Short Sale Strategy on Parents' House - Posted by BigHarold

import · December 22, 2002, 2:44pm

Posted by Heidi W on December 22, 2002 at 23:03:48:

Dear Harold,

First I’d like to send my condolences on the passing of your mother.

Regarding your question, I’m not an expert by any means, but here are some ideas…

Short Sale: Based on what I read from some posts below, you may need to show the bank the purchase and sale agreement from the cash buyer - so the price they pay better not exceed the price the bank sells it for.

In other words - if you’re contemplating getting the money directly from the sale of real estate - you’d probably be committing some sort of ‘bf’ if you hid it from the bank.

However, if you were the seller insisting on $10K, the buyer would have to make arrangements with you to purchase some ‘personal property’ - such as furniture, cars, etc., in order to give you the money that you wanted. Whatever you sell that is personal property is not the banks concern.

Whether you can get them to pay you $10K for personal property depends on how badly they want the real property at the price you can negotiate with the bank.

P.S.- if it was me, I’d do the personal sale transaction BEFORE closing on the Real Estate transaction - but maybe that’s not a good strategy…thoughts? My concern would be that someone sophisticated would buy the property with the ‘verbal’ agreement of purchasing the other items - but then change their mind after the close on the house - so at the very least get the personal property sale contract in writing and signed before closing on the house.

Lease Option: Another option is to try doing a Lease Option. If you can get the new tenant/buyers to pony up a sizeable non-refundable deposit (I don’t know if you could get $10K for a $70K house, but you could try), and their monthly lease purchase payment should hopefully cover the mortgage payment.

The problem with this is it could take a while to find a buyer, you’ll have mortgage payments to make in the meantime and they could stiff you if they don’t make the lease payments.

My gut says, go with your cash buyer, get as much as you can out of them for a personal property sale, but lower your expections of getting $10K.

Good Luck.

Heidi

import · December 22, 2002, 2:44pm

Short Sale Strategy on Parents’ House - Posted by BigHarold

Posted by BigHarold on December 22, 2002 at 15:44:04:

Ok, I’m new to the short sale thing, and was wondering how best to work this deal. My mother recently passed away, with my father having passed as well 3 years ago. They had just gotten a new mortgage on their house before his passing, which she had been keeping payments up on until she died. Now, nobody’s left to make the payments, and the house needs a few repairs. Here’s the whole deal.

The house is in a very nice neighborhood, which here in Harrisburg, PA that means is worth about $70K repaired. The amount owed to the bank is $63K. It does need some repairs, but my mother recently had the bathroom and kitchen redone, so I’d estimate repairs around $10K.

I approached the bank about a short sale, because none of my siblings or I are able to make the mortgage payments or do the repairs now that the house is vacant. They agreed, but of course, they want to see all documentation on the deal once I find a buyer (he flat out said they don’t want us to make ANY money from this). I’ve actually just found a cash buyer for the house, but we still have to negotiate price. Here’s the golden question - How do I structure this deal to sell it to this buyer at a discount, get it on a short sale from the bank, make about $10K off of this to reimburse my older brothers for coming out of pocket to pay for my mom’s funeral (she had no insurance), and of course do this so the bank doesn’t see what I’m making?

I know there are some genius financial people that read this site. I totally need some ideas, and I appreciate all the help I’ve gotten from the great people on this site. Thanks in advance.

Harold Wilson
Real Estate Investor