Potential Short Sale...Need Help!!!!
Hi BP family. I’m a new investor and have found a potential property that looks pretty good on paper. The problem is the property is under water but the owners bank doesn’t seem to want to do a short sale. Has anyone ran into this issue and if so, how were you able to make the deal happen? Thanks so much for your help!!
@Blake Denney
Is it already listed as a short sale? Or the seller knows it’s coming and is behind on payments?
It’s a weird situation. It is not currently a short sale. The owner does not live in the area(the house is vacant) but he is current on all mortgage payments/taxes. The owner told me he owes $60k but house is only worth $40k the way it sits. He made it sound like the bank didn’t want to do a Short Sale since he is continuing to make payments. Does this make any sense?
@Blake Denney
Oh I see. It’s not so much the bank trying to recoup some money it’s the actual seller.
How does the owner know the lender won’t do a short sale? If he simply called and asked the answer is always no. No lender will encourage a short sale in advance. The only way to get a response on it whether a short sale will be approved or not is to actually go through the entire short sale approval process.
Has he done that? Was there a previous buyer? If not -Does the owner have a financial hardship?
Put yourself in he position of the bank. You are receiving monthly payments in full. You are getting exactly what you bargained for. So long as the owner keeps making payments, why take a haircut on the loan amount? It would make no logical sense to do so.
Some investors/insurers won't allow a short sale when a borrower is current on their mortgage. Some do though if a borrower if facing imminent default. It really depends, but a general rule of thumb is that if a borrower is current, it significantly decreases the possibility of a settlement.
This can be said for basically any debt settlement attempt ( mortgage settlement, credit card, professional services, etc. )
#2 Foreclosures Contributor
- Paradise, CA
Absent military PCS orders on some of the GSE loans, there are no requirements for any lender to accept a short sale. That said (and as Brett and others point out), there is little chance of a short sale being considered with a current borrower. Still, no lender can use the borrower's current status as a reason to deny a short sale but, the borrower would need to be in imminent danger of default.
The lender, upon request by the borrower, must provide the borrower with any and all requirements for alternatives to foreclosure and give them 30 days to respond and meet the requirements of the lender. Short sale is one alternative to foreclosure.
If the borrower lacks the documented ability to service the debt, they may be able to be considered for a short sale that meets the lender's minimum net proceeds requirements.