Short Sale Question - Posted by Short Sale Question

import · September 15, 2002, 4:06pm

Posted by Bill - FL on September 16, 2002 at 11:43:43:

Leon,
The place to look would be in the mtg documents. Also could be governed by state law. I don’t like to assume anything but find out directly from the lender. Bringing it current is just a simple matter of finding out from the lender what it takes to reinstate the loan and sending them a cashiers check making sure you receive something in writing saying they will allow you to reinstate first. You also have to have third party authorization to talk with the lenders in the first place. While you inquiring it doesn’t hurt to ask if they will take less. If you don’t ask you don’t get. One other important point. Don’t ever tell them you have the deed. You are just a third party acting on behalf of the borrower. That’s all they need to know.

import · September 15, 2002, 4:06pm

Posted by Short Sale Question on September 15, 2002 at 16:06:57:

I’m pretty sure I know the answer to this, but I’m asking to make sure. Is it possible to short a mortgage that you are going to take subj 2? I would think not as the bank now thinks the home owner has suddenly come current and just moved it into a trust, but I thought I would ask.

If not, is it possible to get the 1st to forgive some attorney fees, if it will be brought current?

I’m working on one now that needs the $10,000 2nd to go down to 1-2k (which I will buy) and it would be nice to reduce a little off of the 1st (which I’ll take subj 2).

Anyway to do this?

Thanks,

Duane

import · September 15, 2002, 7:18pm

Re: Short Sale Question - Posted by Bill - FL

Posted by Bill - FL on September 15, 2002 at 19:18:27:

Duane,
Has either the first or second filed for foreclosure yet? What is your strategy? Hold or sell?

import · September 15, 2002, 4:18pm

Re: Short Sale Question - Posted by Matt (MPD) IL

Posted by Matt (MPD) IL on September 15, 2002 at 16:18:38:

Duane,

You ask about doing a “short sale” on a property you are taking “subject to” the existing notes. Your question is about apples and oranges. The reason I say this is, if you have a loan that you are paying on, why would a lender want to sell it off short of the full payoff amount? Secondly, if you can get them to sell you the note short how could you both payoff the loan (short sale) and keep it in it’s existing status?

To short sale a loan you are buying the note for less than 100% of face value and you then become the lender. You put up 100% of whatever they agree to let the note go for.

In a subject to deal, you are becoming responsible for the monthly payments that must be made to the current lender and are leaving the existing financing in place rather than paying the note off.

The short sale is for investors who are willing to pay cash but expect a discount for doing so. They take over the mortgage but have paid far less in most cases than whatever the lender would have been paid if they would simply continue taking payments.

The subject to option is for investors who don’t want to part with thousands if not hundreds of thousands of dollars in cash and simply control the property while someone else (i.e., a tenant buyer) makes the monthly mortgage payments.

I hope this clears up the confusion I detected in your question.

Matt

import · September 15, 2002, 8:10pm

Re: Short Sale Question - Posted by Duane

Posted by Duane on September 15, 2002 at 20:10:08:

The 1st is going to foreclosure sale in two weeks, payoff is 93k, about 5k behind. The 2nd of $9,500 has already stated that they will take what they can get for it. She also owes about 3k in back taxes. Comps are 115k to 125k (actual sales in this subdivision). House needs NO work. I walked through today.

My plan: Buy 2nd at discount, bring first current and buy subj 2. Sell outright or L/O if I have to. She knows she has to move, so maybe a little moving money to her and I may have to take care of part of the taxes (the portion from 2000).

import · May 23, 2003, 2:11pm

Re: Short Sale Question - Posted by barb

Posted by barb on May 23, 2003 at 14:11:40:

I am interested in a property which has been vacant for over a year and which is listed with a realtor. I have been working with a buyer’s agent who has put in one written bid and a couple of verbal bids without any results. Where do we go from here? How do we find out the info from the bank in order to do a short sale?

import · May 23, 2003, 2:08pm

Re: Short Sale Question - Posted by barb

Posted by barb on May 23, 2003 at 14:08:42:

I am interested in a property which has been vacant for over a year and which is lsted with a realtor. I have been working with a buyer’s agent who has put in one written bid and a couple of verbal bids without any results. Where do we go from here? How do we find out the info from the bank in order to do a short sale?

import · September 15, 2002, 4:37pm

Re: Short Sale Question - Posted by Duane

Posted by Duane on September 15, 2002 at 16:37:59:

Actually, I realize the difference between the two, I was just wondering if there is a way, after I take subj 2, to get the lender to discount. They don’t know exactly what is going on with the house, so I thought they may be willing to forgive some attorney fees or late fees.

Thanks.

import · September 15, 2002, 10:54pm

Re: Short Sale Question - Posted by Bill - FL

Posted by Bill - FL on September 15, 2002 at 22:54:58:

Duane,
Smith makes the point about the L/O. Has the first agreed to accept payment to bring current and cancel sale? Make sure you have the deed before buying the second and bringing the first current. Get everything in writing from lenders. If the first doesn’t want to be brought current you could negotiate a short sale and bring in a money partner or have a private investor loan you the money.

import · September 15, 2002, 9:06pm

Re: Short Sale Question - Posted by Smith

Posted by Smith on September 15, 2002 at 21:06:42:

It seems you’re going to have about 8K to 10K into this deal before all the dust settles, including holding costs. You’ll not be getting much of this back out from a L/O buyer. Are you OK with leaving 5K to 7K in this deal long term? If not, maybe L/O is the wrong strategy for this one.

import · September 15, 2002, 4:50pm

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?

Matt

import · September 16, 2002, 10:09am

Re: Short Sale Question - Posted by LeonNC

Posted by LeonNC on September 16, 2002 at 10:09:30:

Bill,

You said “If the first doesn’t want to be brought current” you could do whatever. Is it determined in the writing of the note as to whether there is a right to bring a loan current? How do you handle the issue of bringing the 1st current if for example you’ve got a deed and you’re thinking of buying the 2nd?

Thanks,

LeonNC