Is this a legit short sale opportunity?

Question

Hi -

Weird situation I wanted to ask BP about.

Got a call from a mailer and here are the details:

1. Call was from the daughter of the owner who is now deceased. She is interested in selling the property.

2. There used to be a house on this property which the family tore down. I have no idea why.

3. There was HELOC made by a local bank for 130k on this property. I think the balance is for more than what the land is worth.

4. The original owner has not been paying the loan for some time (I think 2 years) and they have gotten a notice of default and foreclosure. However the lender has not actually foreclosed.

I think they haven’t foreclosed because there is no foreclosure deed recorded and the owner in CRS is the original owner.

The bank obviously is going to lose a lot of money on this now that the structure is gone.

Does anyone have any advice on how to get the bank to engage in potentially doing a short sale? My thoughts were try to get the property under contract for a low amount of money and then call the bank to see if they will negotiate?

Thanks for any and all advice!

Lynnette E. · Answer

You might want to look up the building department and see if the family removed the house or if the city/county condemned it and removed it.

It seems strange that there was not insurance as that is usually required when there is a loan.  And the insurance money is often held by the insurance company until there is a rebuild contract.  The check is issued jointly to the owner and the lending entity.  The lending agency may have that insurance check so the short sale would not be 'short'.

Also if the property was condemned and the city/county removed the house there could be a large bill waiting.

Jason Norton · Answer

@Hobart King

pimortgages.com

Brent Coombs · Answer

@Hobart King, I'm guessing your bid would be (a lot) lower than current market value?  In which case, I don't see why the Lender would countenance giving your bid the time of day.

ie. I agree with your assessment: "hosed".  But, good luck anyway - no harm in asking.  Cheers...

Hobart King · Answer

@Brett Goldsmith

This is great TY!

Hobart King · Answer

@John Ringgold

This is great advice. Unfortunately, gut feeling says that the deceased owners estate has not been through probate. I think we are hosed here. Any suggestions?

Brett Goldsmith · Answer

@Hobart King You need to be authorized by the borrower or the executor of the estate. Typically you can't do a short sale with an heir unless if they went through probate or if there was a trust in place as they don't have authority over the loan. Having an interest in title and authority over the loan are two separate things.

John Ringgold · Answer

@Hobart King typically all you will need to talk to the lender is a "3rd Party Authorization".  It is simply a letter from the current seller (probably need to include the death certificate as well) explaining that she is the executor of the estate and that her mother, the mortgage holder, is deceased.  She then will note the mortgage loan number and notes that that she gives you permission to talk to the bank about the any and all details of the loan.

You will then call the bank and ask for the Loss Mitigation Department.  Let them know you have a 3rd party agreement and ask them if you can email or fax the form in so you can discuss the loan and the options for a short sale.  Once you send it in, it may be a week before it actually gets filed into the system.  Then you can call the Loss Mitigation Department back and ask to apply for a short sale.  Hopefully by this time they have the authorization form in the system so they can give you direction on their process to complete a short sale.

My tips, call the bank every week.  Most won't follow up with you, you have to be the aggressor.

Also, there will be a time when you call them and although you've talked to them 10 times about the file and the process, they will tell you they aren't seeing a 3rd Party Authorization form on file for you.  Make a note of the date you send it in.  It always seems that when I tell the specifically when I sent it in, they magically find it.

Good luck!

Darius Ogloza · Answer

I doubt the lender will talk to you if you only have a bare contractual right to purchase.  I believe they will demand to see a deed.  No experience behind this, just gut.

Hobart King · Answer

@Brett Goldsmith

Brett one more question. I deal all the time with heirs where the original owner has died and there is no will. I am assuming that is the case here. Do you know the best way to proceed in this situation? I know as part of intestate succession in Alabama her kids inherit everything as she was not married.

Hobart King · Answer

@Jason Norton

Should I attempt to get it under contract first? Will the lender talk to me if it’s not under contract?