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 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.