Short Sale 4plex
Hello all,
My friend is the listing agent for this property and the owner wants to do a short sale. Here is the situation that I gather so far in a couple minutes talking to him.
He bought it around 2 years ago for like 825k. Now the 4plex is worth around 725k or less.
Loan #1: 609k
Loan #2: 178k
Both loan is with the same lender.
Problem is that he owns two 10 unit apt complex and his house. All three property is under his name so I am trying to figure out what to do next.
I know I will need to ask him about his house and two 10 unit if they have any equity or positive CF from the two 10 unit.
What I am trying to figure out is what is the next step I need to take to show that this should be approve for a short sale?
Please let me know how I can help this person.
Michael
I believe he has been in negative cash flow ever since he got the property. I think it was around $1000 a month from what I remember.
I completely understand where everyone is coming from. I just thought maybe, maybe I can help him out. But, it seems like this will by tie up for a very long time if i do pursue it.
Thank you for the advise.
Michael
A lot of it depends on your state as well... Time lines play a large part.
IF you can show impending financial doom or an inability to pay then they may start the process (doubtful). In reality however there is no incentive if the loan is current for the bank to do anything.
Once they fall behind a few payments then the bank has a vested interest in working with the owner to limit loss.
Sometimes these types of deals are great for a sub to if they have good financing and can cash flow..
[addsig]
In addition to the posts above... in our neck of the woods, at least one lender will consider a short sale if they know they are "under water" with their loan. This was a neighborhood thing... everyone was clobbered. Comps were too high when everyone bought. One lender had basically lent to everyone... and short sales in this place were relatively easy.
To answer the question, though, see http://www.bankrate.com/brm/fico/calc.asp
This tool is pretty good at running different scenarios and seeing how they affect your credit. I would sit down with the property owner and show her this site. I would get some of her payment history information and start running through different scenarios. I did this one other time a few years back for an individual... although in hind sight, the best way to provide the answer to your "customer" is to have her put the information in the form herself. Both of you in front of the computer. She drives. This would show her that you empower her... and she will reach the same conclusion that you tell her... that late payments hurt credit... and NOW is time to act. This is what I will do the next time I have the opportunity.
that is a really neat tool - thanks
and thanks to everyone for their input - the lender has actually offered a DIL - terms yet to be determined....
I am in a similar situation but my bank has confirmed they will accomodate a short sale even though I am not behind on payments. I am debating whether I should stop making payments to my bank (I am still receiving rent) while I do the short sale process since my credit will tank anyway. Is this the wrong attitude? Is this legal considering I am still collecting rent (which still leaves $700/mo upside down).
here is what we do for folks who are not delinquent and want to protect their credit: Offer the bank a promissory note for all or part of the deficiency balance. I usually start the offer at 30% balance, 0% interest over 10 years. If the bank accepts (they always do), get in writing that they will release the lien without prdjudice, and follow up with credit agencies to make sure no hits occure. If they do, send the bank letter.[ Edited by ICGPROPERTIES on Date 06/23/2008 ]
Good idea ICG! For me, the key would be the letter in writing so that your borrower has some recourse with the credit agencies. So, ICG, do the banks/servicers want this promissory note recorded in any way? Is there any kind of security instrument in place or documented in public record?
As far as I have seen, if the bank accepts a promissory, they will report paid tradeline. Get the letter though, just in case.