Short Sale negotiation

7 Replies

I have a seller who is upside down.  I'd like to help negotiate a short sale for her and purchase the property.  Has anyone had success doing this?  I'm not an agent, should I engage one to help with the process?  Chase Bank held loan

Sorry @Luke Fouch ,

It's a non-starter. Essentially the bank is going to only work with her. Once they establish that they are willing to do a hardship (She fills out all paperwork), then they are going to want an agent to give a CMA. Next they are going to want it on the open market and review all offers. They are going to want the most they can get for the property and to do that they have to list it. The seller would take $5.00 for it if they got to walk away so their opinion of price (whatever you agree to) doesn't mean much. They want the competition of the market, not a deal to get out of it.

Good luck and hope it works out. 

@Luke Fouch I have gone through a similar case where the loan was held by Chase.
There is a lot of paperwork involved in that type of Sale 
But before engaging any one to help the seller get their lender's approval, I think you should check with the owner that is happy to sell you the house at the price you are happy to pay.
Is that the case already?

@Mike Cumbie
makes some very good points. In my case, the house was listed on the mls.
And one of the multiple documents I had to sign is that it was an arms length sale

It went through the short sale process last year, but fell apart.  I believe due to the buyer and bank not being able to come to terms.  Curious if it is worth another shot at the property.  

I know RE agents are adept at working through the process and I'm happy to contact one if I need to.

I heard in a Bigger Pockets Podcast that investors driving for dollars run into this and can help people through this.  Maybe #258 with Gabe DaSilva?  

Her first step is to contact the bank and see if they will grant her a hardship. Each bank has specific requirements and they will not discuss with a third party. If she is underwater but current the odds of her getting it are slim to none. If she meets the specific banks criteria (Missing X number of payments and currently in line to be foreclosed on) then they will request she gets a CMA done. Find an agent that does short sales and have them do a CMA (or any agent that will determine what the property is worth in the current condition and climate. She will submit that to the bank with her paperwork.

She will then sign a listing agreement with that agent (or any agent of her choosing). They are going to list it on the MLS, In the private remarks they are going to write *Subject to bank approval of short sale*. They are going to have to show the property to any and all interested parties and someone will present an offer. The offer will have to leave enough time for the bank to approve. Could be as little as 2 weeks or they could respond 8 months later. Any and all offers must be submitted to the bank rep. The bank will approve an offer of their choosing (or decide to just foreclose) and will require that the MLS sheets are submitted verifying that it was on the market for X days.

If you see "An Approved Short Sale" in a listing, that means someone else made an offer to the bank and somewhere between 2 weeks and 8 months they said "forget it" and walked away requesting their EMD back. It's "Approved" because the bank already accepted that offer once and everyone is hoping they will accept it again. Banks can and have accepted an offer at month 5 and then decided they wanted a fresh CMA and new price. There are people that use a "Short sale" to hang onto their house for an extra 2 weeks to 8 months (or longer) before foreclosure because generally it puts the hold on the foreclosure proceedings.

It may also make a difference on what type of loan she got (Government backed) and how long she was current before falling into hardship.

I'd say for the most part Mike is spot on. I wouldn't say a CMA is required by the bank because they'll obtain their own valuation but, a CMA is handy when the two values are large in differene (Between lender/servicer appraised value and list/sale price). I'd also say while 8 months may have been the norm "back in the day", Federal rules today require a full package to be reviewed and decisioned within 30 days. The kink usually is the definition of "Full Package". As an example, seller is required to submit a hardship letter but doesn't say anything other than, "Wanting to sell for less than what is owed". Or, bank requires it to be listed on MLS but agent only submits offer and not fully executed that wasn't listed on MLS. Those could push out the review time.

Also, another important point Mike brought up is the type of loan. If it's a government loan, and the borrower is denied a short sale, bank must provide specific reasons why and be offered a chance to appeal the decision if anything is different than from original submission of the package.

Finally, don't forget (As others have pointed out) to use an experienced short sale agent. It's not a sale for those learning on the job or new to short sales. Most deals I've seen blow up are from inept or inexperienced agents. Final bit of my two cents is, stay out of it if you are not a party to the transaction. You're just gonna mess things up trying to get involved.

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