One of my employees told me today that her mom is planning to let her house go into foreclosure. She states that her mom wants to buy another home before starting to miss payments.
Now, I see this as an opportunity. HOw could I go about initiating talks with her lender about purchasing this home as a short sale? Do I have go throught a realtor ? I know that there is an authorization form that the homeowner can sign and allow me to start discussion with the lender, but how do I purchase this without a realtor?
Get the authorization letter. Talk to the lender(s) and find out the particulars of the loan. Pull together a hardship package of why she can't pay and why they won't ever get their money back. Write up an offer and get her to accept it. Submit the whole thing to the bank. Call and bug them a million times and wait for something to happen.
You should tell her if she wants to buy another house she'll have to be able to qualify for both mortgages to get a new loan. Lenders are wise to the "I'm going to rent the old one" trick and will insist on having a tenant in place. New Fannie Mae guidelines just issued require the rental to appear on two years of tax forms before they will consider the rent when evaluating a new loan.
Lee, you don't need a realtor. They(the banks) sometimes require to see it's been listed. I'm pretty good at getting around that by telling them its FSBO and it means their(the banks) net will be higher.
each bank requires basically the same things but with minor differences.
what you will need for sure is:
Authorization to release
Purchase contract
estimated HUD1
POF letter
hardship letter
some bank statements
typically last 2 yrs tax returns
financial worksheet (sometimes the banks version)
close her on the idea of letting you short it and find out what banks 1st and or 2nd(if she's got a second) and I'll tell you exactly what you'll need for those banks.
Also I'll help you package it together if you want. Its not that hard.
Also I just picked up on that the mother might not be in default yet?
If not consider Sub2ing her property if her mortgage is pretty decent(rare but possible)
if she's not in default, you might not have to short anything....
Hey Lee,
I suggust... get the autho, and verify she can qualify for a shortsale of her home, since she feels she can buy a different home.
but how do I purchase this without a Realtor?
Are you planning to keep the home, of flip it? If you are planning to keep the home, list with flat fee agency...costs about 1/2, and you do all the work.
If you are planning to flip the house, then list it with a good agent that can find an end buyer for you. You will want to talk to them about giving you concessions towards your closing costs so they aren't getting both sides of the commission. One that works with other investors in your area can explain how they can do it legally. The lender is paying the commission on the buy side.
Otherwise, you just have to look at RE commission as a cost of doing business, and should be in your budget.
As far as the seller buying another home, Jon is right in what he is saying. But, I work with a lender that will let a seller with a shortsale on their credit buy another home. There are restrictions and all that, but it is still available as an option.
Mitsu
I forgot to mention in my first post that she wants to buy another home, but not on her own. She is planning to buy with her new husband. I'll get the specific about her loan as soon as she feels comfortable with it. I know she is attached to that house. Thanks for all the help, and Nick, I'll definitely contact you if we get this thing rolling.
Another questions, can you get HML to buy a property that is not listed yet? How about a conventional mortgage?
Im not getting what you are saying? Commitment and Sincerity? She can no longer afford her home, buying and moving to new home with her new husband.
She is going to probably let this home go into foreclosure or listing it as a short sale with a realtor. Im just saying is there an opportunity to get in, prior to listing it with a realtor, so i can purchase it as a short sale from her. ? Thanks for the reply.
Her lender probably won't agree to a short sale unless she misses a few mortgage payments FIRST. I mean, if she's making mortgage payments on time, why would the bank agree to a short sale?
Word is a short sale will keep you from getting a new loan for two years. So, if she tries for the new loan, even with her husband, after the short sale she'll have a difficult time.
If she tries to get the new loan, even with the husband, while the existing loan is still on her record they will need to be able to fit within their lenders guidelines with both mortgages. If she can do that, what's the hardship that would convince a lender to allow a short sale?
It is two years after a foreclosure. FHA can finance a new home right after a short sale, if the borrower never missed a payment (all other credit need to be in order too). If they miss a payment or a few, then they have to wait 1 year. Show timely rent payments, and qualify to buy again (all other debtors paid timely). This is not offered by most FHA lenders, but I work with one that does offer it. Minimum credit score has to be 620, and a good letter of explanation for the shortsale.
As far as the mom's hardship...maybe she can't make the payments on her house because they are much higher than she could afford. But maybe she can afford a cheaper house. The reason could be joss of job, and new job paying less. Who knows? Lee would need to find out. But either way, he's wanting to buy the short sale, not sell her another house. If she gets a loan, or has to rent, she is moving out.
Exactly my point.Hardship isnt that hard to prove. I mean she has a recent divorce so I guess that could count for hardship. Either way, I dont really care what she wants to do after she leave this house, Im interested in getting my hands on this house prior to putting it in the market and having competition.
Understood. David's point is that she has unrealistic expectations of how this is going to play out, and that may mean she will be difficult to work with to complete the short sale.
As far as I can tell, theses Fannie Mae Guidelines are still in effect. They are explicit that its two years after a short sale before you can get a Fannie Mae loan and five years after a foreclosure. That's not to say there aren't other lenders who would do a loan with different terms.
Since when is there an investor vs. bank battle? Don't get me wrong. The banks made a huge mess, and deserve to take a hit over the bad loans they've made. I have no issue with buying a REO or a short sale and making a profit on a deal where the bank took a loss.
There's such a thing as spending your time productively and wasting working on a deal that will actually close. The person in trouble here just seems to have unrealistic expectations that she can qualify for a new loan (even with the husband) on one hand and qualify for a short sale on the other. There are so many distressed properties out there it seems a waste of time to deal with this seller.
But who knows. Certainly Lee should have a chat and see if she will work with him.
Jon, your absolutely right. We don't know for sure all the details.
I just don't think you should be so quick to start a whole paragraph and hi-jack his thread about if or how the 'homeowner' is going to 'qualify' for a new loan.
Your 1st paragraph in your original response was great.
Hopefully for lee his thread topic question was answered by you, myself and everyone else who responded to the actual question.
btw, you didn't know about the battle? it's on the Spike channel. It's kind of like UFC but we don't actually get bloody noses :mrgreen:
for now I'm out, I'm stuck to the tv watching CNN and C-Span
Yes Fannie Mae is stricter on their time frames, and they require more down, and have high rates unless you have fantastic credit.
FHA will do it. The problem is not all FHA lenders do the loan. I work an exclusively FHA lender (they don't do all the FHA does), and the purchase after a short sale is one thing they do.
I don't think this is only in Florida/Georgia, as they lend in many states.
As far as the FNMA guides, I'll look, but I think it is a minimum of 2 years, but usually someone after a shortsale can't qualify on everything else to get a conventional loan.
Lee,
If you feel this lady is pie in the sky thinker, and will back out if she can't buy something right away, then let her sit and think about it. If she can't make the payment, and you helped her from the beginning (answering question), she will come back to you, and it will be easier to get her to closing.
As far as the FNMA guides, I'll look, but I think it is a minimum of 2 years, but usually someone after a shortsale can't qualify on everything else to get a conventional loan.
No need to look anywhere, it's on page 5 of the link Jon provided.
There's such a thing as spending your time productively and wasting working on a deal that will actually close.
Amen. At any given time I'm working with 30 different short sellers. It becomes pretty apparent early on which will get their problem solved and which won't. I'm betting this one won't...That's all.
You are exactly right. Lenders won't even begin to talk to you until the homeowner is usually about 3 months behind in their mortgage payments.
If you try to approach them prior to the homeowner being delinquent, you will raise red flags and they will likely label you as someone who is trying to weasel a perfectly good person out of a nice home.
I think that purchasing the property Subject To the existing loan would be a good idea if you want the home for yourself. If not, locate distressed homeowners and start there. Best Wishes and Happy Success~
Feb 12 '09, 12:45 PM
