Realtor · Napa, CA · Member since 2018 · 112 posts · 77 votes
Hello BP,
Question, has anyone bought a property that had liens that amounted to more than that of the property value? How hard was it to get through that and how much time did it take?
We found a perfect live in house-hack/flip but the owner has around 1.2mm in liens and the house is only listed (and worth) 850k. The seller is working with a tax attorney to get letters to lenders/IRS/etc. to do a short sale but wondering if anyone had personal experience?
Lender · Charlotte, NC · Member since 2022 · 739 posts · 410 votes
4y
Hi @Ronnie Galindo, I am assuming this is going to be a conventional buyer.
Working under that assumption, the biggest thing to get is the short sale approval letter. Ultimately, it does not matter if the liens are greater than the purchase price if the difference is forgiven by the loan servicer.
Below is the guideline for purchasing short sales for conventional.
When processing a short sale transaction, the following documents are required:
1. A Purchase Agreement/Escrow Instruction signed by the buyer and seller that includes the final details of the transaction. This includes all additional fees or payments being made by the buyer in addition to any necessary funds needed to complete the transaction.
2. A written approval to participate in the short sale from the servicer with written details of the additional fees and payments and has the option of renegotiating the payoff amount to release its lien.
Lender · Charlotte, NC · Member since 2022 · 739 posts · 410 votes
4y
Hi @Ronnie Galindo, I am assuming this is going to be a conventional buyer.
Working under that assumption, the biggest thing to get is the short sale approval letter. Ultimately, it does not matter if the liens are greater than the purchase price if the difference is forgiven by the loan servicer.
Below is the guideline for purchasing short sales for conventional.
When processing a short sale transaction, the following documents are required:
1. A Purchase Agreement/Escrow Instruction signed by the buyer and seller that includes the final details of the transaction. This includes all additional fees or payments being made by the buyer in addition to any necessary funds needed to complete the transaction.
2. A written approval to participate in the short sale from the servicer with written details of the additional fees and payments and has the option of renegotiating the payoff amount to release its lien.
Lender · CO CA TX WA ID OR · Member since 2020 · 419 posts · 542 votes
4y
Very unfortunate for that owner. I have no personal experience with this, however I suspect your acquisition will reconcile the bulk of those liens.
I suspect there are liens on tax, solar, and some form of second on this property.
FYI, in CA solar liens are tied to the tax bill and will take first position. If the home does indeed have solar on the property, maybe take an interest in helping him clear the solar and tax liens. I've seen solar issues kill a deal, specifically on refinances where the owner doesn't have the $$ to pay if off and equity being cashed out takes a significant chunk out of what they were expecting to receive.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
4y
@Ronnie Galindo Yep, a short sale is the route to take. The owner can not receive any of the proceeds. The IRS routinely releases their lien from the property, taking whatever proceeds come from the sale after mtgs/taxes, etc are paid off..if anything.