Re: Don’t stop there . . . - Posted by JoeKaiser
Posted by JoeKaiser on March 22, 2002 at 01:11:13:
Okay . . . slowly . . .
HARD MONEY: Hard money lenders are the guys who advertise in the newspaper in the “money to loan” section of the classifieds. They advertise ?no qualifying? or ?equity? loans. Essentially, these are loans where the lender looks to the property for its security, not the borrower. The borrower?s credit or even his ability to repay is not a consideration.
It?s the property that matters and only the property.
That means that while they?ll loan to anyone, they?ll loan much less than a typical mortgage lender, usually only up to sixty five percent of the value of the property. The reason is simple, if the borrower doesn?t pay (which is not unusual), the lender must be able to fully recoup his investment from the property. By loaning no more than sixty-five cents on the dollar, that is almost assured.
Simply put, you can borrow $65k on a $100k property without a whole lot of effort if you know a decent hard money guy.
SHORT SALE: Many lenders, in special circumstances, will accept less than a full payoff and still consider their loan ?paid in full.? Foreclosure is THE special circumstance.
Foreclosures are ?problematic? for lenders. Distressed borrowers can sometimes drag things out with a bankruptcy (or two), refuse to vacate even after the foreclosure is completed, (?Now we have to evict them too?? Yes you do.) or even get mad and destroy the property on their way out the door. Once the disgruntled tenant is gone, they may now have to pay to get the property fixed up, and then there?s the not so small matter of getting the thing marketed, sold and off their books.
Simply put, lenders will sometimes take less for the ?sure thing? and be done with a problem loan than face the long drawn out, unpredictable and potentially costly foreclosure scenario.
Most lenders have a program to facilitate the this ?short sale? process.
Where to go from here?
Meet with the homeowners and tell them you?ll buy their house provided the lender will accept a reduced pay off or ?short sale.? Write your offer at sixty percent of the property?s value (you?ll need room for closing costs, that?s why you don?t offer the full sixty five percent).
Once accepted by the seller, obtain the lender?s ?short sale? package and assist the seller in completing it and getting it back to the lender. It?s something that needs to happen quickly because they often take a long time to decide, and the foreclosure clock keeps ticking all the while.
The homeowner rarely has a problem with this deal.
The lender, as you might imagine, will.
That?s why it often helps to include ugly photos and any other materials that will support the low offering price. You need photos, let me know . . . I?ve got plenty (yes, that?s a joke ;-).
When the dust settles, the lender will either accept or decline. Yes or no.
A ?yes? means you head on over to the hard money guy to arrange your loan, and then off to escrow to get the closing process started. A couple weeks later, you?re an owner with little or nothing out of pocket.
A ?no? means you go on to the next one with a little more knowledge under your belt.
Finally, it?s been awhile since I?ve put a ?short sale? together. Things change . . . you?ll need to poke around a bit to make sure you?re up to date with current info before proceeding. There are guys who do nothing but short sales, it couldn?t hurt to seek them out and run a question or two by them.