How to find out how much money lender is owed on a short sale

12 Replies

I'm buying flips now and I was just wondering if there is a way to determine exactly how much money is owed(in other words what the current loan amount is plus penalties and fees) in order to make a better offer on a short sale? I'm trying to find how much money the lender or lenders are currently owed on any given short sale home I'm looking to purchase. This information does not appear to be public information. I've looked on the MLS and was unable to find it. I couldn't find it on public tax records either. Any info would be greatly appreciated.

If there is a loan/line of credit against a house it has to be recorded. It won't tell you the current balance, but it will tell you the original amount of indebtedness and from there you should be able to work backwards and make a quasi-reasonable guess as to outstanding balance. You might have to do some actual work at the courthouse to figure it out if you don't have a fully automated on-line data base in your area. Some counties around where I am, I can pull it all up on-line, others I have to truck it down to the CH. 

Outside of that, unless you are in multiple offer situations, why not just put out *your* best number and let them decide if they can do that? 

The total amount owed on a short sale is irrelevant to the equation. The bank is looking for close to current FMV, and whether that is 90% of UPB or 40% of UPB matters not. More important, is how many loans/liens there are, and Who holds the mortgages/liens, are they fannie/Freddie, FHA, RM, small crdit unions, etc. as they all have different procedures, guidelines and requirements.

Thanks Wayne and JD for your responses. That is helpful information.

Wayne, One of the flips I'm trying to buy now has been contigent for about a month and a half. It is a short sale through Wells Fargo with only one lien holder. It's taking awhile because apparently Wells Fargo has laid off many of its short sales staff. I know it's important to work with an experienced short sales agent on the listing side of things as far as whether or not your offer is accepted and or deal falls through. My question to you is do you know which lien holders are the best in general to buy properties from FHA/Freddie, small banks vs big banks, as far as getting your short sale offer accepted? Thanks

While it is a short sale the property owner is the first person that needs to accept your offer.  It does not make it through to the lender until the seller signs.  Then the lender evaluates the amount they will receive, and compares it against any liens that may be superior to theirs.  The priority is IRS liens, property municipal tax liens, and then the 1st position mortgage.  Second mortgages (especially if by the same lender as the 1st mortgage) often take pennies on the dollar.  The most important factor is your offer price should have nothing to do with what is owed.  The offer is based on what value the property has  TO YOU...whether it is fix and flip, hold for rental etc, or if you need that land to do something else.

Actually, believe it or not, usually the bigger banks have the best short sale processes.  When they're not Fannie/Freddie, certain guidelines will be driven by the actual investor, owner of the loan.  Small credit unions, whether 1st or 2nd are actually usually the worst, as it is Their money they're losing.  The big banks only actually own about 20-30% of the loans they service.  Ocwen is one of the worst, but sometimes their ineptitude, and other's reluctance to work with them, can make for a decent discount.  Forget RM's, they Have to sell for 95% of appraisal.

Originally posted by @Kevin Zimmer :

...  Then the lender evaluates the amount they will receive, and compares it against any liens that may be superior to theirs.  The priority is IRS liens, property municipal tax liens, and then the 1st position mortgage.  ...

 Sorry, but IRS liens do not have a special priority as you have written; that is a myth and there are posts on this site that will point that out in more detail. 

 IRS liens get in line based on time just like all other liens. 

    You wont find the balance anywhere without asking the seller.  The original loan is in the land records.  If the loan is within the last 5 years, they probably owe the full amount.

    Either way, it is completely irrelevant to a short sale.  The bank values the property in as is condition, and wants an offer within 90-100%.

    When you hear 'gurus' talking about short sale investing, they are usually also talking about getting a low valuation.

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Originally posted by @Steve Babiak :
Originally posted by @Kevin Zimmer:

...  Then the lender evaluates the amount they will receive, and compares it against any liens that may be superior to theirs.  The priority is IRS liens, property municipal tax liens, and then the 1st position mortgage.  ...

 Sorry, but IRS liens do not have a special priority as you have written; that is a myth and there are posts on this site that will point that out in more detail. 

 IRS liens get in line based on time just like all other liens. 

Yes, indeed.

I like to think of it this way: 

Property taxes are always in the "zeroth" position, or "absolute first". Then, liens are positioned based on the date / time recorded. IRS liens hold no special priority.

To your original question:

If the property is not yet in default, yes - you'll need to get that info from the homeowner.

However, once the Lis Pendens (judicial states) or Notice of Default (non-judicial states) is recorded, that info may be public knowledge. Check with the county recorder's office and see what info is available there in that case.

@David Dachtera   only thing you will find at the recorders office vis a vi a short sale is the orgininal balance on the DT or mortgage.. Have to get to the lender  servicer trustee owner to get actual numbers on the amounts owed

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Originally posted by @Jay Hinrichs :

@David Dachtera  only thing you will find at the recorders office vis a vi a short sale is the orgininal balance on the DT or mortgage.. Have to get to the lender  servicer trustee owner to get actual numbers on the amounts owed

The DuPage County, IL public records also show the amount in default from the Lis Pendens (IL is a judicial state) if it was supplied by the lien holder. Not sure about other counties - I've been focusing on DuPage and Will Counties in IL. Prior to the Lis Pendens filing, yes - information is less plentiful. The document image is also available and may or may not show the defaulted amount (balance owing, may also include back payments).

Obviously, in other locations, your mileage may differ substantially.