How To Do A "quick" Short Sale
Please help with any ideas,
I have never done a short sale or any real estate investment except for a couple rentals. Sorry this is so long.
I live in a small town (approximately 10,000 population ) in southeast Colorado. I saw a foreclosure notice in the local paper about 8 months ago that got my attention because of the size and location. I arranged for financing and planned to be at the auction but it was postponed several times, then was cancelled. I talked with the owner a few times about making a deal and have gotten nowhere because he wanted too much. But he just told me that the house will be going to foreclosure again soon because he can’t meet the payments. My particular “problem” is that I have all that money still borrowed and paying interest on so I would like to know if there is a quick way to short sale his first and second mortgages so I can pay the money on the house, get the deal done and have the house remodeled so we can move in before winter? I want to get all construction done, then refinance to pay back all the small loans and the original purchase.
To get the cooperation of the seller for his loan information I need to help him. How do I get assurance from the lenders that they won’t file deficiency judgments on him for any short sale loss. If the property goes through foreclosure will they still file on him for deficiency judgments? If the appraisal for the property is more than the 1st mortgage is there any point in even talking to them about a short sale? At the very least, can the seller just tell them to go ahead and begin the foreclosure process now instead of later?
I think they paid $107,000 for it in 1998 and the 1st is around $84,000 and the 2nd is around $45,000. Would I be wasting my time trying to get the 1st to discount and trying to get the 2nd to walk away for, say $10,000?
Apparantly they thought the home would appraise at $150,000 but it came in at $103,000.
The house needs quite a bit of work to include a lot of painting inside and out, carpeting, eve work, electrical upgrade and sewer line upgrade. There are at least a couple rooms that have no heat/cooling vents. The bathrooms need a lots of work and the deck and the kitchen needs work. If I send pictures of problems and a copy of the appraisal with statements about his hardships, won’t that nudge the lender to make deeper discounts?
I will appreciate any information you can provide.
[ Edited by bergvw on Date 03/25/2004 ]
[ Edited by bergvw on Date 04/03/2004 ][ Edited by bergvw on Date 04/03/2004 ]
I'd guess you're overvaluing the second. Think about it the other way - how much would you pay for the second right now? If they're behind on the first, the place is only worth $103k, and the first is for something like $88k now (which is probably low if they're in foreclosure), there's not a lot of equity behind that 2nd:
Selling price: $103k
Cost to sell (commission, excise tax, fees, etc): $10k
Remaining equity: $5k
And I'd guess that there's also outstanding taxes, utilities, etc that take that $5k down even more.
A grand or two would probably be on the generous side for the loan - I suspect they'd take $10k instantly.
I doubt the first would budge too much, if at all, but I'd agree (with JamesPB) that the second would be motivated to discount.
Why not try to purchase the second via an assignment....
A quick short sale = a complete application and compelling proposal
[addsig]
ShortSalePro,
Do I get the application from his lender?
Thanks for the help.
The application will have to come from his lender. You can anticipate the application and begin by gathering tax returns, bank statements, comparable market data, etc.
[addsig]
I would like to begin reading up on how to do short sales. Can anyone recommend any particular books Audio/visual learning materials.?
I would greatly appreciate it.
Bergvw,
If you already have money in hand, why not just look for a better deal that will yield you a better return? My guess is that you could find a truly motivated seller or regular sale and not have to put down so much money.
Seems like you're spending a lot of time on a marginal deal? Just an observation.
Chris
Some will, some won't. So what? Some will, some won't.
Do not chase borderline deals. Move on . This is a numbers game.
Even as a newbie, sounds to me like you are getting emotionally involved with the deal, and it is clouding your judgement. i.e. planning to move in yourself. Even if your strategy is to take occupancy and rehab before you flip the property, I dont see how there is any [worthwhile] profit in this deal. Especially if you are sticking your neck on the line financially as much as you are. But hey, what do I know, I'm just a newbie?
Thank you too everyone who responded.
About the low profit, emotionally involved, etc., I guess I didn’t make everything real clear because my post was extremely long already. In this small town there is not much available like we are looking for to make into our retirement home.
From the time it was first listed as a foreclosure our only intent was to buy it for our own use. It is almost an acre and the house is in the city limits so we won’t have to deal with septic system size restrictions when we add another bathroom. It is 2800 sq. ft. and has a 30X50 shop giving us space for our life long collections and plenty of room for family get-togethers with children and 9 grandkids.
It was my understanding that the owner had filed bankruptcy on two judgments against the property and I wanted to short sale the property after those judgments were removed.
YESTERDAY they told me they have filed bankruptcy on EVERYTHING. So now I don’t have any idea what I need to do to get the property.
Thanks
[ Edited by bergvw on Date 03/27/2004 ][ Edited by bergvw on Date 04/03/2004 ]
Well then, that makes a lot of sense then! Hope everything works out for you buddy!
Actually the bankruptcy is good news. You want to call the attny thats representing the first mortgage holder in the foreclosure. Tell him you want to buy the note at a discount and step into the banks shoes on the foreclosure. At least imply that you want to continue to retain his firm to handle the foreclosure for you. Get him to go to his client and get a number at which they will sell. Do not make an offer. Express interest. Ask for a price. You are, as I understand, ready to pay 100 cents per dollar. My guess is the bank will request considerably less than that. Believe me, the bank is more frustrated with these delays than you are, they are ready to get rid of this headache.