The Counter Offer

Be ready for counter-offers and respond with caution

Although lender counter-offers are not part of every short sale, they do come into play and must be handled properly. There are four main possibilities in most lenders’ counter-offers:

•      Lender may counter for a higher offer from the buyer
•     Lender may request the seller make a cash contribution at closing
•     Lender may request the seller to sign a promissory note at closing
•     Lender may counter to have the closing costs adjusted

The fourth of these will be non-negotiable in many cases as lenders generally have set limits on closing costs.

However, the first three are crucial and be negotiated carefully to ensure the best outcome for the seller.

If the lender counters the offer from the buyer, there are two crucial steps that the seller’s side must take:

• The seller must first go back to the buyer and request a higher offer…any increase in the buyer’s offer improves the chance of approval, even if it does not fully meet the counter from the bank.
• If the buyer is not willing to increase the offer to the full counter made by the bank, then the seller’s side will have to bridge the gap by challenging the lender’s value.

If the lender counters with a request for a cash contribution and promissory note, there are two crucial steps that the seller’s side must take:

• The seller must not panic and accept the counter just to get the deal done – the lender’s request for a cash contribution or a promissory note is very rarely a “take-it-or-leave-it” proposition
• The seller must then craft a sound response explaining that the cash contribution or payments on a promissory note are simply unaffordable. The response should be supplemented with supporting documentation (such as pay-stubs and list of monthly expenses).

Since 2013, requests for cash and/or promissory notes have become far more common, but remember it does NOT necessarily have to be accepted to complete the short sale. These requests from the lender are simply a counter-offer and your short sale can be approved even if you reject their request to pay any cash and sign a promissory note. However, please remember that this needs to be skillfully negotiated for the most favorable outcome for you as the seller. And as always, each case is different, so make sure you are represented by an experienced professional.

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