Your opening line caught my eye... from what I infer this is either your first attempt, or the furthest that you've gotten on an attempted short.
I read your post and can tell you that most folks who have tried to facilitate a short sale (without a cursory understanding of the process) for the first time... have had the same or similar experience.
The short sale approval letter that you received is pretty much an industry standard. One of the precepts of mortgagee approved short sale transactions require that the Seller receive zero proceeds.... the whole nine yards.
Next time, you'll have a bit of experience under your belt and anticipate what is coming so that you structure the deal so that it will conform to ss criteria...
You'll find that the short sale process is riddled with (avoidable) obstacles.... the more you read the better you will be able to avoid the obstacles... and extricate yourself from the ocassional melt down.
Two things come to mind. Firstly, without a HUD1, you haven't met the conditions of the short sale approval. It's easy enough to create a HUD1 to reflect your revised transaction. So, give them what they want. In the long run, it's best to get in the habit of complying with their requests....
Secondly, their release of lien may take awhile.
An experienced closing attorney or title agent will be able to work around that by providing the HUD1 closing statement reflecting the payoff.
The next thing to consider is your Buyer's loan commitment. It was predicated upon a transaction that has been or will be revised. There may be seasoning issues and the lender may not agree to fund and rescind the commitment.
What I am missing here is an answer to his original challenge from the seller's lender.
What specifically can he do to close this deal and make money while shorting the bank? How can he make this happen?
I read your answer and it seemed quite vague and I think I know why. I think your answer is "he can't close this". I would probably agree...unless you have other specific ideas....
I don't consider the lender's terms for short sale approval a challenge as much as they are the rules of the game... which are readily available to anyone who asks. The fact that he was blindsided by an industry standard indicates that this proposed transaction was ill-conceived, and it's a shame that he went to school at the expense of the Homeowner/Seller.
Can he close this deal? I don't know enough about the timeframes, the restrictions placed upon his Buyer's mortgage loan commitment, other closing contingencies, etc
.
But based upon what info he did disclose, I'd wager that if the deal had been structured properly from the onset... he wouldn't be having the problems he now experiences, and would be counting his money instead
of popping Excedrin.
The art of short sale acquisition is a wonderful thing. But it's not everything that some folks make it out to be. A successful short takes time, work, and luck.
Without a proper foundation, and prequalification, an ill-conceived short transaction is destined to sputter and fail... no matter how much you want it to succeed.
The initial poster's problems stem from his wanting to flip the deal... without structuring the necessary framework to accomodate the flip while meeting mortgagee's short sale criteria.
So if I'm following all this correctly you are saying it would have been a better structured deal had the "flipper" closed on the property with Homecomings. Then mailed off the HUD-1, etc. to fulfill his end of the bargain. Once he gets all the paperwork back from Homecomings (which as you said could take a while) he can then close with his buyer and "flip" the property to him. He may just need to hold on to it for a few months until the deal is sealed with Homecomings.
In other words - don't do a double closing with a SS?
Unless it's a cash deal... I wouldn't do a double closing.
Trying to combine a short sale acquisition with a hasty exit strategy is problematic. For the inexperienced as well as for the experienced.
However, if that's what you have to do, expect the process to be more complicated.
I would create an LLC to enter into a contract to Purchase. The Contract becomes an asset of the LLC. The LLC's members can be added/deleted, or the LLC can be sold such that the end Buyer controls the assets of the LLC, and steps up to the plate with his own financing.
If the mortgagee approval requires an individual to be named as Purchaser... the Contract is revised WITH PRIOR MORTGAGEE APPROVAL.
>>The initial poster's problems stem from his wanting to flip the deal... without structuring the necessary framework to accomodate the flip while meeting mortgagee's short sale criteria. <<
This is exactly what I was thinking. I'm aware that SSPRO won't need my approval to give value to his words, but i'm just glad that we were thinking the same thing!
when I initially read this, I was thinking, all he needed to do was not try to give the seller back money (on the hud-1). this is a no-no.
The biggest thing that is throwing a monkey wrench into this on the part of the lender is that the seller will receive money from this that they believe should be applied to what is owed to them. They will never reduce the amount owed and let the seller have those monies.
Geesh, it would have been nice if the original post had stayed in place so those of us trying to learn would better understand what went wrong with this transaction.
Obviously there is a lot more to the SS process than I was aware of.
Your opening line caught my eye... from what I infer this is either your first attempt, or the furthest that you've gotten on an attempted short.
I read your post and can tell you that most folks who have tried to facilitate a short sale (without a cursory understanding of the process) for the first time... have had the same or similar experience.
The short sale approval letter that you received is pretty much an industry standard. One of the precepts of mortgagee approved short sale transactions require that the Seller receive zero proceeds.... the whole nine yards.
Next time, you'll have a bit of experience under your belt and anticipate what is coming so that you structure the deal so that it will conform to ss criteria...
You'll find that the short sale process is riddled with (avoidable) obstacles.... the more you read the better you will be able to avoid the obstacles... and extricate yourself from the ocassional melt down.
[ Edited by TheShortSalePro on Date 03/03/2004 ]
I think that you are screwed. You should have structured the deal differently and paid a little more and made an actual cash purchase.
Integrity is the best policy[ Edited by HouseHunters on Date 03/05/2004 ]
Two things come to mind. Firstly, without a HUD1, you haven't met the conditions of the short sale approval. It's easy enough to create a HUD1 to reflect your revised transaction. So, give them what they want. In the long run, it's best to get in the habit of complying with their requests....
Secondly, their release of lien may take awhile.
An experienced closing attorney or title agent will be able to work around that by providing the HUD1 closing statement reflecting the payoff.
The next thing to consider is your Buyer's loan commitment. It was predicated upon a transaction that has been or will be revised. There may be seasoning issues and the lender may not agree to fund and rescind the commitment.
Or, everything will work out just fine....
Short Sale Pro-
What I am missing here is an answer to his original challenge from the seller's lender.
What specifically can he do to close this deal and make money while shorting the bank? How can he make this happen?
I read your answer and it seemed quite vague and I think I know why. I think your answer is "he can't close this". I would probably agree...unless you have other specific ideas....
Thanks!
I don't consider the lender's terms for short sale approval a challenge as much as they are the rules of the game... which are readily available to anyone who asks. The fact that he was blindsided by an industry standard indicates that this proposed transaction was ill-conceived, and it's a shame that he went to school at the expense of the Homeowner/Seller.
Can he close this deal? I don't know enough about the timeframes, the restrictions placed upon his Buyer's mortgage loan commitment, other closing contingencies, etc
.
But based upon what info he did disclose, I'd wager that if the deal had been structured properly from the onset... he wouldn't be having the problems he now experiences, and would be counting his money instead
of popping Excedrin.
The art of short sale acquisition is a wonderful thing. But it's not everything that some folks make it out to be. A successful short takes time, work, and luck.
Without a proper foundation, and prequalification, an ill-conceived short transaction is destined to sputter and fail... no matter how much you want it to succeed.
The initial poster's problems stem from his wanting to flip the deal... without structuring the necessary framework to accomodate the flip while meeting mortgagee's short sale criteria.
SS Pro,
So if I'm following all this correctly you are saying it would have been a better structured deal had the "flipper" closed on the property with Homecomings. Then mailed off the HUD-1, etc. to fulfill his end of the bargain. Once he gets all the paperwork back from Homecomings (which as you said could take a while) he can then close with his buyer and "flip" the property to him. He may just need to hold on to it for a few months until the deal is sealed with Homecomings.
In other words - don't do a double closing with a SS?
Roger
Unless it's a cash deal... I wouldn't do a double closing.
Trying to combine a short sale acquisition with a hasty exit strategy is problematic. For the inexperienced as well as for the experienced.
However, if that's what you have to do, expect the process to be more complicated.
I would create an LLC to enter into a contract to Purchase. The Contract becomes an asset of the LLC. The LLC's members can be added/deleted, or the LLC can be sold such that the end Buyer controls the assets of the LLC, and steps up to the plate with his own financing.
If the mortgagee approval requires an individual to be named as Purchaser... the Contract is revised WITH PRIOR MORTGAGEE APPROVAL.
>>The initial poster's problems stem from his wanting to flip the deal... without structuring the necessary framework to accomodate the flip while meeting mortgagee's short sale criteria. <<
This is exactly what I was thinking. I'm aware that SSPRO won't need my approval to give value to his words, but i'm just glad that we were thinking the same thing!
when I initially read this, I was thinking, all he needed to do was not try to give the seller back money (on the hud-1). this is a no-no.
The biggest thing that is throwing a monkey wrench into this on the part of the lender is that the seller will receive money from this that they believe should be applied to what is owed to them. They will never reduce the amount owed and let the seller have those monies.
Barbara
Well - I hope this post doesn't get deleted like my last ones!!!
The biggest monkey wrench is the double close with the end buyer using a lender that has seasoning requirements.
You can give the seller money out of closing for services performed or items purchased. Just not related to the sell of the house.
[ Edited by EarnWhileYouLearn on Date 03/05/2004 ]
My understanding is that "CERTIFIED payoff funds" does not include wiring. You have to Fed Ex to their office.
Brenda
[ Edited by EarnWhileYouLearn on Date 03/05/2004 ]
Geesh, it would have been nice if the original post had stayed in place so those of us trying to learn would better understand what went wrong with this transaction.
Obviously there is a lot more to the SS process than I was aware of.
Barb