Re: Short Sale Question - Posted by Matt (MPD) IL
Posted by Matt (MPD) IL on September 15, 2002 at 16:50:11:
Once you have taken control of the property, one would assume you are then making the necessary monthly payments. Once the loan is current and being paid on as agreed, what incentive does the lender have to discount the note? I guess anything can happen but normally lenders are persuaded by misfortune rather than good paying loans to discount.
You need to be able to show them why it’s in their best interest to sell you this note for less than it’s face value, atty fees, late payments, penalties etc. If you have made up the difference and the loan is current, why then would they “let you off the hook” so to speak?
Let’s assume for a second that you HAVEN’T brought the loan current, but you do have a deed, POA, it’s in a land trust and all of your other ducks are in a row… Let’s also assume that you contact the lender as an investor that has done all this and now want the lender to sell you the note at a discount rather than foreclose. If the lender says they will, and you are able to pay let’s say 70% of face value and they drop all fees and penalties etc., you now are the lender (not to mention the new owner) of this house. You no longer have the property subject 2 any existing mortgage unless you think that the borrower is still on the hook for the payable note. However, technically the borrower no longer owns the property, you do, nor are they responsible for the underlying note, you are (as you have agreed to make the monthly payments while the note is still in the borrower’s name).
But now, if you were to get the lender to take a lesser amount and then sell it to a new buyer, you have the new buyer get their own loan which in turn pays off the now lowered first, you have a bigger spread.
Not only CAN that be done, I think it’s just good negotiating. That should have been your intent all along.
Your question maybe didn’t have enough information about who was actually going to fund the purchase of the short sale or whether or not you wanted to keep it as an existing subject to.
Nevertheless, yes, you could possibly persuade the lender to take a lesser amount on their note. Who then holds the note and who is responsible for payments is what I would question.
Does that help at all?