Negotiating with the lenders
The deal. I am working with a homeowner in foreclosure. The owner is over $8K behind in payments. The lender says they want the full price for the back payments since the amount includes attorney fees, etc. So, do I short sale the the amount on the original mortgage?
Also, there is about an $18K second. What is a good rule of thumb, if any, to short sale the second?
Do you need to use a HUD1 form to do a short sale? The second is a conventional loan, so I'm assuming you just make an offer on that.
Any suggestions?
Janis 
Hi Janis,
You didn't list the balance of the first mortgage, so I can't tell you if it has possibilities for short sale. Just on an assumption, you should short sale the first off of the current amount due and same for the 2nd. If the first wont short sale, you still would have a good possibility to short sale the 2nd mortgage for 10 cents on the dollar, because they will most likely be wiped out at the court house sale!
Best of success!
BAMZ
BAMZ,
Thank you for your reply. I am still waiting on a FAX from the lender on the first, noting what the payoff is.
Janis
Hello All,
Replies have been received from the lenders on the 1st and 2nd mortgage. Since the deal will not be a deal without short saleing the 2nd, I contacted them and made an offer. At first I was told by the person on the phone that my offer wasn't good enough. I asked what would work for them to get this mortgage off their books because the property is going to public auction next week. The person on the other end asked me to wait a minute, and he left me holding on the phone. He returned to the conversation a minute or so later, and said that their company was going to arrange buying the first at the sale to save their second.
Any suggestions on if I should contact them again, or what the best direction to take on this might be?
Janis
Pull any and all information that you can to show them why it is not in their best interest to pay off the first just to save their small 2nd.
Option #1
Check out how much the back taxes and current prorated taxes would be, and add this to the amount of the 1st mortgage payoff with all late fees and attorney fees. Fax them them one final offer and make it expire within 24 hours because of your short time frame. Be careful with your offer not to make it too high becasue of this excitement that they have created.
Option #2
Show up at the sale to see if they actually do bid on it.
Option #3
Let it go back to the 1st as an REO and contact them immediately to let them know that you may be interested in a quick purchase (because you know how much they've got in it).
Just remember, not all properties that you work on will be successful. Just keep your numbers consistant!
Best of Success!
BAMZ
Just Curious.
Would the lender of the 2nd buy the 1st at the courthouse steps to protect their interest?
Suppose the 1st payoff was about $140K($121K princ.) and the 2nd payoff about $46K ($32K princ.) - Would the lender of the 2nd be inclined to bid past the 1st? If so, just how far would they go to protect maybe $32K?
It seems doubtful to me but I would really like to hear from you seasoned veterans on this. Thank you,
Steve
Thank you all for your replies.
I did make a written offer on the 2nd and raised my offer from $1200 to $2000. The 2nd is about $18,000. One thing I forgot to do is give them 24 hours for decision. That would have been a good idea since my time is getting short.
The 1st is rather interesting. They tell me that I either have to pay in full, or have the current owner show financial capability to make payments on the mortgage and the back payments, making the payments about $950 per month including both. And the backpayment, being about $9000 would have to be paid down by about 50% right away. This appears to be the only ways they will stop the foreclosure.
They told me no contingencies and no promissory note on the back payments.
Janis
We are missing two important pieces of information here. One, how much is the total liability on the house (first mort amount, the $8k to bring up to date, and the second of 18k). Two, is the house worth that much and will it go for that much at auction. Mortgage co.'s have people who tell them whether it is likely to go for an amount that will satisfy their interest (be it first or second). If it is in a hot area and/or has a lot of equity there is not incentive (read: motivation) on the part of the mortgage co. to take less.
It is true that just because we can analyze all the numbers it doesn't mean that they will work in our favor. Unfortunatley this one looks like one to leave behind.
Great Luck,
KP
KP
The first on the house, including the back payments is $75K. The second, I am trying to get for $2K. The house could easily sell from low $100K to high $110K.