Shortsale pro- You're scaring me w/ your comments
Shortsale pro--
I read in one of your posts that you mentioned "know what you are doing to avoid booby-traps." I'm in a new situation and am curious if I'm tripping any of those wires.
As brief as I can be last week I completed my first short sale with a conventional loan. It was a very simple situation--seller just wanted out and was behind on payments. No liens, 2nd or 3rd mortg.--nothing. Very simple.
In the past I tried one FHA short sale with no success and decided they were too much hassle and I'd place my focus on conventionals. Well guess what, got a call from some sellers just wanting out with no liens, etc (so they say). They have filed bankrupcy to delay the foreclosure. I understand the stay will need to be lifted for the short to go through.
Anyway, I called the lender today and laid it on the line. Told them that I really have no interest in FHA shorts due to all the formalities, etc. Told them if they would take 82% of appraised value then I would proceed. Otherwise, I'm passing. He said 82% would work if the sellers complete the FHA package, etc. Also, he said them receiving 82% would release the deficiency.
Since I haven't done any shorts with FHA/Fannie Mae/bankrupcy are there any serious booby traps I could trigger. I feel I have a pretty good understanding of the whole process but my glasses might be too dirty to see the light. 
Thanks for your support for the newer investors--Jim
As you know, FHA preforeclosure/shorts must meet several criteria.
The ratios (82% / 63%) must both be satisfied. The property must be owner occupied (also means that the mortgagor can't have transferred title), and the mortgagor must have experienced an involuntary hardship that prevents repayment of the loan. Maximum payoff restrictions to junior lienholders kill many FHA PFSS.
Seems like you are on your way to a successful FHA short. Congrats.
I am recently in the processs of getting a fha shortsale approved. My appraisal came in at 79,000. The lender told my realtor that I could purchase the property for 78% of the appraisal value for an fha. I offered 70,000 dollars. Theirs a junior lien for $3135, a realtor fee of 4200 dollars and a closing fee of about 2000 I don't know how much closing will be but I estimate around $2000 for all the recording fees etc plus the title company fees. Also I am doing a double escrow closing. A first for me, but should go over smooth if the numbers work out right. And I must admit the formalities associated witht his tranasction were a pain in the neck. I sign the contract in February, sent in the package on march 27th but I didn't get approval on until june 8th. I signed a contract with my buyer on April 30th for 92,000 the property next door just sold for $129,000 and its June 5 today. In the future I will try to stay away from FHA's but it was a enlightening experience. ANd all parties are happy. Anybody have any success with fha's and double closings.
"My appraisal came in at 79,000"
That's nice. What did their appraisal indicate to be the as-is, FMV? They will want to net no less than 82% of the as-is, fair market value. Juniors are usually permitted a maximum payoff of $1,000.
Realtor's fees are usually shaved a bit.
If the payoff to the second becomes a problem, just buy it for face value (cash, via an assignment) and then you, as 2nd mortgagee, can get $1,000 back at closing.
Shortsalepro--
Thanks for the response. I have to admit FHA isn't overly exciting to me due to the formalities but since I'm "a little" more educated I thought I'd give it another shot.
Thanks again--Jim
Hello S S PRO
In your post you say'"and then you as 2nd mortagee, can get a $1,000 backat closing." Where does this $1,000 come from? Regards
In an FHA insured mortgagee approved preforeclosure/short sale, there is usually (never say never) a maximum $1000 payment to a junior mortgagee. As second mortgagee, you would be entitled to $1,000 from proceeds.
The HUD1 would simply indicate the 2nd mortgage with a balance of $3500(?) accepting a settlement of $1,000. The settlement agent would disburse the amount to the junior lienholder at closing.
Still unclear. Who paid the $1000? tomjerry, FHA, the 1st lender, WHO? Thanks
Whomever bought the house from the seller.
Tom