Seattle Real Estate Blog by David Monroe

Bank's Actions Defy Logic

PuzzledI specialize in short sales, and I’ve observed many actions by banks that seem to defy logic.  This particular experience is no exception.

A while back, I had a short sale listing that was being negotiated with the bank at $300,000.  The buyer ended up backing out right before we received the short sale approval, because their financial situation changed.  We received the short sale approval letter, and the approval was conditioned upon the seller signing a promissory note for $20,000 or coming up with $10,000 cash at closing.

We managed to quickly find another buyer who was willing to pay $10,000 more, but the bank refused to even consider the offer and asked to have the offer rewritten at $300,000.  They also said that regardless of the price offered, the seller would still be required to sign a promissory note unless the bank was receiving a full payoff.  Since full payoff would have been $450,000, that wasn’t going to happen.

We gave the bank what they asked for -- $300,000 plus an additional $10,000 cash at closing, but the bank said they wouldn’t accept the additional $10,000 from the buyer—It had to come from the seller.  So what was the motive here?  To punish the seller?

In the end, the offer was reduced to $300,000, the seller signed the promissory note (at 0% interest, payable over 10 years), and the deal closed.  I typically don’t like the idea of sellers signing promissory notes in these situations, but this seller’s situation was a bit unique and they felt it was in their best interest to do so.  They’ll most likely file for Chapter 7 Bankruptcy, which will wipe out the note.  The money was on the table and the bank refused it.  Now they’ll end up with nothing.


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Authored by David Monroe, Realtor and Pre-Foreclosure and Short Sale Specialist.
Access Seattle area short sale help and foreclosure resources including selling in foreclosure, and 8 Ways to Avoid or Stop Foreclosure.

Copyright (c) 2010 by David Monroe (Home4Investment Team at Keller Williams Seattle Metro West).

Comment balloon 2 commentsDavid Monroe • February 03 2010 04:09PM
Bank's Actions Defy Logic
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I specialize in short sales, and I’ve observed many actions by banks that seem to defy logic. This particular experience is no exception. A while back, I had a short sale listing that was being negotiated with the bank at $300, 000. The buyer… more
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