Short Sale Accomplished- Anything Else To Consider?
I arranged a short sale for a client. Here are the particulars:
1. 1st lien holder agreed to short sale with only $1000 going to 2nd.
2. 2nd lien holder is owed $3500 and refuses to settle for $1000
3. Client is prepared to pay 2nd off with loan from friends/family.
4. 1st lien holder's approval letter has this terminology:
- abc mortgage will file a "satifaction of debt"
- abc mortgage will report to credit bureau that Account is Settled.
Questions:
---Is wording in #4 sufficient for client to not have to worry about a deficiency judgement being filed against them? I called the 1st lien holder and asked them to provide a letter stating that the account balance would be 0 and the lien would be released, and they told me that what I've been given is all that they ever give out.
---at this juncture, are the foreclosing attorneys out of the picture? This property was originally scheduled for auction on Sept 1, but was postponed for 30 days. Closing for the new buyer is scheduled for Oct 4. Since I was advised by the 1st lien holder that the attorneys work for them, I assume that no further action will be done by the attorneys i.e. rescheduling auction, seeking fees from client, etc. Am I correct in my assumption? I cannot get anyone to "write" anything down to this effect.
Can you tell I've never done a short sale before? (and probably won't do another -- oh the headache, the paper, the phone calls). I just want to make sure that nothing comes back to bite me or my client in the rear.
Normally, I am in email contact, so I just shoot them an email that says, "I just want to confirm that you will not be pursuing a deficiency judgement." Their response is then in writing, and it goes in my file. I have yet to have a Loss Mit Rep send that statement in the SS Approval Letter. Item 4 looks like it at least implies there will be no deficeincy judgement, and is probably enough, but to be sure, you may want to get a legal opinion. Since settlement is after the next sale date, you will want them to either cancel or postpone the sale. They will probably postpone the sale instead of cancelling.
Thanks bnorton.
update: the auction has been postponed to allow this sale to close. Now, the buyer's agent is telling me that his client's lender is not responding appropriately. My seller has made a lot of concessions, primarily because good offers were not forthcoming on this property. The buyer is going FHA and the appraisal hasn't even been ordered. The title companies have the paperwork, the regular buyer inspection is scheduled, but again, there's the lender -- a prominent community bank -- whose underwriter has been on vacation and no paperwork has been generated. My clients know that this whole thing is iffy. We're just hoping that it closes. If not, then my clients know that's the way the cookie crumbles. I've put a ton of work into this. I won't do it again - unless it's for my own investment portfolio. The only reason I did it at all is because these clients were referred to me by a person who sends me business on a regular basis.
I'm mildly surprised that the short sale was approved without a Purchaser preapproval....
The FHA appraisal might indicate needed repairs... most short sale approvals are subject to the property being sold in it's as-is condition....with no Seller credits allowed.
[addsig]
I agree with SSPro. I am assuming that you are doing a double close to get this to your buyer, and the SS was approved based on your ability to buy. Can you go into more detail about how the back end of this is structured? SSPro has more experience than I do, but I have never sold to an FHA buyer. All of my buyers, when I do a SS, are other investors. The only way I can see that I would sell to an FHA buyer is if I rehab it and sell retail, and even then I would prefer conventional financing.