Portland, OR · Member since 2013 · 14 posts · 2 votes
Greetings BP,
I have a grass roots lead in a very nice neighborhood in Portland, OR.
The homeowner hasn't made payment in 4 years! The unpaid principal balance represents just about my exact MAO in order to make a major rehab pencil with a 100k return There is no second on the property.
What can I do? Can I contact her bank directly if I get her approval or does she need to do that? From what I can gather, the property has to be listed for a minimum amount of time on RMLS? I.e. I can't craft an agreement between seller, bank and me without the deal ever hitting RMLS? Is that correct?
Thanks for any advice! I know there's something here...
Real Estate Broker · Portland, OR · Member since 2013 · 43 posts · 22 votes
12y
@Account Closed That is your version of the right thing. You have no idea if this seller has a debilitating medical issue, a death of the main income producer in the family, etc. The seller has no responsibility to anyone but themselves and their family. If they can put food on the table because they skipped their mortgage payments, then I vote their family doesn't starve. You are projecting a narrative on this seller without knowing any of the details. I have completed over 300 short sales in the last 3-4 years. I have seen retired men drain their retirement accounts in order to keep up on their payments only to have it go to foreclosure anyway. Is that the right thing?
I have seen banks call homeowners and demand their last $5k or they'll "be out on the street by the weekend" when they easily had another 3-4 months in the house regardless. Is that the right thing?
That fact is, this seller owes you or their neighbors nothing. They owe it to themselves to keep a roof over their family's head and food on the table. If the bank wants to take the house back in 90-180 days, that is up to them. If they want to wait 4 years, that is also up to them. But I guarantee you, the bank will make more money off of this by waiting it out until 2014 instead of foreclosing in 2010. Now they can sell the home for more $ and a homeowner had a place to live. They probably kept it looking nice and it did not become another delapidated vacant house on the block. That is the "right thing."
Real Estate Broker · Portland, OR · Member since 2013 · 43 posts · 22 votes
12y
It will need to be listed, unless the loan is a small private lender. We've done a ton of short sales (I've negotiated roughly 300, our group has done about 2000) over the last few years. I can give you some pointers if you like. If the numbers are really close, you may not have to go short.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
12y
Right, a short sale will need to be listed, using an experienced SS agent and/or good third party negotiator. I assume by unpaid principal balance you're not including, or know, the additional monies owed for interest, fees, insurance, etc. If the Total balance owed is at your MAO, then just buy it straight out.
Santa Barbara, CA · Member since 2014 · 49 posts · 11 votes
12y
Interesting situation. The 'owner' is still in the property and hasn't made a payment in 4 years..? ooof. If this is true and a foreclosure hasn't been completed, I suppose you 'could' make a straight-up (cash?) offer directly to the owner. The owner has a relationship with the bank, albeit strained. But the owner can take your offer to her bank and request a response. Then of course the bank will decide if they'll take less than what the current owner owes them. I suppose depending on how distressed the area is, the bank might me motivate to get some loot for it (instead of sitting there like it is). It seems there would be a reason (area, banks views, etc) why the bank hasn't taken it back after 4 years. MAYBE this is a sign the bank is just waiting until things turn around and they can get more. But again, maybe it's a sign the bank would just like to get the heck out of the situation and all cash can make get a non=performing asset off the books. Watch out for costs even if the bank says 'sure we'll sell it to you.' Banks screw up too, or get lazy, or, or, or. All they can tell you is no. But since technically the owner is still in the house, the owner can receive an offer and then see what the bank says. If on the other hand the bank actually has the house, go right to the person dealing with REO's. Again, depending on the area, some such departments have simply handed over several sets of keys to houses and said go look, bring back the keys and bring me an offer. Good luck...
Los Angeles, CA · Member since 2013 · 169 posts · 27 votes
12y
@Account Closed serious question: have you actually talked to the owner of the property yet? It seems you're speculating some things, which is always a deadly mistake in the short sale world.
Dallas, TX · Member since 2013 · 4k+ posts · 744 votes
12y
I am shock that the home owner has not made a payment in four years and screwing the lender. That is a reason no one can get a mortgage now for all the dishonest home owners thinking they can live rent free.
Real Estate Broker · Portland, OR · Member since 2013 · 43 posts · 22 votes
12y
I would argue that the homeowner has done nothing wrong. 2 parties signed a contract. The homeowner stated they would either pay money monthly or the bank could take the house under foreclosure laws. It is the BANK that has allowed this to drag out for 4 years, not the homeowner. If that homeowner has had some medical emergency, or lost their job, etc. what do you expect them to do? Again, if the bank wasn't ok with the arrangement, they would foreclose quicker, or they wouldn't make loans in the first place. Quit placing blame on those going through a hardship.
Los Angeles, CA · Member since 2013 · 169 posts · 27 votes
12y
@Account Closed So, what is the situation? Why can they not pay for the home, and how can you help them, yourself, and the bank come to a mutual benefit? I generally find that asking that question to all parties involved answers itself better than outside advice.
Now, if you're two steps ahead of me on this, post an in depth scenario, and let's try to figure out the solution.
Your goal is to acquire the property with 100k profit potential, (congratulations, that's a nice spread)
The owner's goal is ____________________________________________?
The bank's goal is _____________________________________________?
To answer your initial question in a simplified manner, yes. You CAN help facilitate the process, but you have to be on good terms with the other two parties, understand and compromise on the goals of the other parties, and ask what you can do, then follow through 100%.
Banks are notoriously slow and ineffective when it comes to making this process comfortable for the other two parties. I find that if I figure out who personally has a vested interest in getting the bank's job done, and maintain communication, you pick up your shortcuts along the way.
Have you consulted a RE attorney on the matter? You'd be surprised at how easily a legal nomenclature can grease the wheels of communication.
Los Angeles, CA · Member since 2013 · 169 posts · 27 votes
12y
@Benjamin Ficker I would agree. In fact, I'd go one step further in saying that neither parties have committed a wrong. Despite our profession revolving around the exchange of properties, we have a duty, much like those in the medical and legal industries, to realize the human factor in our product and services. We are dealing with people's lives. The sense of home and belonging is generally positioned within the walls and property lines of the currency we exchange.
Without the ability for people to be unable to continue possession, we would have nothing to possess. Without the ability for people to be able to find, purchase, and live in our product, we would have no product. It parallels the natural order of things to begin and end, and blaming a road for coming to an end is to blame the road for existing.
Real Estate Broker · Portland, OR · Member since 2013 · 43 posts · 22 votes
12y
That's a great point. As much as I say "don't blame the person," I should be saying "don't blame anyone." Both parties are acting within the agreement they signed. If the bank doesn't want to foreclose within the given timelines, theta is their prerogative. No one is screwing anyone. It just is what it is.
Los Angeles, CA · Member since 2013 · 169 posts · 27 votes
12y
@Account Closed And if they had "done the right thing", we wouldn't be discussing the potential income Ashley is about to make. People drop the ball, other people pick it up. It's how the game is played. Imagine basketball without anyone making mistakes, and the other team capitalizing on those mistakes. Kinda pointless huh? If the winning team always looked down on, or blamed the other team, where would all the joy go in playing basketball?
Los Angeles, CA · Member since 2013 · 169 posts · 27 votes
12y
Anyway, my point is this: to facilitate the effectiveness of the other parties in the process, facilitate effectiveness. Don't wait around for all involved to have the answer, you be the answer.
Los Angeles, CA · Member since 2013 · 169 posts · 27 votes
12y
@Account Closed Correct. The home owner rides the system. The bank loses money. The bank has to sell at a reduced rate to stop the pitfall. Ashley buys the property at a reduced rate, hires a few people to help rehab the property, everyone gets paid. Hence the inner workings of the system. Who is actually "losing" in this case? The bank? Perhaps, but then, aren't we all making up for it in financing fees? Yep. Are we getting screwed? Not if we buy REO's at reduced rates and make a good living rehabbing and selling those same properties.
Real Estate Broker · Portland, OR · Member since 2013 · 43 posts · 22 votes
12y
@Account Closed That is your version of the right thing. You have no idea if this seller has a debilitating medical issue, a death of the main income producer in the family, etc. The seller has no responsibility to anyone but themselves and their family. If they can put food on the table because they skipped their mortgage payments, then I vote their family doesn't starve. You are projecting a narrative on this seller without knowing any of the details. I have completed over 300 short sales in the last 3-4 years. I have seen retired men drain their retirement accounts in order to keep up on their payments only to have it go to foreclosure anyway. Is that the right thing?
I have seen banks call homeowners and demand their last $5k or they'll "be out on the street by the weekend" when they easily had another 3-4 months in the house regardless. Is that the right thing?
That fact is, this seller owes you or their neighbors nothing. They owe it to themselves to keep a roof over their family's head and food on the table. If the bank wants to take the house back in 90-180 days, that is up to them. If they want to wait 4 years, that is also up to them. But I guarantee you, the bank will make more money off of this by waiting it out until 2014 instead of foreclosing in 2010. Now they can sell the home for more $ and a homeowner had a place to live. They probably kept it looking nice and it did not become another delapidated vacant house on the block. That is the "right thing."
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
12y
And back to the short sale deal.
@Account Closed Do you have the property's current market value pinned down? (Not the value you want to buy it for.) It's possible that if the market is strong enough, the lender wouldn't need to short.
Has the owner filed BK any time in the last four years? That might be part of the delay. If so, there are other options besides a short sale.
A short sale will expose the deal to an appraisal or BPO and to the open market. Not the best way to get a deal IMO.
Owner's goal is to minimize credit harm and find a new beginning as smoothly as possible. She has had some hardship and has been living inside a turtle shell for a long while. We will be helping to facilitate her move.
Bank's goal is a wild card. We have enlisted the help of a short sale expert to help us navigate the poker table.
@K. Marie Poe
Great question as well. The value in this deal is adding additional square footage for much less than the market values that footage, combined with improving and polishing the existing bones. She does not have a BK.
Given the property's current poor as-is condition, the lender will likely need to go short given the amount in arrears. We will see. The unpaid principal is right in line with what we want to pay.
Owner's goal is to minimize credit harm and find a new beginning as smoothly as possible. She has had some hardship and has been living inside a turtle shell for a long while. We will be helping to facilitate her move.
Bank's goal is a wild card. We have enlisted the help of a short sale expert to help us navigate the poker table.
And yes, coffee sounds good!
@K. Marie Poe
Great question as well. The value in this deal is adding additional square footage for much less than the market values that footage, combined with improving and polishing the existing bones. She does not have a BK.
Given the property's current poor as-is condition, the lender will likely need to go short given the amount in arrears. We will see. The unpaid principal is right in line with what we want to pay.
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
12y
Originally posted by @Ashley Offensend:
@Corey Davis
Great question:
Owner's goal is to minimize credit harm and find a new beginning as smoothly as possible. She has had some hardship and has been living inside a turtle shell for a long while. We will be helping to facilitate her move.
Bank's goal is a wild card. We have enlisted the help of a short sale expert to help us navigate the poker table.
@K. Marie Poe
Great question as well. The value in this deal is adding additional square footage for much less than the market values that footage, combined with improving and polishing the existing bones. She does not have a BK.
Given the property's current poor as-is condition, the lender will likely need to go short given the amount in arrears. We will see. The unpaid principal is right in line with what we want to pay.
This isn't making sense to me. If the unpaid loan balance is what you want to pay, skip the short sale and buy the thing. A short sale doesn't help your seller. It helps lenders get paid off and helps agents and appraisers get paid. Why would you add a short sale negotiator to the mix if a short sale isn't needed?
If the arrears amount is a good buy price, why not buy it instead of exposing it to the open market (required in a SS) where other buyers may want to pay more than you. What I am missing?
Real Estate Broker · Portland, OR · Member since 2013 · 43 posts · 22 votes
12y
The unpaid principal balance and the total amount owed are different. If someone owes $100k, but unpaid interest and charges put the total payoff to $150k, you need to do a short sale in order to get it at the $100k price. A short sale where the bank is receiving the unpaid principal balance, but is shorting the fees and interest, is much easier to close than one where the principal amount is also shorted. The deal may make sense at $100k, but not at $150k.