How do closing costs get paid in short sales? - Reid Real Estate Group
August 28, 2017

How do closing costs get paid in short sales?

You know what my favorite part of a short sale listing appointment is? It’s at the end, when the seller asks me what my services will cost them, and I get to tell them… DON’T WORRY ABOUT IT!

Here’s why:

There are actually several costs to a home seller in the sale of their Connecticut property:

  • Realtor commissions
  • Conveyance taxes
  • Adjusted real estate taxes
  • Legal fees
  • Seller paid concessions to the buyer
  • Junior lien payoffs
  • Recording, wire, courier fees etc.

In a “normal sale,” these come out of the proceeds of the sale property and are a loss to the seller. In a short sale, there are no proceeds to the seller. The purpose of the short sale is to get the lender to accept less than what they are owed, so we’re already starting with no proceeds to the seller. However, when approving short sales lenders understand that there are customary costs to selling the property, including all the fees above. Lenders allow these costs to be deducted from the proceeds of the sale and, in fact, collect the “net” proceeds – what is left afterwards.

So what does that mean to my sellers? Well, it means that, although their closing costs were paid for out of the proceeds of their home sale, they didn’t actually pay any of these costs out of pocket. The only time my sellers pay anything at closing is in instances where the lender requires a cash contribution in order to approve the short sale… or in instances where there are junior liens or judgement liens. Less than 10% of any of my sellers have any out of pocket costs involved in their short sale.

Isn’t that beautiful? I get to sell my clients homes, get them out of their massive mortgage debt, and nothing I did cost them a single cent out of pocket! 

Talk about happy clients!

 

Minna Reid

Minna Reid is Broker/Owner of Reid Real Estate Group. Reid Real Estate Group is a full service Connecticut residential real estate brokerage, specializing in helping homeowners with legal and financial challenges including short sales, probate sales and tax lien complications.

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