If 1st lender won't budge, what's the point?
Okay, so if you have a house worth $100k, 1st mortgage is $98k and 2nd is $50k, and you can't get the 1st lender to budge, what's the point of trying to short sale?
Okay, so there's some people who say don't bother. But I had been cheered on by others who did say it was worth it. SOMEONE PLEASE TELL ME HOW THIS IS WORTH MY TIME IF 1ST LENDERS NEVER BUDGE ON THEIR LOAN VALUE? It in effect voids the entire theory of Short Sale technique!!!
There is something missing from this picture. I had thought that the whole object of a short sale with the 1st lender was to save them time, and save them money on the foreclosure proceedings, as well as get their investment pulled out instead of being tied into a vacant property for months.
If the 1st lender never negotiates or waivers, then you can't get anything done with the 2nd, and the whole deal is dead in the water.
Someone tell me I'm not CRAZY here....
Andrew
FMV = $100,000
1st = 98,000
2nd= 50,000
"SOMEONE PLEASE TELL ME HOW THIS IS WORTH MY TIME IF 1ST LENDERS NEVER BUDGE ON THEIR LOAN VALUE?"
I don't understand what you mean by loan value? The first mortgagee is concerned with the as-is, FMV of the property, irrespective of the remaining loan amount, and how best to maximime their recovery.
Their perception of the as-is, FMV is crucial. "Negotiation" is the sharing of information to acheive a desired result.
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Every situation doesn't indicate a short sale. There are soooo many variables to identify and consider before you spend the time and resources to prepare a comprehensive short sale proposal.
Too often people spend their energy trying to pound a square peg into a round hole.
In this scenario, I would want to ascertain the actual, as-is, FMV. Then, find out why the second made a loan based on their perceived value of at least $150,000 or more.
Somebody made a mistake. Exploit that mistake.
True, I agree that someone made a serious mistake. I'm not certain how to exploit that when the 1st mortgage is so near to FMV.
I'm afraid I didn't clarify the point of my original post. It keeps getting stated here in the forums that senior lenders want to get the maximum value out of their loan. Accordingly, if the house is worth more than or at least equal to the remaining loan amount, they won't negotiate because regardless of junior liens or other circumstance, they'll come out on top in a foreclosure proceeding.
As well, if a property is worth less than the loan amount, according to the idea that they won't budge, then you have even *less* of a chance of negotiation. You'd essentially be asking them to take an even bigger loss in order for an investor to squeeze in.
Therefore, what my question really boils down to, is this:
We have two theories in the art of short sale. One is that the senior lender will be willing to negotiate a reduced loan amount in order to facilitate a quick pull-out from the sour investment. The junior lien should, out of logic, follow with a reduced amount because if they don't, then likely they will receive little or no proceeds; particularly in a case where they have royally screwed up and loan far over market value.
The second theory is that the senior lender is out to get a maximum recovery. If there is equity or at least break-even value in the property, there is no need for them to work with a short sale proposal. If it's negative equity, they're doomed either way. The junior lien therefore doesn't matter because if you can't reduce the primary loan amount, the secondary is just more baggage. If there is no junior lien, it appears the best hope would be to nail a motivated lender for somewhere under FMV, or essentially pay retail.
So, the first theory seems the most workable, the second seems rather dismal. When I came upon this site in January, the former was the idea and philosophy that got me really jazzed and ready to take on this first project. It made sense.
Unfortunately, the latter also makes sense; but based on that line of thinking I don't see how a short sale could ever be possible or viable. Based on this experimental deal, this is becoming more apparent and my belief in the original idea is facing utter meltdown.
What I'm looking for is this: Is there some sort of mixture I can create by blending the two theories? One seems far too optimistic, the other makes the whole short sale process seem pointless and invalid. If the second theory can somehow be used to create an ideal short sale situation, what on earth would the figures be in order for that to occur?
The numbers I pose are exact with my deal; but they are fairly simple, standard figures in comparison to what is offered in the Articles on this site. Therefore, it should demonstrate a general sense of what an investor would deal with in terms of short saling. So far, as much as I would desperately love to do so, I can't quit my day job.
Andrew
P.S. I apologize for the philosophical rambling on my part; this is something I'm really trying to understand and get through my thick, gooey carmelized brain.