Hi Everybody,
I have a seller who is severely upside down with the bank. He is on title for the property, however, is not on the mortgage. He is the main point of contact with the bank, and has had multiple conversations with them without the mortgage holder. Current mortgage holder doesn't want anything to do with the property. My seller received a "Request for Mortgage Assistance" from the first position lien holder. The plan is to request the bank to reduce the mortgage amount to 225K from 600K.
Do you think it'd be best to submit the form with or without a LOI for that amount?
Any constructive feedback will be helpful if you have any experience handling this lead.
And if you connect me to a good real estate attorney in Los Angeles, that'd be highly appreciated as well.
Owes 600k in mortgage, as-is value around 425K, ARV 510K
@Alex Shin are we headed back to short sales?
I have a seller who is severely upside down with the bank. He is on title for the property, however, is not on the mortgage.
"This is rare, but does happen. Who is on the loan? I hope you know that person is responsible and it will affect his credit the most."
He is the main point of contact with the bank, and has had multiple conversations with them without the mortgage holder.
"Again, this is rare as the bank will not discuss the loan without the permission of the person on the loan."
Current mortgage holder doesn't want anything to do with the property. My seller received a "Request for Mortgage Assistance" from the first position lien holder. The plan is to request the bank to reduce the mortgage amount to 225K from 600K.
"I wish you luck in the reduction request as this will probably never happen. It did not happen very often 10 years ago and there is no incentive from the bank to do this now."
Do you think it'd be best to submit the form with or without a LOI for that amount?
"Try it as all they can say is NO."
Any constructive feedback will be helpful if you have any experience handling this lead.
"What you are dealing with is a short sale. Only licensed real estate agents are allowed to deal with short sales as they deal directly with bank and that is their requirement. Please however, contact an experience real estate agent that knows how to negotiate short sales. If the current owner just wants to walk away he can. It will be the mortgage holder who suffers the most."
And if you connect me to a good real estate attorney in Los Angeles, that'd be highly appreciated as well.
"You do not need an attorney, unless you want to stall the pending foreclosure with a bankruptcy. This will only postpone it for several month, but the bank will eventually pull it out of bankruptcy."
Good investing...
Owes 600k in mortgage, as-is value around 425K, ARV 510K
@Alex Shin are we headed back to short sales?
I have a seller who is severely upside down with the bank. He is on title for the property, however, is not on the mortgage.
"This is rare, but does happen. Who is on the loan? I hope you know that person is responsible and it will affect his credit the most."
He is the main point of contact with the bank, and has had multiple conversations with them without the mortgage holder.
"Again, this is rare as the bank will not discuss the loan without the permission of the person on the loan."
Current mortgage holder doesn't want anything to do with the property. My seller received a "Request for Mortgage Assistance" from the first position lien holder. The plan is to request the bank to reduce the mortgage amount to 225K from 600K.
"I wish you luck in the reduction request as this will probably never happen. It did not happen very often 10 years ago and there is no incentive from the bank to do this now."
Do you think it'd be best to submit the form with or without a LOI for that amount?
"Try it as all they can say is NO."
Any constructive feedback will be helpful if you have any experience handling this lead.
"What you are dealing with is a short sale. Only licensed real estate agents are allowed to deal with short sales as they deal directly with bank and that is their requirement. Please however, contact an experience real estate agent that knows how to negotiate short sales. If the current owner just wants to walk away he can. It will be the mortgage holder who suffers the most."
And if you connect me to a good real estate attorney in Los Angeles, that'd be highly appreciated as well.
"You do not need an attorney, unless you want to stall the pending foreclosure with a bankruptcy. This will only postpone it for several month, but the bank will eventually pull it out of bankruptcy."
Good investing...
Owes 600k in mortgage, as-is value around 425K, ARV 510K
Short sales are tough and banks want to see what it will bring on the open market. If it's been on the MLS for 3 months at $225,000 and no bites, there is some (albeit slim as paper) chance. If it has not been on the market and someone just comes in with a 225K offer on a note they hold worth 600K, performing or not, it is simply an educational opportunity for you. Kind of like collecting McDonalds monopoly pieces, gets frustrating after awhile if you think you can win it. After you get all kinds of paperwork, beg, plead with the actual note holder (possibly offer them some money for signatures), the bank will spend months asking for more information only to sell it to someone else or put it up for auction where someone offers closer to "As is value".
Just my thoughts but good luck!
@Joe Homs Joe, thanks for your knowledge and expertise. I mainly deal with multifamily and ground up developments in LA. I've had 3 of my 4 escrows cancel in the last 2 months. Luckily, my sellers are liquid enough to weather the storm, however, they did want to reinvest that money into the market, which they cant/wont for the time being. That and I'm coming across a lot more distressed owners who cant afford their payments, let alone will probably be in a worse position in 3-6 months once the dust settles with COVID. With that being said and a lot more factors, I do think short sales will be more prevalent.
On the negotiation with the bank... a partner of mine got his loan reduced to 100K from 400K. He put 10K into fixing it up and sold for 700K. This was back in 09. Like you said, it's rare but doable. My main concern is if we should submit the mortgage assistance form with a LOI for that amount and open up the conversation for negotiation. OR... submit the mortgage assistance form alone and wait for a response. Then go from there. Sounds like you may have experience with this and can appreciate your feedback
@Mike Cumbie Hey Mike. I've felt the frustration of trying to collect all the McDonalds VCRs back when I was younger lol. I'm not trying to treat my business as such. I approach all prospects to try and preserve as much equity in the property in the least amount of time and am willing to exhaust all options before moving onto the next most feasible option. Sounds like you're suggesting to get this property on the market right away through a short sale. In that scenario, would the property title holder have the legal right to sign the listing agreement without the mortgage holder? The mortgage holder would rather have the property go through foreclosure and is not too concerned with his credit score. Hes leaving to Mexico in the near future
@Alex Shin I would go for the reduction first. Especially if its not a nationwide bank as most local and regional banks are easier to deal with.
Good investing...
@Brett Goldsmith Hey Brett. We're going to submit the loan mod with the LOI for that amount. If that doesn't work, we're going to start preparing the short sale. Thanks buddy
There are two lien holders and total debt for both is $600K, but you want to get them to go down to $225K? If I read that correctly, i don't see that happening, especially if as you say, your sellers are liquid. They (The lender) will stip the seller for their financial statements. The seller must be truthful or risk criminal prosecution (I've seen it happen) so, that lessons the chances reducing the balance further.
If you are looking to practice for when the market turns and short sales come back, i guess its a good idea but absent that reason, i'd stay away from this one.