Q: I’m in contract on a second home in Florida. It’s a short sale and I know it can take a long time. My mortgage has been approved, but the delay now is that there is a lien on the house. The owner didn’t pay a bill for a water purifying system, and the bank is not responsible because it’s not a tax lien.
Is there any negotiating leverage here for me? Could I possibly get the price lowered if I pay off the bill, or make some arrangement like that? I just want this process to be over. I have a basement full of furniture waiting to go to its new home! –Ramona L.
A: First things first: Let’s be clear that any and all existing liens on the house are the seller’s and/or their bank’s responsibility, if they want to close the deal. You cannot close escrow and obtain the title insurance that your mortgage lender will require unless and until all liens — including what I’m assuming is a mechanic’s lien recorded by the water purification system installer — are removed.
I’ve seen banks pay off back homeowners association dues and delinquent garbage collection bills, so I just want to correct your assumption that the bank "is not responsible" to pay it.
Talk with your own agent to get a sense for whether the bank is at least considering paying it off, and to make a decision about whether you might want to give the bank some time to try to work it out.
With that said, the bank has the right to simply refuse to pay it, and the seller might also refuse or simply not have the cash to pay it. Fortunately, this is real estate, and in real estate everything is negotiable. So if the other parties refuse, or if you simply want to get this thing closed as soon as you can, you should feel free to take your sense of urgency to close the deal and propose some alternative solutions to the bank.
Certainly, lowering the price in the amount of the lien and you paying it off seems like an easy solution, but is effectively the same for the bank’s purposes as if it allowed the escrow holder to pay it at closing out of the proceeds of the sale. So, if it’s the case that the bank has refused to pay it up to now, chances are good that this won’t work. Maybe you offer it anyway and see what the bank says, or perhaps you offer to pay off the lien in exchange for a price reduction of a smaller amount. You might even consider approaching the seller and offering to split the lien costs with them 50/50 or 75/25, or think about proposing a three-way split between yourself, the seller and the bank.
Just keep in mind that every time you submit a proposed renegotiation to the bank, you might be adding anywhere from a few days to a few weeks to your closing calendar; if time is more important to you than a small amount of money, keep that in mind and tailor your proposals around what the bank is likely to accept with minimum back-and-forth, based on what you already know.
You don’t mention here how much the lien is, but if it’s fairly small (whatever that means for you and your budget), and you really want to close the deal, there’s no law against offering to cover the whole thing and keep the transaction moving.
Again, you don’t want to jump the gun and offer a large sum of extra cash if the bank (or the seller) has given any indication that it might still pay the lien off, but if it’s a relatively small sum and time is truly of the essence to you, you should feel free to forward a proposal strategically designed to expedite the process by taking some of the cost of the lien off the bank’s back.
Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.
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