Settlement Offer Received!
I bought a property in May for $250.00 subject to..... a lot. It then had liens totaling over $275K, $4K past due HOA fees, and back taxes of $7K. The seller had filed BK in 2010, included the house, and then moved out after her BK was discharged. The bank (who owns both loans) never went forward with any foreclosure notice or action.
My goal all along was to negotiate a discounted payoff. The seller's debts were eliminated in BK so she had no interest and was not willing to participate in a short sale. I looked for advice here at BP and from investors I know and from short sale specialists about how to work a short without a seller. I hit a wall as pretty much everyone said the bank wouldn't talk to me or that it couldn't be done without a seller and hardship documentation.
It took me awhile to find a path, but I found one. The bank agreed to my last counter and Fedex delivered it to my door this morning. The bank is accepting $85K as payment in full to release the liens. There was no listing, no escrow, no agent, no short sale documentation, no HUD1.
I was hesitant to post about it, as I'm not sure how replicable this kind of deal is. But I wanted to put it out there if it helps someone else. The key in this one for me was the seller's BK. I was secure in knowing that if the bank wouldn't work with me, that she would suffer no harm from a foreclosure. The purchase agreement included full disclosure about this. Also included in the PA was that I pay off the HOA liens and attorneys fees as they were one week away from becoming a judgment. So, the seller avoided a ding on her post BK credit. HOA liens start adding up against the owner right after a BK discharge. Many borrowers who file BK and walk away from their properties end up owing for however many months or years it takes the bank to foreclose.
There's a lot that went on with the bank, but to be fair, once I was assigned a closer, it took 60 days and about 6 calls/faxes to work out the settlement.
Special thanks to J Scott for help with repair estimate documentation and Dion DePaoli for explaining short sales from a lender's perspective. (Sorry, neither of their names will come up in the mention function.)