I really doubt he’ll cancel the contract with the realtor though. I’d still like to try a short sale though. In order to get him to play ball and still protect myself I’m thinking I could present an offer to the realtor labeled ‘payoff’ contingent on reduced mortgage amount as you suggested. Can I get paid for my efforts negotiating? To get paid for my time I could add another clause saying in the event the seller accepts another offer I will get paid $500 if it sells within a month, $1000 is it sells within 2 months.
The hardship may be tough to prove, this guy’s house is mint. Nothing wrong with it. The hardship he experieces is that he has an expensive 2nd house that he is living in, holding costs on the first home, 4 kids, legal bills, etc. The first mortgage is well below his asking price, it’s the 2nd and the third that puts him upside down. Is that really the kind of hardship a lender is sensitive to? Could this be the kind of situation where foreclosure is the only way out?
I’m working with a homeowner who is 2 payments behind and willing to let the house go to sale. He’s in it for too much and has a 5-yr history of hardship to prove it. There was a partner and a lawsuit, etc. The house is currently listed with a realtor. It hasn’t sold because it’s priced too high. The realtor knows it and so does the homwoner but he’d rather lose it to forclosure than sell it for less than what he owes. His immediate need is to get rid of the monthly payments. Between his 2 mortgages and holding costs (house is vacant) he just can’t afford it and would be tickeled pink to walk away with even 5k.
IS a short sale the the best way to handle this? Can I get his mortgage info and talk to the lender even though the house is listed? He won’t ask for the listing to be withdrawn unless I can guarantee a sale in writing. Of course I cannot guarantee anything.
I think he owns too much for sub2? I wouldn’t mind doing a long term equity split of some sort.
This Seller Needs a Reality Check… - Posted by Randy (SD)
Posted by Randy (SD) on March 21, 2006 at 12:54:02:
“Subject to” won’t work, if the Realtor can’t sell it with the amount of existing debt you probably won’t either.
“Short sale” will be difficult unless you defraud the lenders, no lender accepting a short sale will allow the seller to receive any proceeds from the sale. You could “disguise” his $5 K. as payment for personal property, but I wouldn’t do that until you have sold the property. So the guy is in foreclosure, he won’t accept less than what he owes, he wants a guaranteed AND he wants $5000 profit, my response would be to submit an offer through the Realtor “conditional on the lenders accepting $X (short sale)” work the short sale and use the Realtor as an ally (most short sales require it be listed with a Realtor anyway, don’t try to cut him/her out their commission comes out of the lenders proceeds anyway REMEMBER the seller is not getting anything) if your seller doesn’t want to play… NEXT.
I absolutely would not consider a long-term equity split! You have no equity to split, he’s already upside down.
Exactly. This guy is already upside down, he owes more than it’s worth. He is in no position to be negotiating anything. He needs to understand that he is in the hole big time, and he is at the mercy of everyone else. All you need to say is, do you want my help or not? He won’t be walking away with anything except an unscathed credit report. And MAYBE $500 under the table for his cooperation (buy a piece of junk from the guy for $500 that is worth $0.50).
Attack this like a regular short sale, do not sub2 it.
I was unsure about the realtor’s involvement but now it makes sense why they need to stay involved. Should I make an offer low enough so it will sell within say 30 days or just lowball it at 80 cents on the dollar based on the appraisal/comps (minus holding/selling costs of course)?
Just talk to him and tell him there’s no way he will sell for what he owes right now, and that what he owes is growing by the month. He only has two options: dip into his savings to make up the difference between what it is worth and what he can sell for, or work with you on a short sale. Let him know that he won’t get anything from the sale of the house. If he gets an attitude and asks why he should work with you then (despite saving his credit), tell him you’ll buy a lawn chair from him for $500 if it all works out. But that it is illegal for you to give him money from the sale in a short sale situation. If you can, get the realtor to release him from the listing agreement since a short sale is the only option and requires a lot of work on your part. Then after the release, submit an offer directly to the owner with the price written as “PAYOFF”, with contingencies citing the lender taking a reduced payoff that is accetable to the buyer (you). Once you get all that in place, start talking to the lender (after getting a letter of authorization from the seller to talk to the lender). The key here is to influence the BPO (broker price opinion) … the bank will send someone out to appraise the house. You need to point out every little flaw in the house so that you can justify lowering your price. The BPO is all the lender has to work with, and you don’t want to be arguing the BPO after the fact. There’s a couple other pieces of paperwork that go along with a short sale (hardship letter, etc) but try to see if the lender has a standard package they use. Then, make an offer for a reduced payoff that works for you. House worth $200k ARV, needs $10k in repairs? Then make an offer for $130k. Only do the deal if the numbers work for you, otherwise walk away.