I was told recently by my realtor that all short sales she has seen closed resulted in the seller having to come to the closing with a promissory note.
We lost a recent deal due to this. Do most SS result in this? If so, how seriously should this note be taken by the seller?
Thanks
Rehabber · Tucson, AZ · Member since 2008 · 1k+ posts · 802 votes
16y
Originally posted by Stephen Gathman:
......... that all short sales she has seen closed resulted in the seller having to come to the closing with a promissory note.
This is completely false! Promissory notes are considered by the lender, but are rarely enforced in my experience. However, there are certainly some scenario's which will lend itself well to a lender requiring a promissory note.
1. Deficiency states: If the property is in a deficiency state, the lender may want to pursue a note in lieu of filing a judgement for the deficiency. I think this can be valid option for a seller when avoiding a judgment is important to them.
2. PMI: When there is Private Mortgage Insurance, you can expect the insurer to want to be paid back and will often times require a note.
3. FHA/VA: Although this is not a certainty, when the government has paid out a claim to the lender, they may require a note.
4. Investment Properties: If the property being sold short is an investment property, you tend to have a higher instance of a note being required.
A formula of success I use to counter a promissory note is to prepare the seller for the possibility before signing. During the negotiation process, have the seller save as much money as possible and make a cash contribution at closing in lieu of a note.
You need to know, prior to signing a client, what to look for and screen those leads for situations that may result in a seller disincentive.
Rehabber · Tucson, AZ · Member since 2008 · 1k+ posts · 802 votes
16y
Originally posted by Stephen Gathman:
......... that all short sales she has seen closed resulted in the seller having to come to the closing with a promissory note.
This is completely false! Promissory notes are considered by the lender, but are rarely enforced in my experience. However, there are certainly some scenario's which will lend itself well to a lender requiring a promissory note.
1. Deficiency states: If the property is in a deficiency state, the lender may want to pursue a note in lieu of filing a judgement for the deficiency. I think this can be valid option for a seller when avoiding a judgment is important to them.
2. PMI: When there is Private Mortgage Insurance, you can expect the insurer to want to be paid back and will often times require a note.
3. FHA/VA: Although this is not a certainty, when the government has paid out a claim to the lender, they may require a note.
4. Investment Properties: If the property being sold short is an investment property, you tend to have a higher instance of a note being required.
A formula of success I use to counter a promissory note is to prepare the seller for the possibility before signing. During the negotiation process, have the seller save as much money as possible and make a cash contribution at closing in lieu of a note.
You need to know, prior to signing a client, what to look for and screen those leads for situations that may result in a seller disincentive.
Thanks. How do you get a negotiator involved in the process where you have 2 real estate agents already in on it? Can a negotiator even get anything done when you are dealing with B of A and equator?
Real Estate Investor · Indianapolis, IN · Member since 2009 · 161 posts · 46 votes
16y
Ask your Realtors if they would like to NEVER talk to the banks again????? That shouldn't be a hard sell, in fact we, as most do, require that the Realtor never talk to the bank. There ONLY job is to find leads and sell property...
You may pay a flat fee or a % of the spread on a deal if you bring in a negotiator... And I have two deals moving through BoA now, though I just fired my negotiator due to poor service, so choose wisely!
Centennial, CO · Member since 2009 · 758 posts · 251 votes
16y
Very good responses here. You have two very experienced negotiators right here in this thread. If realtors involved will not let you do your own negotiations it may be better to move to the next deal with higher probability of success. Realtors negotiating with an investor in the middle = unlikely profit for you.
Thanks again. How do I insert a negotiator into this situation, and what can they do to make the deal more likely to close when we are working with BOA and Equator?
I can be reached at [PHONE NUMBER REMOVED]