More on Discounting Banks. (longish) - Posted by karp

Posted by Jack on November 25, 1999 at 19:27:30:

Have you apologized to Jackie Lange for stealing her material yet?

I think it is a disgrace for everyone on this website to dismiss Jackie and to accept this thief.

More on Discounting Banks. (longish) - Posted by karp

Posted by karp on November 24, 1999 at 10:56:16:

Hi Folks,

Here are two interesting things I have discovered recently while doing my part in insuring that banks get less than what they are owed…

On a whim, I decided to switch gears with the way that I had been discounting banks. Usually my approach is to be on the same side as the lender and to be a problem solver. Well, I brought in a third party as the investor in the property that needed to be discounted. As we talked to the lender, I played good cop and the investor played bad cop. He would explain the only reason he would offer anything was simply to avoid the competition at the courthouse steps etc, etc…

I wanted to see if I would have any better success with this approach. Well, the lender sent me a simply fax that stated they would not discount and to consider the matter closed. In other words, I got shot down big time. My track record with banks is extremely good and this came as quite a blow.
Final Score: karp (0) bank (1)

In addition, I felt like an idiot. And I am not sure how I am going to save these people’s house etc. yuck.

SO if there is a good side to my attempt at playing hardball, it is that I have now had my previous approach 100% confirmed. It is this: WHEN DEALING WITH BANKS, YOU MUST PRESENT YOURSELF AS A PROBLEM SOLVER ON THEIR SIDE.

If you come off as representing the investor, you have drawn a line in the sand and the lender immediatly feels confronted to get the best deal.

Okay- on to the good news:

I called another lender yesterday and bought a 2nd trust deed with a face value of $26,948.41 for $4,000.00 dollars. I got a faxed assignment and wired funds. The whole deal took MAYBE 15 minutes. Here is why. I got to know him and what is needs were. We talked about the situation with the borrower and how to resolve it. He came out and said “We will not bid to protect our position.” I asked “Well, let’s just cut to the chase, what would make you happy to see this file gone right here, right now” He gave me a quote, I paid it. Sometimes it can be that simple.


Karl Hartley

He who cares least . . .WINS - Posted by Bob H

Posted by Bob H on November 26, 1999 at 04:11:10:

Your comments about being a “problem solver” are right on the mark. In my experience, I have found that banks often tend to treat investors and/or brokers who submit discounted offers in an adversarial manner. On some level, even though you are solving a problem for them, they still seem to resent the fact that you are going to profit from their bad loan. I’ve had more than one banker tell me he would rather write the loan off than take $XXX for it. Whenever I get that response, I know I’m dealing with someone who is making a personal, rather than a business decision. Clearly, our job is to diffuse that resentment, and keep them focused on the issue at hand - the benefits they are going to receive from the deal. Never, never let their problem (the bad loan) become your problem!

I’m a RE broker and I recently had a property u/c that required a short pay off on the 2nd TD. The lender’s “loss mitigation specialist” was hostile and uncooperative (read ignorant) and, after taking over 3 weeks for “review”, rejected our offer of net proceeds. She wanted to reduce the brokerage fee to 4%, wouldn’t pay for repairs, closing costs, etc. I called and thanked her for all of her hard work in trying to make it work, but unfortunately, due to the delay in getting an answer, and the bank’s unwillingness to pay for needed repairs, our deal was dead - the buyer was going to walk.

In the meantime, I had a partner of mine send the department manager an offer to buy their Note & TD for just under 1/3 of the amount of our offer.

Guess what? Within 24 hours, I got an approval letter on our original offer (7% commission, and all submitted expenses were just fine now) and could I please contact the buyer and see if they were still willing to close?

The moral here? Sometimes the easiest way to get a deal done is simply take it off the table.

Re: tell me more… - Posted by Todd (CO)

Posted by Todd (CO) on November 25, 1999 at 09:06:59:

I am very new to the Real Estate scene and I dont understand alot of your information. Could you possibly e-mail me with more info on your subject matter and briefly explain how you operate such projects…profitable?


Re: More on Discounting Banks. (longish) - Posted by Ed_IL

Posted by Ed_IL on November 24, 1999 at 14:51:43:

Would it be worth asking a lender that holds a 2nd of 15K on a 230k property to discount it? There’s a 1st for 169K and neither are behind yet but I’d like to satisfy the 2nd if I could get a discount on it. I thought that if I told the lender that the seller was in trouble and that I’m trying to help his situation out that maybe they would budge. Thanks for the post.

Amen! and a follow up. - Posted by karp

Posted by karp on November 26, 1999 at 11:13:38:

Was this purchase done as an assignment? Reason I ask is recently I did a deal with an assiignment and the lender who sold me the note later called me and asked me how the previous payor would be paying off the balance!

I think somebody in the LOSS MITIGATION department just got in big trouble…lol

Karl Hartley

203k fha loan insured? why discount? - Posted by leslie

Posted by leslie on November 26, 1999 at 02:54:14:

is there an incentive for a lender to discount on insured loans? i don’t know…i guess they are not insured 100%. you are going to have to show the lender there is some risk to them, is the seller really in trouble, can you prove it to them?

Re: More on Discounting Banks. (longish) - Posted by karp

Posted by karp on November 24, 1999 at 20:14:23:

Yes, it is almost always worth it. I mean, what is the worst they can say- “NO!”- right?

Here are your two difficulties.

  1. The CLTV is low enough thatthe second is not really in a bad position.

  2. The note is not in default yet so there is no real reason for the lender in 2nd position to believe that they won’t receive payments.

Having said that, I would certainly call and see what happens. You always miss 100% of the shots you don’t take, right?

Karl Hartley

HUD pre-foreclosure program - Posted by Bob H

Posted by Bob H on November 26, 1999 at 04:33:30:

FHA has a pre-foreclosure program that lenders can use to accept short sales. Lenders receive an incentive payment from HUD on completed transactions. The general critera is as follows:

loan must be at least 3 mos delinquent.

default must be due to hardship (medicial, loss of income, job transfer, etc.)

property must appraise at at least 70% of loan balance

sale must be “arms-lentgh”

Lender can approve offers that net 86% or more of as-is appraised value

Exceptions to the above can be made on a case by case basis.

Have the owner call the lender and request a short sale package - they will send you all the required forms.

Thanks again Karp, glad to see you’re back! (NT) - Posted by Ed_IL

Posted by Ed_IL on November 25, 1999 at 02:05:11: