What happens when a seller goes to closing but doesn't have enough money from the sale of the home to cover closing costs? Where can the seller get the money to close?
When selling a home it is usually the buyers responsibility to pay for closing costs but sometimes, as in a short sale, sellers need to bring money to the table if they are selling the home for less than what is currently owed. If the seller cannot get approval for a short sale the deal will expire.
If the seller does not have enough money to pay unpaid liens on the property before closing the liens could become the buyers responsibility. The buyers should run a background check on all of the liens and loans against the property to title insurance before closing on the home.
Closing costs are a variety of fees and costs involved in facilitating the transaction. These could be loan fees, insurance and title research fees, real estate commission fees, taxes, escrow fees and courier fees. These high fees can cut into the profit a seller is expecting from the sale of their home and it could increase the amount of money the seller needs to bring to the closing table. If the seller owes more on their mortgage than the amount they will receive from the sale of the home, they can borrow money from a variety of sources. Often times, if sellers can sell their home for close to the amount they owe and just bring a little to the table, they are willing to take that risk. Lenders and agents don’t care where the money comes from as long as you have it.
For instance, if you are going to be about $5,000 away from breaking even at closing it would probably be better to find the funds rather than ask for a short sale. If you are seriously upside down meaning you can’t do $30,000 or more, a short sale is probably the best option. But for smaller amounts, many sellers don’t want to have the ding on their credit if they don’t have to.
Sellers can obtain funds a variety of different ways; 401K, savings, even credit cards. Of course you can’t obtain a home loan or HELOC on the house you are trying to sell because that would throw everything off. But if you can borrow from a family member, friend or from some other source to cover a small amount at closing, it’s usually better than a short sale.
Feel free to Contact me anytime for information on selling your Portland real estate or property and how much you may need at closing if any. We can run the numbers and find out what will work best for your situation.