Pre-Forclosue/Short Sale Question - Posted by TomM

Posted by TomM on October 31, 2003 at 08:11:39:

Matt: Thanks for the advice.

The reason I was not planning to approach the 1st with a short sale is that I think the appraised value would be considerably above the 1st balance. If I could discount the 2nd from 50k to 25k I think there would be about a 40k to 50k net opportunity.

There is a new wrinkle in that I just realized the same mortgage company holds both the 1st and the 2nd. I guess I will just have to approach this as if it was one loan and combine the back payments etc. when I am negotiating.

Thanks again

Pre-Forclosue/Short Sale Question - Posted by TomM

Posted by TomM on October 29, 2003 at 21:37:55:

I have negotiated 3 short sales during the last year and I feel very comfortable in how to handle this situation if there is only one mortgage.

I have a pre-foreclosure situation where the first mortgage is about 80k and the second is about 40k. I have a cooperative seller and I would like to buy for 90k or even 100k.

I understand conceptually the concept of buying the 2nd at a discount but I would like some help in understanding the specific techniques of approaching the 2nd. Does the loss mitigation department handle the discounting of the 2nd? What will they want to see in the way of documentation? Is it similar to the short sale package that I would put together for a normal short sale?
In a nutshell how and when do I influence the 2nd to discount.


Re: Pre-Forclosue/Short Sale Question - Posted by TheShortSalePro

Posted by TheShortSalePro on October 30, 2003 at 10:17:05:

The Seller/mortgagor should make it’s application and attach your accompanying Proposal to the second, assuming a full payoff to the first.

Get your LOA, contact mortgagee’s loss mit department, request ss application, assist Seller to complete application, and devise your Short Sale Proposal.


Re: Pre-Forclosue/Short Sale Question - Posted by Randy (SD)

Posted by Randy (SD) on October 30, 2003 at 09:15:59:

Tom, one unique think about dealing with a 2nd is finding out what the 1st will allow! Frequently when the 1st lien holder is accepting a short sale in addition to not allowing the owner to receive any money from the sale, they will allow the 2nd to receive only a token amount ($1k - $2k). So find out what the 1st will allow for the 2nd. Present the same package to the 2nd (documentation, purchase agreement, ugly photos etc.).

Re: Pre-Forclosue/Short Sale Question - Posted by TomM

Posted by TomM on October 30, 2003 at 09:52:32:

Randy: Thanks for the advice. That makes sense if I were intending to do a short sale with the first but in this case I am looking to pay off the 1st in full (about 80k) and if I could get the 2nd discounted from 40k to about 10k or less it would be a very profitable deal.

In effect I won’t have to deal much with the first it’s just the 2nd. Do I approach the 2nd as if I am doing a short sale … do I contact the loss mitigation department and talk about buying the mortgage at a discount or am I talking short sale with the second or is this one and the same.

The seller is 3 months behind on both the first and the 2nd.

I understand the concept it’s the mechanics that I need advice on.

Thanks again.

Re: Pre-Forclosue/Short Sale Question - Posted by MattFL

Posted by MattFL on October 30, 2003 at 21:22:37:

You approach the 2nd differently than the 1st. You can be frank with them at let them know you are an investor and you are trying to buy the property. Let them know if they won’t discount that you won’t be able to make the deal happen and will just let it go to the auction, in which case they probably won’t get anything. Immediately, the 2nd will want an Authorization to Release form. Then let them tell you what else they want from you. I’ve had a 2nd just have me make a verbal offer to them right there over the phone. I offered them 1k on there 40k mortgage. The next day they came back to me with an acceptance at 2500. I suggest you start with a similar offer to mine. Yes you will be talking with the loss mitigation dept. to do a short sale, not to buy the mortgage which is a different angle. Once the second accepts, ask them to fax it to you immediately and to make it good until your closing or as long as you can possible get it for. By the way, why aren’t you trying to do a short sale with the first? Is the house worth a lot more than the two mortgages? Otherwise, it won’t hurt to try. Good luck!