Posted by Bill K. (AZ) on May 28, 1999 at 20:56:42:
NJDave,
Excellent advice, and congratulations are in order for your deals.
About a week ago, Joe Kaiser alerted me to the fact that I should be dealing with the lender personally. However, in this case, the seller had already contacted the lender. So, if I don’t get this deal closed, I will have learned a valuable lesson about taking care of my own business.
Part of my hesitation was my lack of experience in negotiating a discount. In fact, I’ve NEVER negotiated a discount before. So, I thought that it would be better for the seller to get an earful instead of me.
If I don’t get this sale, it will be totally due to my lack of being hungry for the sale. It won’t happen again.
I’m getting more and more confident in my abilities with each passing day.
Hey all!!! Thanks for the great information thus far, but I need to pick your brain again…
I know finding the balance of a sellers loan is a key piece of information. But is this the “rock bottom” point for an offer? Have there been many sellers who accept offers for less than the balance of their mortgage loan? I appreciate any advice you might have!!!
My Second “Potential” Deal is This Transaction - Posted by Bill K. (AZ)
Posted by Bill K. (AZ) on May 28, 1999 at 16:56:32:
Emmett,
My seller owes $120,000. Property is worth $113,000. I offered $84,000 contingent upon the lender accepting a “short sale” or deficiency. The seller is currently talking with the lender to work out the details, ie: pay the $36,000 deficiency over time (but, release the lien on the property at my closing), or walk away and accept the “short sale”.
Also, I informed my seller that a “short sale” might subject them to tax ramifications due to loan relief. They signed a paragraph stating that I informed them of this, and that I recommend they seek competent legal and financial advice in order to fully understand their position.
I’m awaiting word from the lender. But, they are willing to talk.
The Seller may agree to accept less than is necessary to satisfy an existing mortgage loan, BUT the Seller would have to bring cash to the closing table to make up the difference, OR the Seller would seek short sale approval from their mortgagee… the Contract For Sale should specifically state that the sale is subject to lienholders’ approval.
We recently found a seller that sold to us for less than owed. Their reasoning was the rehab from past tenants costs them more than the loss of principal.
Pat
If you, as an investor, want this deal to proceed, you can’t assume that the Sellers will be able to successfully negotiate the terms you seek. You must take a proactive approach.
Last month, I completed two short sales: (1) $140,000 mortgage was reduced to $50,000, and (2) $160,000 was reduced to $82,000. NOT typical, but possible. Takes a lot of work. I assigned my approved short sale contracts to investors who completed the deals…
Depending upon the mortgagee, short sale approvals can take from 45 to 60 days, or more if the loans are sold during negotiations.