Owner Filed Bankruptcy- Could I Short Sale?
Need help on this please. Have never done a short sale and owner recently responded to letter I sent prior to court sale. She filed Bankruptcy and is scheduled to go to hearing late this month. The Facts:
House valued between 130,000-160,000
1st Mortgage Balance- 137,000 (FHA)
home in arrears- approx 14,000
Has a trust Deed. Home was placed in a trust with the advice of a relative and she claimed they attempted short sale and the bank had agreed to short for $127,000 back in October 03, but they could not find a buyer. (probably too many repairs for that price)
REPAIRS:
Don't have any formal estimates and have not seen property yet. scheduled to see today.
1) Homeowner mentioned front of home is built with synthetic stucco that creates moisture problem and is of poor quality and very thin.
2) Leaks from the front windows when it rains;
3) plumbing problem
4) Needs new carpet
5) needs new garage door, front door and I'm sure ithe list will get longer once I get there.
My question is, can I do a short sale in this situation(bankruptcy), and, is it worth it to pursue considering all the problems with the home. Since it's an FHA mortgage, would that make it difficult to get the bank to discount lower than 85 cents on the dollar?
I know this is long, but I would like some feedback for shortsalespro and others as to how you would tackle this one.
PS: Owner vacated property August last year . 
The FHA would consider a payoff of about 85% of the property's confirmed, as-is, value. Eligibility will be determined using the NET PROCEEDS, which must be 82% of the "as-is" appraised value. The ratio of the appraised value to outstanding
mortgage indebtedness must > 63%.
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Two items of concern: The mortgagors have vacated the property (standard FHA short sale criteria mandates owner occupancy), but you can get a waiver on that... and, of course, the bankruptcy. You'll need bankruptcy trustee approval.
This will be a good learning experience for you.
Are there any monies from the DRIVE-IT (blown stucco siding) manufacturer's insurance policy, or HOW policy that might be available?
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Short Sale Practitioners can't predict, or guarantee results... but can take steps to insure the likelihood for success....[ Edited by TheShortSalePro on Date 05/06/2004 ]
Shortsalepro,
Thanks for the enlightening information. I don't have much information from the owner yet, she's moving very slowly on this. I received a signed LOA from her about 15 minutes ago. I will post when I'm further along in the process.
A good idea would be to have a contractor give you estimates on the repairs before the bank's appraiser shows up. Then hand the appraiser a copy of the estimates.
Depending on the size of the house you can figure $10 - $20K to put new vinyl siding over the stucco, maybe $1500 for the doors, $3000 for carpet. Do the math and decide if you still have a good deal before you spend a lot of time on it. Also, how's your local sales market? It's a buyers market in my area -- make sure you don't over estimate the true after repair value.