Owners owes more than house is worth

10 Replies

Hi BP community,
I've had multiple responses from my first yellow letter marketing campaign. A few owners owe more than the house is even worth. I'm sure these are dead deals but if they want out of the house bad enough is there anyway I can offer them a well below price than what they owe and they somehow carry the debt? If anyone has had experience with this, your input is appreciated.

Thank you.

Those are candidates for short sales.

@Jon Holdman Could you explain more in depth, please? I am not too familiar with short sales.

Thanks Jon

A short sale is one where the lender agrees to accept less than the full amount they're owed.  Not easy to do and can be very time consuming.  But if you're getting a lot of these leads it might be worth learning.  We have a Short Sale Forum dedicated to this topic.

@Jon Holdman I will look into it. Thanks for taking the time to help.

@Jon Holdman I'm under the impression short sales are banked owned. This seems like unique situation because it is not owned by the bank and the owners owe 180,000 but I believe the house is only worth about 130,000-140,000. Is this still an example of a short sale? Can I offer below what they owe and have them carry the debt?

@Account Closed  , the situation you describe is the definition of a short sale and, unfortunately for many homeowners, not unique at all.  

Either the bank will have to agree to a short sale (ie seller gets to pay off the mortgage with whatever proceeds there are from the sale) or the seller could bring money to the table from some other means to make up the difference.

I believe the homeowner may also have to claim the difference of sale price and what they owe as income. Make sure they are aware of that as it could have a substantial effect on their taxes.

@Robert Zuccaro REO properties are bank owned properties. When the home owner has a mortgage balance that is greater than the market value you have to get approval from the bank holding the lien to sell the property for less than the mortgage balance. There is a lot more to the process but in a nutshell that is a short sale.

Originally posted by @Account Closed :

Jon Holdman I'm under the impression short sales are banked owned. This seems like unique situation because it is not owned by the bank and the owners owe 180,000 but I believe the house is only worth about 130,000-140,000. Is this still an example of a short sale? Can I offer below what they owe and have them carry the debt?

You may have been reading the wrong info. Short sales are not bank owned properties. The properties are owned by borrowers who owe more than their property is worth. The seller has to agree to sell the property, typically has to list it with an agent.  Then when an offer is received the lender has to agree to accept less than the balance owed.  While the lender's decision makes or breaks the deal, only the seller can list and sell the property. The bank never owns the property during this process.  If the lender won't agree to a discounted payoff the borrower can choose to continue to pay the mortgage, or they can default and be foreclosed on.