," then the seller will be in breach of contract if he cannot deliver clean title to you by the closing date.
by Mr Placid- 3 weeks ago