Banks Ask For Promissory Notes And Money At Closing
Welcome back to Short Sale Power Hour with special guest Brian Gubernick. We’d like to chat about promissory notes at the moment and how to deal with situations when the bank or backer is asking for promissory notes.
We have been dealing with short sales for nearly three years now. In 2008 and 2009 there were a few requests for promissory notes, but many of those requests made sense. Homeowners were showing banks things like 401K details. However, more recently, we are seeing an increase in requests for promissory notes from homeowners that have demonstrated hardships. For example, a gentleman that is not working was accepted to a school in Hong Kong and Freddie Mac requests a promissory note.
We assume that a lot of realtors could be causing this dilemma. As an agent, you should not be preparing homeowners to bring cash to closing. many agents make use of this as a sales tactic. This is not a way to negotiate the greatest possible agreement for your customer. bank requets for promissory notes are only rising, but realtors need to stop giving in to these demands.
The bank may look at this and judge that they can solicit for a promissory note from each short sale deal. If the lender knows that some agents are allowing this to happen, they would be prone to ask every single time, hopeful to get a percentage of these deals with promissory notes.
If you are completing short sales and accepting promissory notes, you are not doing your clients justice. Simply stop taking the business if you ask for clients to come up with cash at closing. We need to remind the banks and servicers that mitigation is about how much the home is worth and how much can you get for the home. Bear in mind, with foreclosure, the bank gets no promissory note. Do not put your seller in a worse situation than they would have with a foreclosure.
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