short sale
I'm new at the short sale thing so I need a little help with this situation.
Owner called me on wednesday with a house that goes to foreclosure next tuesday 6/3. They owe $94,240 on the first and $10,450 on the second and it's an FHA loan. I talked to the loss mitigation dept of Household Finance (the first) this morning, he said that they wouldn't stop or postpone the foreclosure unless the arrears were brought current ($9,400) then he would do a short sale. House ARV is $108,000 and needs nothing, it's in great shape. House could be made to look like it's needs a lot of repairs so the BPO would come in around $80-$90K which would put the short sale price around the $70's, discount the second down to at most $1k and you have built in equity. I would like to buy this property, but I don't have the funds to bring it current by this monday, what can I do? Thanks
If the 1st is an FHA loan, then you have to keep in consideration that they have an 82% rule. That means that since FHA loans are backed by the government, then they are guaranteed 82% of the "as-is" value by HUD. So you may only get away with short selling for 82% of the market value. You may also want to read this post called I Got Too Greedy -- Can This Deal be Saved???.
Tanya
Ok, so does it still make sense to bring it current so that a SS can be worked out or do I just let it go?
You don't bring a mortgage current to short sale...the home has to be in foreclosure for the lender to consider a short sale. Remember, HUD guarantees 82% of the "as-is" market value. So if you can convince them the home is worth less than it really is, then it might work to your benefit. But, as is stated in the I Got Too Greedy -- Can This Deal be Saved??? post:
they couldn't do a SS because FHA rules say that:
a) They can go down to 82% of as-is appraised value, BUT
b) The appraisal must be not less than 60% of the current mortgage balance ( I didn't know this rule or I would have made a higher offer)
So if the appraised value fits the 60% criteria, then you are safe to do the short sale. I say go for it. It can't hurt to try and see what happens.
Tanya