I’m in the process of negotiating a short sale transaction with Chase. House had water problems and the insurance company issued a check to Chase for 60,000. Chase is holding the money in a restricted escrow account and has been sending letters to the seller asking him to hire a company to fix up the house and Chase will release the fund in stages as the house is being fixed.
Mean while, I already negotiated the short sale and was aiming to take that insurance money as part of the transaction so I could fix up the house. The Chase short sale department doesn’t know about the insurance money and doesn’t seem to care.
I’ve been contacting the department holding the insurance money explaining the situation and was hoping that they would release the money as part of the closing process. They refused. They would only release the money to a contractor and upon verifying that the house is being fixed. And as I stated earlier, they would only release the money in stages.
Has anyone experienced this before? Is there any advice you can give me? Anything I could do? With the insurance money, this would be a great great deal for me. Please help!!!
Thank you
Brian,
I am curious what others are going to say.
Assuming you close on the purchase through the short sale process, I wonder if the funds would then legally be released as the Chase would no longer have a claim.
Second, I would expect the short sale process to receive the funds. As they are selling as-is, they might see the cash as compensation for part of the short sale discount.
As I have no direct experience with anything similar I am not sure what to suggest. It might help if you can get John Merchant (co-host of the legal forum) to comment. He might know of a way to legally free up the cash.
There is nothing unusual about a mortgagee demanding repairs and verification before the release of insurance proceeds. In fact this is normal.
I think if i were you, I would consider closing the short sale (if its worth it) and after the mortgage lein is released, I would attempt to collect the ins proceeds.
There is only about a million holes in that plan though, so I would discuss it with my atty before laying out the purchase money.
I’m assuming the insurance company has paid the claim in full, and the reason they paid Chase was because Chase was named the insured lender. So it’s the insurance escrow dept. at Chase that will only release the funds upon completion of various stages of work?
Why not add an addendum to the purchase agreement that states that escrowed insurance funds in the amount of $60K will be released to buyer upon close of escrow? Or make your offer $60K lower, stating that buyer forfeits rights to the escrowed funds (in the amount of $60K) currently with lender.
If the owner is getting mail from the lender about it, and you’re able to communicate with a dept. at Chase, then it sounds like there is plenty of supporting info available to you. Put the details of the insurance escrow account (amount, dates, insurance company, etc), supporting it with copies of your communication with this dept., in writing and see where the lender’s short sale/loss mit. person goes with it.
Idea
I’ve been brought into any number of similar deals and found that typically my call to bank branch mgr and lawyer released such tie-ups.
Chase being the largest bank now, I have no idea if this would work with them but it’s worth trying.