How do I find out whats owed pre-short sale?

Question

I have a motivated seller/realtor that is about ready to go into short sale, is there a way I can find out what the seller owes? Is it public record? The seller is not disclosing that info and the offer from a big rehab company that the bank turned down. I figure if I can find out what’s owed I got a place to start negotiating. This place is gutted and needs major renovations, so I don’t think the bank wants it back.

I’d think this bank would be my best place to negotiate at least construction financing, but the seller is holding that back too. I know the seller can’t disclose too much being a realtor by law. Other thing I learned is the city is criminally prosecuting the seller for not working on the place it’s been on the market a while untouched. Wow! 
We are getting rehab bids together to look at cash flow.

Don Konipol · Answer

Terry P., I think you are a little confused.  A short sale occurs when the loan on the property is greater than the market value.  The seller is essentially asking the bank to accept a loan payoff "short" of the amount required to fully pay off the loan.

If the offer on the property is for the amount owed or greater, it would not be a short sale and not entail the need for mortgagee approval.  Seller's are not able to sell the property for $80K, payoff a $60K mortgage for $40K and pocket the difference - at least not legally.

Further, I am afraid you do not have a motivated seller, or if you do he does not regard you as a serious buyer.  Any motivated seller would be more than willing to give you the information you are requesting.  There is NO law requiring a Realtor not to provide information on his own property.

Steve Babiak · Answer

If you are considering buying at the sheriff sales, this next thread is a must read:

http://www.biggerpockets.com/forums/41/topics/68977-foreclosure-auction-sheriff-sale-and-trustee-sale-faq

Terry Portier · Answer

Got it! Just wanted to say thanks again to all for taking the time to educate me on short sales. :)

Wayne Brooks · Answer

To do a short sale, the property will have to be listed for sale, in the MLS, then you submit your offer to the seller.  The seller still controls the property up until an auction.  The bank won't talk to you, only the person (realtor or other 3rd party) authorized to negotiate on the seller's behalf.  There will be a way to track the progress of the foreclosure, and any auction date, through your local court house or trustee.  Other than buying the house through a short sale, you can't buy prior to the public auction.  The auction will be all cash, either due immediately, or maybe 24 hours, with a deposit.  Check your local procedures in advance.

Terry Portier · Answer

Wow Don thanks! Not intuitive to the casual observer. So if a seller says it is in short sale and I know the bank I figured I try and see if I can negotiate with the bank next week but they may not talk to me. Is the seller still considered a party with legal interest during a short sale such that the bank and the seller have to agree on a sales price? So I learned last week the sheriff’s office handles these mortgage auctions, are properties literally auctioned off at the court? How do I watch this property to see or know when it is going to auction and out of short sale status? Do I have an opportunity to buy the property right before the auction, I mean that day at the court house? I assume I have to have cash to bid at the auction?

Thanks for the education, you can see I am green to all this but eager to learn.

Steve Babiak · Answer

Imagine their school-age kids, one who brings home straight A's and gets a pat on the back, the other brings home straight F's and gets handed a C-note ...  :)

Don Konipol · Answer

Actually it's the opposite, with most lenders you need to be behind on payments for them to okay a short sale.  I know it's hard to believe but it all part of government and government regulated industry: bad behavior is rewarded, good behavior is punished, failure is rewarded, success is punished.

Many have done well chasing short sales; but many or most short sales do not end up happening.  There is a real estate investor in Phoenix who currently has the back up offer on over 1000 short sale properties.

Terry Portier · Answer

Question about short sales? Don't you have to be current on payments to qualify for a reduced sales amount to what is owed? Also, I read a blog on BP where it said often times the bank will back out of it right before going to the auction at the court house so investors waste time and money dealing with bank short sales?

Terry Portier · Answer

I was able to find the bank and original loan amount & date off the register of deeds website after I called the clerks office and got a legal description. Well at least I know how to do that now. :)

Terry Portier · Answer

I AM confused, thanks for clearing that up :)

How do I find out whats owed pre-short sale?

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