Foreclosure Issues...Negotiating with the bank

5 Replies

Hello Everyone.  

Im new to bigger pockets and Im excited to be apart of this amazing community.  As there are many members here that are experienced in real estate Im looking for some advice about the following:

I am dealing with a property that is currently in the foreclosure and is coming close to a sales date.  The balance owed to the bank is about 30% lower than the current market value.  I am currently putting together the funds to clear the mortgage, but I was hoping to negotiate with the bank to reduce the total amount owed to get closer to the amount of funds I have available.  Does anyone have any experience with this that can give me some advice?  Do I need a lawyer to do these negotiations, or can I do it myself? Are banks even willing to reduce the amount owed on a foreclosure property to keep the owner in the home? 

Thanks in advance for the help!!! 

@Nevasca Powell

Banks don’t operate that way. They’ll want to list it at current condition market value and only entertain price drops if there aren’t any takers.

No.  The bank won't entertain a discounted pay off unless the loan balance was higher than the property value, and then only via short sale.  No reason for them to take a discount when there is 30% equity..

I agree with the others. As long as the market value of the property exceeds the mortgage, the bank will not negotiate a reduction of the principal.

The bank would just let the property sit. I use to go to public auctions to bid on properties because that's the only way they figure they get a good honest deal. At these auctions, banks sometimes put a bid in themselves if the highest bid is below the outstanding mortgage amount if it's an absolute auction, or set a reserve price equal to the mortgage amount. 

The other issue is fraud prevention. I worked in a finance for a private company where they extend credit to customers. The division is closing and someone had to negotiate the wind down of debts. The official word is that a committee approves balance reductions and in reality, the person who approves it is me, and there was no guidelines given. If I decide that 10 cents on the dollar is good enough, it's good enough.

What happened? Word got out that I was the one in charge of this. People started bringing me envelopes  of cash. If someone has $100,000 outstanding, they bring an envelope of $10,000 cash, and say, can you settle this for $20,000? If I shake my head, no, they have another envelope with $5,000.

When I was doing foreclosure purchases of bank foreclosure properties, many buyers are frustrated the banks would sit on the properties, instead of opening the floodgates settling the mortgages.

Sales reps for the company sometimes accompany the customers to see me and wonder why I refuse the payoffs. They say "Frank, it's all tax free". I laugh. I told them I wouldn't be surprise some of these guys wear a wire and then turn me in for a reward. After all, they're all crooks.

Thanks for all of your responses.  Just wanted to clarify that the property belongs to me.  Im not trying to purchase it from someone else.  I realize that my statement may not have made that clear.  

Originally posted by @Nevasca Powell :

Thanks for all of your responses.  Just wanted to clarify that the property belongs to me.  Im not trying to purchase it from someone else.  I realize that my statement may not have made that clear.  

 you...someone else...Frank's analogy would still apply. 

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