Newbie Short Sale Questions.

[Matt Gill]

I am new to REI and Short Sales.

The property is in distress and needs 30K in repairs due to their tenants trashing it. I have been in good contact with the owners about purchasing the property for my business' office (zoned commercial/residential). Neither I or they have an agent. They want out (They have 2 other properties in distress and are looking at bankruptcy and cannot afford the payments), and are ready to give the property to the bank at the end of this month (March).

They bought the property for 158K in the summer of 07 and still owe 150K. I won't pick up the 150K with the amount of work needed so I suggested a short sale. Problem is I have never done a short sale so here are my questions:

1. Their concern is not having to pay the bank the difference but from what I have found, I can create an addendum that waives their obligations, correct? (if they accept it)
2. I think I have a good understanding of how the process works from reading here and various other sources but am I biting off more than I can chew as my first REI?

Any help is greatly appreciated.

[Dave P.]

I'm sorry to say it is not that simple Matt. It is not up to you to waive their obligation to pay back their original lien holders.

If you desire not to use an agent then you will either need to get written permission from them or convince them to take the lead and begin communication with the bank.

The bank will require that they submit a short sale packet and it will consist of the following (at a minimum):

-last two months of bank statements
-last two years tax returns
-last two pay stubs
-hardship letter
-etc...

The next step would be to enter into a written contract with the distressed seller with a purchase contract. This contract is for the amount that you are willing to pay for the property. This agreement is then forwarded to the bank and they will decide whether it is a deal worth taking or not. They do not have to allow the sale to go through.

They will hire an agent to conduct a broker price opinion. The purpose of the BPO is to determine "market value" of the property. If this value falls within their parameters, then they will take the deal. If it doesn't ,then they may or may not....depending on how good of negotiator you are.

Assuming you reach a deal with the bank, this does not necessarily mean that the seller is off the hook. The bank may or may not seek a deficiency judgment against the borrower...but that is a whole other topic.