Short Sale Questions
Being new to this, I am trying to figure how to proceed. Facts first:
fmv guessing 110k to 120k
morgtage balance 207K (yes, you read that right)
sellers did chap 13 1 year ago
mortgage company is Washington Mutual I think
just had payment bounce
not behind in anything they say other than this one payment bouncing
realize they are stuck, want to walk, are looking at rentals in area
with payments at 1900 they cant do it anymore
income last year 38000, wife has MS, lots of medical expenses, good case for hardship,
house in great shape, and bascially just needs paint and carpet, hardboard for siding.
So, maybe not technically behind yet, but will be. I am wondering about having them move out and getting rental, or do they sit and let some payments go unpaid then get rental, or call bank now and tell them they are about to have a bad loan (of course, it is bad already). Also, concerned about sellers, since they did chap 13, 3 months after refi, but sure that was addressed by bk attorney. Thinking about how forgiveness of debt issues will effect them and such. Do I deal with trustee in this? Do I get some kind of contract now or wait closer to when they move out? Thanks for any answers.
Double check the payoff, and your estimate of FMV. If the Seller in BNK, proceedings more difficult. Until the BNK is dismissed and the mortgagee seeks lifting of the automatic stay, they probably won't communicate with you easily, or at all.
The issue of debt forgiveness and exposure to a liability to pay income tax may be a nonissue if the Seller was insolvent at the time the debt was forgiven. A CPA who doesn't mind working with the financially disadvantaged should be able to help.
Well, I am finding out maybe to stay away from those in bankruptcy. I thought the trustee would be one to allow or not allow a sale, but they said the lawyer for sellers needed to get permission from the court for them. I told the sellers there may issues with them saving $900 a month if house was sold (looking at that much in savings to go rent). But if they walked and filed Chap 7, and wiped out everything maybe they would be okay? If they filed chap 7 then bank might be more willing to deal on short? I know that bk lawyers push 13 because they make much more money with them but seems sellers should go 7.
One more thing if I may. These sellers would just give me the house for free, well, they know with negative equity they wouldn't get anything, so not on this deal, but in general would I get a contract for some amount and go talk to lender and modify later to the amount bank agrees to or?
If your figures are correct then something definitely is wrong here. I would start with the appraisal and see where it leads. I can see an over appraisal but thats a bit excessive. Unless hes paying some astronomical interest rat.Your talking a huge difference in the amounts.
Benny
[addsig]
Figures are correct. I didn't bother asking about the interest rate because I didn't think it would matter, I guess except to know why the high balance. I just think it is fraud on the lenders part. I can't imagine someone lending that much when their credit was kinda shot anyway and not taking home much money. I am going to see if they have the appraisal used because that would give some clues. I wonder what the lender will say when they find out the house might be barely worth half the balance. Who would think this stuff is out there.
Property is coined over-encumbered. The atty handing BK can remove property out of BK by exclusion. Dont leave it to lender to lift. Lender may sell short if you can prove the comps and depending on BPO. Im sure at this point they realized they loaned more than property is worth. Show a good reason for a reduction. AKA the BK, priced higher than FMV etc. Buyers can stay in house until lender decides what they want to do
in addition, house does have to be in foreclosure to work a S/S. In the bk plan, arent the payments being taken out by the BK trustee? IF a chap 13 they will repay if a 7 then lender may proceed with lift of stay. You can try discounting the note. if you can get note discounted you can service the loan and if the homeowners miss payments you can get a deed in lieu of, not foreclose and just have the homewoners become renters.
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in addition, house does have to be in foreclosure to work a S/S.
It DOES have to be in foreclosure to do a ss or does not? I thought it didn't matter.
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In the bk plan, arent the payments being taken out by the BK trustee? IF a chap 13 they will repay if a 7 then lender may proceed with lift of stay.
They are making payments of like $250 a month to the trustee and making their $1,900 payment to the lender separately. My understanding is that when the trustee said lawyer needed to ask court that the implication is that 1st, they would have $1,900 going somewhere if not the house, and 2nd, that they weren't making money on the deal. I was wondering at what point should I get a contract signed with the sellers. They will sign anything right now so, I could get one contingent on the lender accepting less than balance of mortgage.
Discounting note might be an option, but the sellers want out because of the wif'es MS and the stairs in this house. They need to get out not matter what. The only concerns is the effects on their postion in bk, and if they should go to chap 7.