What To Do When The Bank Says "no"
I submitted an offer to a bank that was rejected. No counter offer was made. Of course, I am going to revise my numbers and resubmit, but I wanted to get input on any creative ideas or quotes for the second offer letter.
Then numbers are as follows:
BPO value: 218K
Loan principal balance: 144K
Payoff (w/ backpayments and prepayment penalties): 163K
Obviously, the bank feels like they are in a pretty secure position given the numbers. They are sitting firm at 163K. I would buy it for that except that there is a 36K second note on the property. My first offer netted them 135K with me paying all closing costs.
I was considering putting something in the next offer about the owner filing for bankruptcy. However, the owner already filed for bankruptcy about 9 months ago -- does anyone know if a person can legally file for bankruptcy 2 times that close together?
Any thoughts anyone has are welcome.
chris, that is because the lowest the bank will usually go is 80% of the BPO which in this case would be 174. try again with that number and more than likely it will be excepted. good luck, Ryan P.S. call the bank and tell that that you need to be there when the person doing the BPO shows up becasue there are problems in the house and you need to point them out. point out things that are wrong with the house and get the BPO lowered and then offer 80% of the BPO..Sorry if im giving away anybodys secrets. delete the post if needed.
[ Edited by I_Need_Help on Date 08/22/2004 ][ Edited by I_Need_Help on Date 08/22/2004 ]
I did meet the person doing the BPO. Unfortunately, this house is in PERFECT condition in every way. New paint, carpet, new sunroom, beautiful kitchen with custom cabnets, perfect lawn, etc.
Thanks for the reply.
-cd
well you should have knocked down the walls and dumped trash in the front lawn... lol[ Edited by I_Need_Help on Date 08/23/2004 ]
You need to work to short the 2nd mortgage...
hey Myfrogger? is it possble to short the two mortgages? One of them is prob. a HELOC. how can you short that. i heard that it would just get forclosed upon. no sure though..thanks...
Not every scenario indicates short sale as the best acquisition technique. There are several conditions that must be present to properly prequalify a short sale candidate for feasibility.
[addsig]
It is true that if the first mortgage holder forecloses the second mortgage will possibly walk away with nothing. This means that their modivation is high to settle for pennies on the dollar.
In my opinion 2nd mortgages are much, much easier to short.
You should be shorting the second. they are easy to work with and depending on their payoff, could take an extreme discount.
so my question is, can you short both of the mortgages? os do you short one and offer the other a small amount?
The answer is "yes", you can attempt to short both 1st and 2nd notes at the same time. The responses from the other posters here are indicating that the junior note holders have more incentive to negotiate than does the senior note.
I submitted short sale offers on both at the same time. Hindsight being 20 / 20, I would have offered even less for the 2nd mortgage.
I offered the 1st note holder $135K and the 2nd note holder $15K. The balance on the second was $36K. If I knew that the 1st was not going to play ball, I would have opened negotiations with the second at around 8K. I have not yet heard back from the 2nd mortgage company.
Rejection and not being called back is the norm. Squeaky wheel gets oiled first. Must have relentless follow up.
Work on the second mortgage first. Tell them the 1st has agreed to a short payoff subject to the second receiving no more than $3,000. (Even if that is not the case - just tell them that. It works)Tell the second if we can't come to an agmt, the first is going to foreclose and the owners have mentioned they will trash the place etc (a little white lie - but it scares them into doing something) and you (the second) most certainly will be wiped out. Once you get the second to agree to $3k payoff in writing - work on the first. You have a nice deal there if you short the second. I would just offer the first the principal balance and do the deal. That is a no brainer approval. Why haggle for $9k. With the 2nd taking $3k and first at $144k + closing - you're in the deal for $150k +/- A quick sale at $200k is a $50k deal.
Chris,
First, if I saw this deal, I might have worked more along the lines of paying off the first, and shorting the second, but that is hind sight. I am assuming that with a BPO of 218, that your FMV could be higher.
With regard to filing bankruptcy, that depends on what happened with the first bankruptcy. If the bankruptcy was a ch13, and the owner defaulted, then no, he cannot file for 180 days following the default. Other than that, he may be able to file again.
Without knowing all the details, I think I would be inclined to still work a short on the second with the argument that they will be wiped out if the first forecloses, and that if they don't short, you will not be able to complete the transaction, and get them some money. On the first, you started the short, and I would follow through, but based on FMV, I expect they don't have much incentive to do a drastic reduction. If it comes down to the wire, I would try to at least short the fees.
Finally, the rejection is nothing more than their opening negotiation position. I recently did a SS where the lender opened the same way. We ended up at 57% of the balance due.
Thanks to all for the feedback here. Here's how the deal worked out:
The 1st note holder would not discount, even by a little, based on the $218 BPO. They even wanted the prepayment penalty -- they would not budge, even 5 days prior to the auction.
Neither would the 2nd note holder budge. I was surprised, but they held their ground that there was $40 - 50K of equity in the house. The BPO mentioned "Pride of Ownership" and "Perfect Condition"... I believe they were planning to go to the auction to buy it.
I had title work done, and it turned out there were 2 judgements on the property -- one for $15K and another for $2K. Both were ex-business associates who had sued the owner. Neither was willing to accept a discounted payoff or release their leins. I must admit that I had never tried to negotiate to have lawsuit judgements released, so I was probably not as slick as I could have been, but thier position was basically "I don't care if you buy the house or not, I want my money, and I know his house is beautiful, and if there's equity there, I want it, and I don't care if it goes to the steps. Screw him." Hard to argue with someone who has no incentive to settle. -- Any suggestions from the gallery on how to work with such folks would be appreciated.
So I called the owner a few days before the auction and explained that no one was willing to negotiate and so I could not buy his house. I told him he might be able to find another investor to buy it, but not me.
As it turns out, he must have found someone, because it did not go to the steps -- the auction date was postponed until next month. I need to give the banks a call and find out what the status is...
It sounds like this guy could have ruffled a feather or two. I am very curious to find out what caused the postponement.
Can back and forth negotiations postpone the sale, i am in georgia and have worked my tail off trying to short sale several properties, and have had no luck, simply because the seller, waits till the last minute to call me, how do you post pone the sale,
Looking at the deal to start with, it should never have tried to short sell it in the first place. There seems like there was too much equity in the property to start with and no case to build against the lender and the homeowners distress.
If i may ask, if this is information you can disclose. Where did you find this lead from? Your own makerting?
Indirectly telling you homeowners to file for bankkruptcy , chp 13. they have 45 days before 431 hearing. At that hearing thay can extend another 45 days. in that time you can put the short sale together and the homeowners can use that sales contract once short sold to motion to dismiss . If and when accepted they will not have to go through bankruptcy. you get you sale and ev eryone is smiling
Yes, I found the lead from my own marketing: I send letters to folks in preforeclosure in my farm area.
The seller had already been through bankruptcy within the last year, so that was not an option for him.