Short Sale Assistance Needed
I just got off the phone with a gentlemen whose home is in foreclosure. The sales date is FEBRUARY 23. The property is currently worth about $118,000 as is. The owner has a $88,000 first mortgage(FHA) and a $35,000 second. The second is the one foreclosing. The owner declared bankruptcy last year(one year ago) and home is just being sold now. Is there anything that I can do with such short notice? Thanks in advance for your guidance.
When working on potential shorts that involve both an FHA insured first, and a substantial second... there are a couple of scenarios you could consider.
Since FHA short sale criteria prohibits junior lienholders from getting more than chump change... it's possible to purchase the junior (at a discount) via an assignment for cash. Then, YOU become the junior lienholder and can agree to accept the chump change in addition to the FHA approved short.
However, in your case, since the property has an as-is FMV of $118,000, the FHA wouldn't consider a shortsale... since their payoff now stands at $88K and would not meet their criteria for short.
If you are intent on a short sale acquisition, you should focus your energy on the foreclosing junior.
Your proposal should be factual, and compelling to make them agree that accepting your Proposal is in their best, financial interest.
Work hard to denigrate their perception of value..... and your Proposal will be given consideration.[ Edited by TheShortSalePro on Date 02/11/2004 ]
Assuming that all you have is these two liens totaling $123k, make offer on property contingent to 2nd lienholder approval of a short. Since you write that the 2nd is foreclosing, I assume that they believe that they are secure in getting a good price at this foreclosure sale. You may need to get the 2nd lienholder to reevaluate the property, and you should take pictures and point out any deficiencies the property may have, once they have a lower valuation they will be more inclined to take a short on their 2nd. Present a net sheet to the lender to show what amount they will net by approving your short. As far as the 1st, just ask for the payoff.
SSP,
Are you suggesting to have the 2nd assign the lien to the buyer, instead of just paying the 2nd off because the 2nd may not discount to the FHA requirements??
Thanks
Bginvestor
Yep. Since FHA allows only $1000 for junior payouts on FHA shorts, sometimes it makes sense (or the juniors demand) more. So, to save the deal, the Buyer purchases the second at whatever discount he/she can negotiate.
Then, the Buyer becomes junior mortgagee and can agree to accept the $1,000 as payoff in an FHA short.
So, instead of walking from the deal because the junior refuses to accept $1,000, you can salvage the deal.
Thanks for all the guidance. I have learned about things that I was not aware of. Best of luck to all.[ Edited by JustOneDeal on Date 02/11/2004 ]
Awesome! Thanks SSP.