Short sale possible

[wizard]

Guy called me last week telling me that he wants to sell his porperty. He is 3 months behind. The lender said he needs 5k to bring the loan current. He told me that he just cant afford it any more since property taxes went up. So i am thinking of a short sale. here are the numbers
*Comps 95k-100k
*1st morthage 62k
behind 6k-8k
*2nd mortgage 15k
current
*Repairs 6k -8k

Do you think this property can be short saled? If so Should I try and short sale the second then the first? If not SS on the first, is it possile on the second? Also on the purchase price what should I put? Someone told me to just put "loan pay off" on the purchase price line. Please help out on this one.

[SynProp]

Wizard,

From what I have experienced this is what will happen.

1. You will not get the first to move... They are looking at ~65% LTV, so they are in a good position, so chances are very good they they will tell you to push a rope, especially since you stated that only minor repairs are required (~$8K.)

2. The second might move, maybe... I would contact them, and work out a discount. Like I said, they might move, but lately I have seen that the seconds will secure their position by reinstating the first, doing the minor repairs, and then selling the property... I mean looking at your figures, they are at 77% LTV, which still is D**N good positioning.

So, if I were you, and you are really interested in the property as a good location where people wish to live in, is I would talk to the second, to see if they will entertain a discount. If they wont, then how much of a gambler are you? Sometimes their position changes, once the sale is just around the corner, and if you sense that they really don't want the property... (But like I said above, they really are not in a loosing position, at 77% LTV.)

Ok, back to what I would do. Once I got a feeling of what the 2nd thinks about a discount, if they would take a SS, then finalize the paperwork, and buy out the 2nd. Then reinstate the 1st, and get a LO tenant in there, or sell the house out-right, after making the repairs. If the 2nd wont move, I would either purchase the note from the 1st, and continue the foreclosure, but I would have the homeowner sign over the deed and a POA... That way, if an investor wins the bid, any monies over the two mortgages would be yours; or I would just reinstate the 1st and get a LO tenant in there, if the payments of the two mortgages were reasonable, where you could get a LO tenant in there and still have a +CF.

Wizard, really, there are 1001+ ways to approach this one, and without more details, and the stance of the lien holders, it is hard to tell you the perfect way.

Just to make a long story short, the 1st probably will tell you that they will not take a discount, unless there is a reason where the comps say it has a FMV of ~$65K.

Well, hopefully I gave you some ideas to follow, so let me know how things are going, and I could help you some more.

GL!

Michael.

[Just Information]

Lenders will not accept a sales contract that shows the home seller is receiving money. Why should they? If the lender is taking a loss on the loan why should the borrower get any cash?

Lenders will not accept a sales contract that shows the contract can be assigned. If you are planning on flipping the property, you will have to arrange a double close, so that the mitigation division is not aware of your plan. There’s nothing unethical about doing the double close. The lender will only require that the contract not be assignable. As soon as your escrow with the lender closes, they are paid off and your obligation to them is terminated.

Just be aware that the mitigation people do not want to see anyone obviously making money on any of their discounted deals.

Many times, you will discover first Mortgage Lenders require more components in a short sale package than a second mortgage holder. Understand this-The reasoning behind a bank collecting this package is to determine answers to the following three concerns from the lender's perspective. Lender Concern number one:

1. Does the homeowner truly deserve a short sale?

2. Is it in the bank's best interest to take a short sale or repossess the house and sell through a realtor?

3. Are there any hidden factors, which might affect our ability to recoup a loss assuming a lender must repossess?

Accept a short sale or repossess the property? Behind the decision to accept a short sale is heavily scrutinized values, repair costs, realtor commissions, and holding costs. Other mitigating factors have absolutely nothing to do with our world. Some of these factors include:

1. How many properties does the lender currently have in default?

2. How flexible is the investor backing this loan?
3. Is a third party servicing this loan?

4. What is the demeanor of the person in loss mitigation with whom you are dealing?

Don't expect a lender to accept a discount just because it sounds good to you. If the lender thinks they will get a higher payoff by taking back the house, the lender will turn you down.

Remember, on a second mortgage offering 10% of the mortgage, balance is not unreasonable. That is a good starting point. If the second mortgage is instigating the foreclosure, the 10% offer might have to be substantially increased. ALWAYS play with the lender's resistance and start the negotiation with low offers.
If the first mortgage lender gets a specific value from their appraisal or real estate broker (called a BPO), many times they will want the value of the BPO.

There is an exception to this point, which leads into the next major lender concern:
What hidden factors might affect the lenders ability to recoup if the lender repossess?

REPAIRS! This is an extremely powerful negotiating tool in a case where the lender is to receive discount offer. Get at least two contractors to give you written estimates.

Make sure these estimates aren't coming from the cheapest guys in town. The repairs estimates are one of the best negotiating tools one can use along with influencing the BPO.