Posted by Carmen_FL on January 03, 2003 at 15:53:09:
Thanks. I didn’t set out to become a short sale expert; I kind of fell upon it by necessity. Then it became just one more tool in my box! Still not my favorite - too time consuming and frustrating at times.
negotiating with junior lenders - Posted by Mel(NC)
Posted by Mel(NC) on January 02, 2003 at 16:47:34:
Hello everyone,
I’ve got the top bid on a foreclosure auction and I could use some advice from someone with experience in this arena. Here’s the info:
My bid is 200K. I get a call from the lawyer of a car dealer who has a junior note on the property for $30K and wants to “talk” to me before upsetting my bid. FMV on the property is around $260K in a very slow market. Any guesses as to if they will really upset the bid or are they just blowing smoke? I would be willing to negotiate with them but certainly not anything close to the whole amount. Any suggestions?
Thanks,
Mel
Re: negotiating with junior lenders - Posted by Walt
Posted by Walt on January 02, 2003 at 19:58:16:
If I understand your scenario right, you have the right to purchase the property from the 1st mortgage holder that has already foreclosed on the property and now the second lien holder wants money. I don’t know how it’s done where you are but here in Texas, once the 1st forecloses, the second is totally out of the picture unless he wins the bid at the auction and buys the property to protect his position. It sounds like they are trying to bluff you into paying them what they have no right to collect. Before you do that, get a Real Estate lawyer and find out if they have any legal position here.
Re: negotiating with junior lenders - Posted by mel(NC)
Posted by mel(NC) on January 02, 2003 at 21:10:27:
Walt, thanks for the reply. Where I live there is a 10 day period to upset the bid. However, the new bid must be at least 5% higher than the last. The 10 day period for the auction is not over so the second lender has to bid ont he property like anyone else if they want to protect their interests.
Re: negotiating with junior lenders - Posted by Carmen_FL
Posted by Carmen_FL on January 02, 2003 at 21:55:51:
Question: is the junior lien on the house there because the owners defaulted on a car loan? If that’s the case, they are probably bluffing. It’s more than likely a collection company, and even if it’s not, a car company doesn’t want to own the house. If, however, you are stating that it is a second mortgage privately held by an individual who happens to be a car dealer, well, disregard all the below and let me say that unless you know what they are thinking and whether they are investors too, etc. you won’t know how much they want the house until you talk to them.
A short illustration: In Florida, I’ve had to deal with Mazda credit and Ford credit regarding liens they placed on the owners of homes I was buying on short sale. We have homestead protection, so in neither case could these lienholders bring foreclosure actions themselves, but they COULD demand payment once the house was sold (through a lien), thus holding up the sale of a house. Although technically the homeowners could file a declaration of homestead and have these liens removed from the house, this process takes about 45 days, and usually sellers don’t have that kind of time (I’ve learned from experience to start this “de-liening” process the moment I get a homestead property under contract!)
I have therefore had to negotiate with these auto loan people. Most of the time, they know they have you over a barrel regarding time (in both cases these were short sales), so they try to play hardball. They have nothing to lose, because although the house may go to foreclosure, they don’t lose their judgment against the seller’s other properties, right to salary garnishment, etc. With that being said, they will usually rather take SOMETHING to release the lien, knowing that they will still get NOTHING if it goes to foreclosure.
I did get one to take $500 just to remove the lien from the property, without losing their right to pursue the homeowner for their $8,000 claim. In this case, the owner was employed, so I guess they figured something was better than nothing (since the house would go into foreclosure if they refused), plus they could still garnish wages, etc.
In another case, Ford Motor played a little harder ball, and forced $1,500 out of me saying that it wouldn’t be worth their time to do the paperwork otherwise, but at least I got them to deduct that from the owner’s $13,000 balance (not that I believe the owners will EVER pay them back, but hey, I had to get SOME kind of moral victory for my money!). In both these cases, they did not write off the balance owed, meaning the seller of the house would still be liable for the amount due them, but they did sign a release of their lien from each particular piece of property.
I have a feeling that, if your state is anything like Florida regarding judgments, they may try to squeeze you for as much as possible. Since yours is a foreclosure situation, in your case they would actually have to come up with money, rather than accepting a lower payoff like in the two above. My thought (and this is just a feeling) is that they will NOT come up with $200K just to perhaps someday satisfy a $30K debt - what company in their right mind would do that? They are not in the business of buying houses; they are in the business of debt collection, and they are good at that, so although I think it’s a game of chicken (and some of these collectors are REALLY good at it!), I don’t see that as a business they would want to buy a house.
So, take that for what it’s worth! I know it doesn’t answer your question. But my thought would be: decide what the house is worth, and don’t pay a penny more. If that causes you to lose the deal, well, NEXT!
Re: negotiating with junior lenders - Posted by mel(NC)
Posted by mel(NC) on January 03, 2003 at 07:36:14:
Thanks for the reply. I would have to agree with you that the dealership is probably not going to spend $200K to protect their $30K loan. I think I will try to negotiate with them at maybe 10% of the loan value. I’ll tell you how it went next week.
I am impressed with… - Posted by osirus
Posted by osirus on January 03, 2003 at 01:53:48:
your knowledge of short sales. Was short sales something you learned through trail and error?