BiggerPockets

It's a risky situation to be related to the seller. If I'm not mistaken, the approval letter might even state something like that.

Is your uncle upside down? can he financially keep the payments up?

The bank has very little to no rason to agree to accept a short sale if the payments are current and teh owner has the ability to pay (no hardship).
It is still possible under extreme hardship scenarios that it could get approved, but if your Uncle has the current ability to pay and nothing has changed that other than him being upside down, there is no reason the bank would say, sure we will take less just because you owe more than it is worth!

he's not upside down and he's current?

Have you considered purchasing his home Subject2 and then refinancing out of it later on. This will help the both of you, if you're not interested in doing that, lemme know, I will be

If he's not behind on payments the lender will not consider a short sale. If he starts falling behind on the payments and he owes more than the property is worth, he'll have a better chance. Hope that helps!

Mitch, I thought you had said there was equity but then re-read it and saw you say he's not upside down. Can you tell me the difference? I'm confused.

Sorry for my mis-communication. He is not upside down, he may have $2k-$3k in equity if that.

Also if I were to tell him to wait to go into default is that fradulent activity if he was going to consider it anyways? Also since he is an inlaw, is there a conflict of interest.

Also there is negative cashflow.

Thanks for the replys!

Come on guys! Mitch already said he has a hardship! His uncle cannot afford the payments and the house has no equity. (With REALTOR comissions and closings costs will mean he is NEGATIVE)

In my opinion, since your uncle has a hardship and there is no equity, he does qualify for a short sale.

Bottom line, most lenders will compare the projected Shorts Sale Net proceeds against the Net proceeds in a REO scenario. Therefore, even if your uncle has a little equity, it will undoubtedly be covered by espenses in either scenario.

Do not encourage your uncle to miss his payments, this should be something he needs to consider himself.

Additionally, the bank will likely require an at Arms Length transaction, or your local or state laws may also require this. Technically, your relation to him may disqualify you, so do some research and call local title companies just to be sure.

Good luck!