Hello All. I could really use some help here. There's a FSBO house that I'm interested in buying as my primary residence. The home owner can't keep up with payments and has left me voicemail saying that the lender/bank is willing to do a short sale.
Thing is....the home owner has no real estate agent. I have no real estate agent either. Is this a bad idea or can we march on ahead ,as long as we have a real estate attorney reviewing all the paperwork?
I'm new to this. Any help will be most appreciated!
thanks, Dave
David, I really appreciate your help. I'm going to get all these answers over the weekend. At this point, I'm just trying to "ramp up" to get a head start on the process, so that I'm better informed before I go to meet the seller.
A month ago, the seller wanted 730k "700 to pay off the bank and 30k for me to walk out of this place". I felt he's on crack and forgot about it. Four days ago, the seller left 3-4 voicemails for me, saying he's willing to short sell and that I can have the house for 600k. That's about all I know for now.
When he says you can "have the house for" is irrelevant if he's going to short sale it. It's ultimately up to his lender. If they agree to a price, and he's still interested in short selling, all he can do is sign the purchase agreement.
Yes Mark, *I* do understand that. The seller appears to be quite clueless and wishy-washy so far. It is going to be an uphill task to close this successfully.
I'm going to get all these answers over the weekend. At this point, I'm just trying to "ramp up" to get a head start on the process, so that I'm better informed before I go to meet the seller.
Very smart. Let us know how the meeting goes (whenever it happens).
Good luck.
Why it matters who is holder on first, who on second? I guess balance matters so you can negotiate price better, right?
Marko,
Simply put, some loan servicers have investors that seem to be more willing to conduct a short sale than others. That is why it is nice to know which loan servicers are working each loan.
Regarding the balances of each, I have found that the best deals normally occur when a large second mortgage is in place and I can nearly satisfy the first by shorting the second drastically.
David,
How can you tell which loan servicers are better then the other ones?
Experience, trial and error, and by following the news.
For example, Ocwen is currently leading the charge in principal reduction loan modifications. I read a stat that indicated that they have participated in over 70% of all (recent) principal reduction loan modifications. This leads me to believe that they will be harder to work with on short sales, and my personal experience confirms this.
This is just an example, there are dozens of large loan servicing companies, each servicing many different investors. Trends can change quickly.
>> How many mortgages are on the subject property?
Two. Both with countrywide. Total amount owed is 700k.
>> Who is the lien holder on the first?
BoA.
>> What is the balance on the first?
Don't know (yet). Total is 700k
>> Who is the lien holder on the second?
BoA.
>> What is the balance on the second?
Don't know (yet). Total is 700k
>> How long has the owner owned the property?
Since July 06
>> Did they receive 100% financing?
No, HO said she put down 150k but I think she's lying.
>> How many months behind on each mortgage is the seller?
5 months
>> How much did the most RECENT comparable sale sell for?
One home sold in 07/08 for 700k. One home is currently listed for 590k. THIS home in question will need 30k in upkeep - flooring and paint.
>> Most importantly, how badly does the seller want to conduct a short sale?
The owner wants to "get something out of it". She's saying if she gets nothing out of it, she'll just let the bank take it. If she can get 30k from me, besides what I negotiate with the bank, she'll agree to a short sale. *ugh*
She says she's already talked to the bank and they've allowed her to pursue a short sale. What amount should I offer the bank? 80% of Fair Market Value? I'm thinking FMV is 600k. 80% of that is 480k. What do you think?
TIA, Da Deep
Walk away. Waste of time.
Pick it up as an REO.
Sorry to be so blunt, but if that is the seller's attitude then this deal is going nowhere. I've seen this movie more times than I care to share.
In a short sale, there will be disclosures that the seller signs stating that they receive nothing. If you give them something outside of closing, then they are committing fraud.
Yeah the HO is somewhat nutty. It will be a few months before it is REO and I'm sure it will be trashed at that point. I'd like to get this house in a short sale if possible. How about I call her and tell her that I can't give her any money to walk away. If she agrees to proceed with the short sale anyway, I'll play.
Thanks David. Do post when you can. Apart from the difference in the negative effeft on her credit rating "short sale is like being hit by a bus; foreclosure is like being hit by a train" what else can I tell her in the hope that it will knock some sense into her? Right now she's saying, "If I don't get something out of this, I'll just let it go to foreclosure"
Thanks in advance.
If she gets foreclosed, she will be ineligible for a Fannie Mae under-written loan for a minimum of five years.
If she sells short, she will be eligible to buy again (Fannie Mae standards) after two years.
Lenders will pursue a deficiency judgment if she forecloses.
Lenders may or may not pursue a judgment with a short sale.
Finally, it's the right thing to do. Abandoning your obligations is not the right thing to do.
Hope this helps.
*In my experiences, the last one is the most powerful.
Wouldn't it be better to talk to the bank? At the end, bank owes that peoperty, not that woman. Da Deep, i don't understand why do you ask David how much you wonna offer? You know the best. David doesn't know your finances, your investment plans with that house, your other business options, or if you plan to live there and how long. If I am dieing to live in it I woud give 80% of appraised, if it is an investment, no more then 60, unless is a very hot market area, like Manhattan, New York, or South Beach, Miami. You can probably try to bid with the bank. Offer 440, if they say no, maybe tomorrow they call and say yes, if not, the day after you offer 470...If you blow, REO is plan B
As for what I want to offer, I'm just trying to get an idea of what to offer, considering the circumstances. I don't want to overpay and I don't want to underbid so much that the bank tells me to FO. This will be my primary residence; it's not an investment property.
"Finally, it's the right thing to do. Abandoning your obligations is not the right thing to do. "
Yeah but the woman is morally bankrupt too. I think she's devoid of scruples and besides, she's very very broke. She told me she's sold her jewelry, her possessions, her furniture..yesterday she sold her car.....she's in a world of pain right now...
She asks for 30 but she would probably be delighted if she shortsells it and gets 5!
Wouldn't it be better to talk to the bank? At the end, bank owes that peoperty, not that woman.
Just to be clear, there is no "bank". An investor owns the loan, the loan servicer works for the investor. The woman still owns the property (the bank doesn't own anything at this point). The servicer will not speak to the buyer without expressed written consent from the borrower. As a matter of fact, the servicer won't have any conversation of substance with anyone, concerning a short sale, without an accepted offer between buyer and seller.
On another topic, If you pay her outside of closing you could be party to fraud. Don't let her desperation be your problem.
I can tell you that I've heard all I need to tell you (with 99% certainty) that you are wasting your time.
Marko,
Did you just say that Manhattan and South Beach were "hot" markets?
You think they aren't? Manhattan and South Beach are interesting to international investors...That's why prices haven't gone down in Manhattan yet. What? You disagree?
You're kidding right?
Miami - 3rd worst market in the Nation
http://4.bp.blogspot.com/_pMscxxELHEg/SOJUBZrWo3I/AAAAAAAADgo/0kebZN4Lz-w/s1600-h/CaseShillerPriceDeclines.jpg
NYC - Losing 165,000 jobs.
http://www.wnyc.org/news/articles/112627
I am not talking about Miami and New York, I am talking about hot areas in these cities...I have attended reo auctions in Miami, 300 properties, none from South Beach...In South Beach everything got sold in short sales...that's why I say it's hot market!
Yes, NYC a lot of people lost job, but isn't that normal since you consider how many people work there? (more than 8million new yorkers +NJ+long island+ upper state+even pennisilvania)... I am talking about real estate, hot in real estate. last 2 years prices went down everywhere besides Manhattan.
I was looking for tax deed auctions in NYC, everything that's offered is: Bronx, Queens, Staten Island and Brooklyn...Manhattan-nothing! That's why I think Manhattan is hot market. Anyway you are expert in short sales, there's no doubt...you're one of my mentors, I even saved some of your comments in my memo, anyway here is a question: since you are from Florida, did you try short sell anything at South Beach? I tried, lender posts price and waits offers, like sealed auction, if you wont to win, you have to offer at least 75% off market value...not a great deal, wright?
Marko,
Thank you for the kind words. One of the great things that you will find on BP is that there are many people, with many different strategies/theories about investing.
Personally, I believe that it is wisest to invest in your own back yard. Furthermore, I think it is entirely possible to make money in real estate in any market. Having said that, I only know national real estate trends.
The only thing that I know about NYC real estate is that:
-CRE is crashing
-hundreds of thousands of bankers, traders, and fund managers are losing their jobs
-The oldest and most powerful investment bank are crumbling
-etc...
I'm sure there is a way to make money in RE in NYC, but I wouldn't know how.
Which kind of takes us back on topic to Da Deep's situation. We are in unprecedented times. Just because you can buy a property for much less than is owed, does NOT necessarily make it a good deal.
"The servicer will not speak to the buyer without expressed written consent from the borrower."
Yes of course. The HO has faxed me a letter of consent. I'll fax it to BoA on Monday.
As a matter of fact, the servicer won't have any conversation of substance with anyone, concerning a short sale, without an accepted offer between buyer and seller.
What offer? The bank has to accept my offer. The seller just has to sign on the dotted line. The seller has already spoken to the bank and they're willing to do a short sale.
On another topic, If you pay her outside of closing you could be party to fraud. Don't let her desperation be your problem.
Yes, this is worrisome. I will speak with an RE attorney on Monday.
I can tell you that I've heard all I need to tell you (with 99% certainty) that you are wasting your time.
Yes I know only 1 out of 5 short sales actually close successfully. However, this property is worth wasting some time on, so I'll pursue it for a while. I wish the seller wasn't as whacked as she is.
What offer? The bank has to accept my offer. The seller just has to sign on the dotted line. The seller has already spoken to the bank and they're willing to do a short sale.
Wrong. The contract for purchase and sale is between you and the seller. The sale is contingent on bank approval. In 99.99/100 cases, The bank (loan servicer, whatever, etc...) will not discuss any possible sale without a complete short sale packet submitted.
Short Sale Packet:
Listing Agreement
Last two years tax returns
Last two bank acct statements
Last two pay stubs
Property disclosure
Hardship Letter
Preliminary HUD-1
Etc...
After that has been submitted, they will wait for a contract. That contract will be an agreement between you and the seller. They will not negotiate anything without a contract.
*It is possible that they will do all of this without the property being listed publicly for sale, which was the original topic of this thread. However, it is unlikely. And, they will most likely still require the rest of the steps to be followed.
**I can guarantee you that the bank has not agreed to do a short sale. I would bet that some $9/hour bank rep. told her that she could try a short sale. They haven't seen your offer yet. What if it was for $10? Do you think they would agree to a short sale then?
Just my thoughts.