Also, do you have any idea what properties are going for at auction?
$169k/$220k = 77%
That’s getting pretty high up there. And the fees tacked onto the 1st are increasing daily. Let’s say the 1st settles out at $175k in the next few weeks before the auction. And, let’s say someone is willing to pay 85%.
$220k * 0.85 = $187k
$187k - $175k = $12k
Another $6k in fees is easy to come by. And 85% is stretching it for investors. Perhaps a newbie investor will pick it up, but that’s a gamble, not a calculated move. So ask the 2nd, are they willing to risk it for an extra $2k over your $10k offer? Show them as many numbers as you can to get them on your side. Low comps. High repairs. Low bidding. Extra fees. Etc.
In the end, if you can get the 1st down to $100k, it would probably still be a deal at $147k (depending on the repairs needed). So any discount you can get on the 2nd would be gravy. Even if you offered them $20k, which might sound a lot nicer to their ears. However, if the 1st doesn’t like seeing the 2nd get so much for their position, they may not deal. So you may have to deal with the 2nd outside of the property purchase (i.e. buy their note for $20k instead of putting it on the hud-1).
But then again, what if the 1st comes back and will only take $150k. Then it’s not a deal at $197k.
Play it by ear and make sure you are on top of the numbers. Let us know how it turns out please. Just post a reply here or post a new topic.
Short Sale - negotiation with 2nd mtg holder - Posted by Susan Kirby
Posted by Susan Kirby on April 18, 2006 at 15:48:46:
This is my first short sale and I am having difficulty with the 2nd mtg holder. The second mtg holder will not budge unless I send them a HUD-1. The person assigned to this is saying they want to know how much the first lender is going to get before they will submit our paperwork for approval. The first lender is still working on the paperwork, appraisal, etc., so we don’t know how much it is going to be. Does the 2nd really need that info??? He made the comment that they would not let the house go for less than they had it appraised for, they would foreclose themselves before letting that happen. The person assigned is not very cooperative at all, do you have any suggestions as to what to say to him?
One thing that I have used a number of times is this. I have the seccond Mortgage holder call the first and I let the first explain to the seccond why they should settle. It takes you out of the picture and it verifies with the seccond that what you have been telling them is true. (I would make sure it is ok with the first that the seccond call them and discuss the settlement)
Also make sure you know what the first is going to tell them before you set tis up. It has worked a number of times for me this year.
You do not say who the second mortgage holder is such as a mouse house lender, a private party, a seller carry-back, etc.
My experience with people like your second holder is they are wanting you to do the work with the first and then step in and take over to maximize what they can pull out of the deal by offering their own short sale or buying the first at the discount that seems to be available.
It is a good policy to get junior lien holders to commit before you bother with the senior lien holder. Take control by getting an option on the note for a few bucks from the junior holder and tell them thats how you work because it is useless for your to take all the time and trouble to negotiate with the senior lien holder until you know how you stand with all the junior liens on the property.
If this guy really means what he says by not letting the house go for less than it appraised for, then you are up a creek here. If they really think that, and the ratio of 1st:2nd is something typical like 80:20, then they are going down with the ship at the auction. (Unless they are referring to a 10 year old appraisal.)
We need to see some numbers on this deal, let us know what you have. If the numbers show very little equity, you need to educate the LM on why they’ll get some $ if they work with you but $0 if they go to the auction. Be nice, as always, but be frank.
sometimes the lenders are cooperative and sometimes they are not. those loss mit guys can sometimes be very difficult. Just continue to be very nice to them.
I’d wait to see what the 1st lender says sine they are in the drivers seat here. then go to the 2nd lender with their number.
The first mtg co is still working on their paperwork, we don’t have anything confirmed from them as yet. I should wait until the first is confirmed, correct?
An BPO was done by the 2nd a few weeks and he said it was in the 220K to 230K range. The first is presently at 169K and the 2nd is presently at 47K. We have made an offer to the first for 100K and to the 2nd for 10K. They are just the 1st offers. I am wondering if the 2nd is using a scare tactic.
I think you are right, it is a waiting game at this point, until the 1st is finished with their paperwork. The 2nd is asking for a completed HUD-1 and we don’t know how much the 1st is willing to take.