investor · McDonough, GA · Member since 2015 · 230 posts · 77 votes
A homeowner that contacted me from a yellow letter is willing to short sale her home. She owes too much. She is 6 months behind. The house needs a total rehab to be rent ready. She is supposed to talk to her mortgage company about doing a short sale. She wants to know what is in it for her. She wants $15K or $20k in cash to short sale her home. First of all, there is no way that is happening. This is a C neighborhood and that much cash would never fit into the numbers for it to be a good deal.
Second, and maybe most important, it doesn't seem like it would be legal to give her cash for basically defaulting on a loan. Thoughts?
People crack me up asking "what's in it for me" when they're 6 mos behind and the house needs a total rehab to be rent ready. It's a good time to ask politely why she thinks the bank will give her 15-20k cash, let her sell her home for less than she owes while living there for free. Where do I sign up for that deal?!?
Are many short sales even being approved in your area? They a far and few between around here these days. The ones that do go, move sloooower than they used to.
I'd move on as it could be a big time suck for nothing.
Depending on who the investor they may qualify for 10,000 in relocation. Getting them more than that is not likely without stepping into the grey zone.
Depending on who the investor they may qualify for 10,000 in relocation. Getting them more than that is not likely without stepping into the grey zone.
I was thinking if she got anything it might be a few thousand or maybe $5k. I also was thinking that it could be used for "moving expenses". Thanks for the positive response.
@Account Closed It's not a guarantee the bank will give relocation expenses. We were working with a couple in this exact scenario. They wanted $10,000 as well as do a short sale. They hemmed and hawed and dragged their feet. We made the mistake of getting short sale specialists involved that did a horrible job and the couple somehow got stressed and delayed even further until they were just a couple days away from foreclosure. By that point we had done everything we could possibly do and we had to let it go.
Long story short you can give the property owners cash out of gratuity or you could just buy their redemption rights without having to go through a long short sale process. Either way this won't be the most straightforward deal. Good luck!
People crack me up asking "what's in it for me" when they're 6 mos behind and the house needs a total rehab to be rent ready. It's a good time to ask politely why she thinks the bank will give her 15-20k cash, let her sell her home for less than she owes while living there for free. Where do I sign up for that deal?!?
Are many short sales even being approved in your area? They a far and few between around here these days. The ones that do go, move sloooower than they used to.
I'd move on as it could be a big time suck for nothing.
It's my first attempt at a short sale. The time suck would be worth the knowledge I will gain. My offer is gonna be so low for this house, I doubt the bank will agree anyway. It needs A LOT of repairs. I haven't been inside yet, but the outside alone is a disaster.
@Account Closed You are right, it is a huge conversation starter, the "how can i get paid to move?". The majority of our sellers do receive some type of relocation assistance. We have over 40 short sales currently listed with my team and they do move slow! Short sales require a long term commitment and a lot of patience from Realtors! Short sales close if the listing agent knows how to handle the process and never lets up on the negotiations with the bank. We also do all our own in-house negotiations, no third party, because they've let us down too many times in the past. We average about 12-16 weeks to get a pre-approval letter and we make sure all buyers understand it is a very lengthy process. But it is a different market today.
Our investors love us because we postpone auction dates, clear the title of tax liens and make sure the HOA is up to date. We handle over 35 different banks and if the investors are willing to sit on the property 90 days, to pass the deed restrictions, it's a great portfolio filler. It's always a balance for the investor to put in time vs. money. Rarely is there a bidding war on a short sale but with the overall housing market so slimmed down on inventory, we are seeing a few more offers thrown into the ring. Some investors are now seeking to unload their properties with us as well, but as you know, non-owner occupied properties don't qualify for relocation assistance.
Well in that case @Account Closed I would take some time to try and get the homeowners expectations right first. Offer to be of help and remind her of the benefits of a short sale vs foreclosure-that's what is in it for her. Prepare her for the process so she understands how it will work.
I would also try and find out if she is motivated or curious? Conversations that get her to talk and think about next steps, why she would want to move etc will help.
Her $15-$20k has already been 'given' in the form of not making payments. If you can help her get a non-recourse short sale that's plenty, IMO.
Banks are wising up to rising values and aren't letting these just slide through anymore. With the help of a short-sale specialist realtor, I would make an offer that works for me. Prepare for a long and frustrating journey. I've made plenty of offers on my own, but won't touch a HUD or short-sale offer without a knowledgeable realtor's help. Any equity to be had at the buy here @Account Closed? I certainly hope so!
@Account Closed If the homeowner wants to try to do a short sale and has reasonable expectations I'd give this a go if my offer is accepted to test the waters with the bank.
@Steve Vaughan I've had that "talk" around the kitchen table on many occasions with underwater home owners, some of whom have not made a mortgage payment in 4 or 5 years. But they will ask for relocation assistance just the same! I know better than to ask where the free rent has gone because many folks have been hit by divorce or job loss, illness, or death in the family. Or a combination that you wouldn't wish on anyone. Working closely with distressed homeowners puts a sharp focus of life, and what's really important. It makes me appreciate the small stuff even more.
@Jeff Valentino thanks! I'm not on BP forums a lot, but I know you are! Got any short sales in Orland Park?
Sometimes a homeowner who occupies a home can be eligible for relocation assistance, paid by the short selling bank at close of escrow.
When a Seller short sales, all parties to the transaction have to sign a short sale affidavit, and "Arm's Length Transaction" which is required to be signed notarized by all parties. This document indicates that the Seller is not receiving any financial benefit beyond what is indicated on the final settlement statement. Meaning, if the short selling bank does not offer incentive, she will receive no money from anyone. they will not allow credits from Buyers on the settlement statement, as if money is left on the table, the short selling bank wants that money. Escrow officer, Brokers, and principals to the transaction have to sign. It would not only be bank fraud if you have an agreement to give her money, you could be defrauding the government (if the loan is backed by the government). Do not get involved. Here is an example of a short sale affidavit from Wells Fargo. Many other institutions affidavits are similar. https://reo.wellsfargo.com/docs/Short%20Sale%20Aff...
What she gets out if it, is generally a formal notice from the bank indicating they will not pursue the defaulting borrower for the amount deficient. She gets something in writing indicating they will not require a promissory note to allow the short sale, and she gets something in in writing indicating that that debt will now be considered "settled" by the credit agencies. Sometimes if they have other liens and judgments against them, that bank will pay those as well to offer clear title.
Awesome info! Thank you! I was wondering if the relocation assistance could come from me or if it had to come from the bank or mortgage co. It looks like in the future I will tell homeowners that they may be eligible for some money, but that will be up to their mortgage company.
Well in that case @Account Closed I would take some time to try and get the homeowners expectations right first. Offer to be of help and remind her of the benefits of a short sale vs foreclosure-that's what is in it for her. Prepare her for the process so she understands how it will work.
I would also try and find out if she is motivated or curious? Conversations that get her to talk and think about next steps, why she would want to move etc will help.
Good luck!
The homeowner hasn't made a payment in 6 months. She's been renting the home out to some people. It's vacant now. She said I can buy it or it can go back to the bank. She is kind of motivated because she did call me, but then she isn't worried about the bank taking it either. I think she's just over it. She has been talking to the mortgage co about deed in lieu.
@Account Closed If the homeowner wants to try to do a short sale and has reasonable expectations I'd give this a go if my offer is accepted to test the waters with the bank.
The homeowner is supposed to talk to her mortgage co today and see if they will let her do a short sale. If so, I will go look at the property and give her an offer. If the mortgage co says no, then I'm moving on to the next deal.
Her $15-$20k has already been 'given' in the form of not making payments. If you can help her get a non-recourse short sale that's plenty, IMO.
Banks are wising up to rising values and aren't letting these just slide through anymore. With the help of a short-sale specialist realtor, I would make an offer that works for me. Prepare for a long and frustrating journey. I've made plenty of offers on my own, but won't touch a HUD or short-sale offer without a knowledgeable realtor's help. Any equity to be had at the buy here @Account Closed? I certainly hope so!
I will be finding an experienced short sale realtor to help me. I want someone to walk me through the process and teach me.
As far as equity, it all depends on what price I get it at. The house is in a run down neighborhood that is full of other rentals. It needs a major rehab from what I can tell from the outside. The homeowner even agreed with me in that. I will be running numbers on it before I put in an offer. I want a lot of cash flow. I don't expect to ever have a lot of appreciation in this neighborhood. If I get it at the right price I'm sure it will be a great cash flowing property.
A short sale I purchased recently went rather smoothly: The seller had to pay $16k and the bank agreed to a pretty low sales price. It worked out for everyone because the seller was anxious to get out of their nightmare. That seller was smart enough to know the bank wasn't going to pay them to get out of their mortgage. Russ, maybe share this story to re-adjust your seller's expectations.
@Account Closed The way you find out if a short sale is an option is to apply. Literally all borrowers are eligible for a review. Time and energy is being wasted by speaking to the bank to ask if a short sale is an option.
Wow...I will be curious to know how this plays out. From my beginner eyes, I don't see a deal here. I guess it depends how far you can get the bank to lower the debt.
It's not a deal at what she owes on it, plus 6 months of missed mortgage payments, plus the major rehab it needs. That is why I told her I would be interested in buying if she can short sale it. Otherwise, I'm not interested.
She owes $63K. ARV for that neighborhood these days is probably $75K.
Before trying any short sale offer, I'd make sure the property is listed for sale on the MLS. No lender/bank/servicer is going to entertain your offer if it doesn't come from a real estate agent with a listing agreement on a property listed on the MLS.