Newbie Foreclosure/shortsale - Posted by George

Posted by Randy (SD) on January 26, 2005 at 13:17:36:

The LTV “test” he’s referring to is most short sales must be 82% of fair market value (or thereabouts) minus repairs, and this scenario he is proposing a 61% LTV… the property would have to be in a serious state of disrepair.

Newbie Foreclosure/shortsale - Posted by George

Posted by George on January 25, 2005 at 22:05:55:


I just aquired a propery in Texas that is 4 months in arrears for $1.00 down. I agreed to buy the property from the seller at $139500 and the property is worth about 145000. I have begun a shortsale with the lender for $89,000.

I have already sandwhiched leased it for an option payment of $6,500 and a price of $153500. What are the odds the bank will accept a shortsale of $89,000 on a $142000 home?

If they don’t accept my short bid will I still be able to bring the loan current?



Re: Newbie Foreclosure/shortsale - Posted by NJdave

Posted by NJdave on January 26, 2005 at 05:37:57:

two problems… the first is the perceived value… there is zero incentive for the mortgagee to entertain a preforeclosure short… the second, you may have stepped on your own foot by acquiring title to the property.

The majority of mortgagee ss criteria requires that the home be owner/mortgagor occupied, and the ‘relief’ be afforded the mortgagor… If the mortgagor is out of the picture… the proposed relief would not directly benefit the mortgagor, but a third party.

Even if they were to waive the owner/occupant requirement, it’s unlikely that the application would survive the LTV test.

Re: Newbie Foreclosure/shortsale - Posted by George

Posted by George on January 26, 2005 at 13:21:11:


Thanks for the reply.

All I have at this point is a release of information from the owners. They have moved out of the property but it is in immaculant condition. They are about $10,000 behind on their loan.

There are two mortgages on this property, one for $122k and another for $30k, the $122k is foreclosing. Should I walk away from this deal? The value of the home is around $150k.

Thanks for the input.


Re: Newbie Foreclosure/shortsale - Posted by Pete(MI)

Posted by Pete(MI) on January 26, 2005 at 10:23:46:

Please define “the LTV test”. I know what LTV is, but I haven’t heard this context previously, and since I’m looking to do the same types of deals that George is, this info may be crucial to the success of a short sale deal. Thanks!

Re: Newbie Foreclosure/shortsale - Posted by Rob

Posted by Rob on February 04, 2005 at 19:46:44:

The question is what’s the value of the property to the lender. They certainly will have done an appraisal, usually a drive by. Next obtain the short sale package from the lender. Keep the borrower in the loop. It’s his liability. I believe Texas is a deficiency state so it’s in the borrower interest to short and clear the loan not let it go. The beneficiary may be able to get a judgement on both loans. Is the loan an FHA or VA loan? Different sets of rules for short sale. If conventional a short to the lender is feasible if they have something to gain. i.e. they will make more money selling it short than going to foreclosure.

Anyway an interesting problem and it would be a challenge.

Re: Newbie Foreclosure/shortsale - Posted by C

Posted by C on January 28, 2005 at 17:48:55:

Have you tried shortselling just the second??? I think the LTV test changes a lot if the first is foreclosing on the second. The second should have a lot of motivation to short sell it’s mortgage.

Who owns the second?