Short Sale - Owner owes less than property is worth

3 Replies

We have a very motivated seller on a Foreclosure property.  We have a settlement statement from the bank.  We want to offer less than what she owes, (obviously).  Question is, her settlement statement includes all of the late fees and interest from her not making payments for four years.  They have started the foreclosure process.  What she owes -penalties and all- is about what the property is worth as-is.  Is it feasible to still get the bank to settle on a short sale offer?  The house is not liveable and will not qualify for a conventional homeowner/loan.  We want to make the right offer and not mess this up, as it is our first truly motivated seller property and the property is exactly what we are looking for in a rehab.

Any suggestions on making this offer would be greatly appreciated.

The seller being motivated in this isn't all that important.  It's the bank that's the issue of course.  Accruing interest, property taxes and insurance paid by the lender and costs won't be waived.  It's like any other short sale,you'll have to find an experienced short sale agent, list it,  submit the contract with all the owner's paper work, wait for a BPO and an answer.  The bank will want as close to market as possible.  Sounds like you may have to get the foreclosure auction date delayed also, depending on fast they are there.

Hi Laureen,

Yes, @Wayne Brooks said it as short and concise as I never could have. The short sale offer; with all its getting the seller's financials together, presenting a hardship, and you/buyers agent presenting all of the CMA's and Comps to prove the value is lower than the mortgage +, will depend on the BPO/Appraiser's value. In the end, that's all the lender will consider. (However, the borrower has to be in hardship, having one of the 4 D's to qualify for the short sale in the first place.)

The good news is that if the appraiser's value in the end is the same as it is now, you'll still be granted some discount as the buyer, depending on whether the underwriter of the loan is FHA, Fannie Mae, VA, or ...

I'm not a buyer's agent, but I do handle my own negotiations of my own short sale purchases. 

You might be interested to know that we have a new member at NWREIA that knows how to get properties at auction for less than the bank's balance due. I'd like to learn how they do it! I know part of it, just not the rest. If you can visit the Portland meeting this Thurs they should be there. 


No secret to getting foreclosure properties at the auction for less than the judgment. It simply depends on whether the bank sets an acceptable price (something near FMV), as opposed to the judgment amount that may be double the value. Sometimes they do, sometimes they don' way to control it.

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