My apology, I am not sure who I am replying to on this thread but for the past 15 years full time I have always funded my short sale purchases with a private lender.
You ALWAYS submit your short sale offer to the bank as Cash AS IS but you can always in most all cities come to closing with someone else’s cash. So that can be a private lender , a Hard Money Lender , heloc , doesn’t have to be your money but it must be there on the closing date so usually a traditional bank loan yes takes longer than the 30 day Approval letter will allow.
Thank you all for your advice.
Newest update is that the buyer is threatening to sue and place a lien on the property. They are insisting we sell and be out within 24 hours.
I don’t know what threaten means. They either sue you or they don’t. The contract comes to the closing date and it passes then there is no more contract. Also you can’t squeeze blood out of a rock or water or whatever it is you squeeze. I suggest that you get a written statement that says you do not have the cash for the funds to be able to close, and that you’re going to proceed with a short sale and you’d like to offer them the opportunity to be the buyer for that otherwise you’ll find another buyer.
This is not legal advice. This is just me reacting to what they’re doing.
I handle a ton of sales with HUD partial claims. Over the last 4 years they have been giving out these claims like candy to make their Covid workouts possible, and sellers are always surprised at the amounts owed. You can never get the partial claim reduced or forgiven. They must be paid in full.
You have two options: Pay the partial claim off out of pocket or do a short sale. In a short sale with a partial claim, your first lien position with the FHA loan takes the loss so the claim can be paid in full. Currently FHA is offering no doc short sales through 4/2025, so you wont even have to provide any financials to get your short sale approved. Just a standard borrower hardship form. Pennymac is one of the better lenders to work short sales with right now. I have done a few FHA shorts with Pennymac over the last year, and you are looking at maybe a month or two from application to approval, if the person handling the sale knows what they are doing.
However, you would have to rework your current contract to be subject to SS approval (which the buyer may or may not be into),or sell to another party, and if you are getting financing for the new house, that will likely fall apart as well.
If you have the cash to complete the transaction as is, I would recommend simply paying the balance.
Great reply. I agree with everything except the very last statement about paying cash to pay it off. The whole reason FHA developed a short sale method is to reduce the loan balance down to reality, down to what the home is worth, down to the value of the collateral at the bank accepted. if they had the cash, they wouldn't be behind on their monthly payments.
NEVER let it go to Foreclosure (auction) That hits your credit for 7 years and 300 pts and depending what state you live in the bank can come after you for the deficiency.
There are many options and way to many to type out here and explain so feel free to call me at 636 685 2990. I have negotiated short sales for myself as the buyer with the banks for 14 years and have seen this quite often. The silent second had no interest and no monthly payments but you signed a 2nd deed of trust. This amount MUST be paid back even if the bank/FHA has to take a hit on their payoff. The bank will NOT work with you just because you ask them to, especially if they think the value of the house is high.
On a short sale they will only give you $3000 so forget $7K. I suggest you call me about one of the following options:
1. Tell the buyer you have no financial means to close and the contract will end on the expiration date. Most Realtor board documents have clauses and you should have filled out a Short sale rider when you listed the property.
2. Immediately get the RMA form (Request for Mortgage Assistance) and select "Sell the house" (Short Sale). Banks do NOT do a DIL (Deed in Lieu) because they do not want to accept any under lying 2nd lien positions. This could get you 4-6 months in the house while you save money and $3000 at closing paid by the bank.
3. File Bankruptcy and fix your house up and sell it or sell it as is for the amount you said it was worth vs what you have it under contract for now.
4. There is a possibility that you could keep this buyer under contract (for example if he tries to cause you legal trouble) if he is willing to wait (which he will if he is an investor who was underpaying you what you think itis worth As Is. I have a ninja trick (that sounds cool doesn't it) to where the bank will accept alot less than the appraised value. For example, if it appraises for the $290K you think, I know how to get the bank to accept a little over $255K. Would that make life easier?
5. I have a developed a way to snap my fingers and could easily help you get your foreclosure postponed so feel free to reach out to me at 636 685 2990 IF you just want more time to think about it.
6. 14 years helping families out as an investor NOT a Realtor.
@Hunter Gibson I have 14 years experience negotiating and buying Short Sales which are "pr-foreclosure". The process is Federal and the "same" across the whole United States. I have a free video and slides on where to find them and a 20 case study if you want to connect with me.
For better or for worse, we aren't "federally" in a short sale environment anywhere in the country at this point in time (Yes, maybe one neighborhood in one city may have disproportionate value to debt, but not on ANY large scale ANYWHERE). Also, short sales are not always "pre foreclosure". You can be current on your mortgage and do a short sale if the math works.
What I meant by Federal and “same” across the country is that the banks RMA (Request for Mortgage Assistance) form you get from the bank is the same form in all “50” states. The “process” is the same as opposed to how the marketing is different in each state depending on whether it is a judicial process (court filings with a judge) or non judicial ( Lender simply posting in a legal newspaper)
Yes,a short sale can be done by a homeowner without a foreclosure date if they are being relocated by their Company more than 50 miles but in this group we are real estate investors and it is hard to target a “list” of those home owners who may have received a job promotion AND think their home is worth less than the total debt. So for me for 14 years I do the ones who have missed a payment (both those with a foreclosure date and those that don’t have a posted foreclosure date Yet), that is my experience.
We haven't been in a short sale environment in at least five years, and probably more, on any level outside of some small blighted neighborhood or over speculated concentrated area. if you can earn a living on short sales in this environment, good for you.
WOW, in my opinion that is short sighted. No disrespect but "Can not make a living" are you talking about MASS foreclosures and then the MASSES doing short sales all over the news and FOX and CNN? If so I would agree. But there is NO masses in real estate. I have "made a living" at it for 14 years (actually contributed to my $3.5 Million in my IRAS that I hard money lend) and St. Louis county Missouri and St. Charles county are not Blighted neighborhoods. We might as well shut down BIGGER POCKETS because there are no good houses for people to buy and make any money off. NONE of it is in the MASSES. This is about being there to help that individual homeowner out with their problem.
@Sriv Nava
This is really helpful. Thanks again. I haven't seen a lot of DoJ liens, but the ones I have have been quite a lot of money. So I wanted to be sure I understood the lien position and redemption before considering them
I have dealt with these before so contact me directly if you need help or questions on one.
@Hunter Gibson I have 14 years experience negotiating and buying Short Sales which are "pr-foreclosure". The process is Federal and the "same" across the whole United States. I have a free video and slides on where to find them and a 20 case study if you want to connect with me.
For better or for worse, we aren't "federally" in a short sale environment anywhere in the country at this point in time (Yes, maybe one neighborhood in one city may have disproportionate value to debt, but not on ANY large scale ANYWHERE). Also, short sales are not always "pre foreclosure". You can be current on your mortgage and do a short sale if the math works.
What I meant by Federal and “same” across the country is that the banks RMA (Request for Mortgage Assistance) form you get from the bank is the same form in all “50” states. The “process” is the same as opposed to how the marketing is different in each state depending on whether it is a judicial process (court filings with a judge) or non judicial ( Lender simply posting in a legal newspaper)
Yes,a short sale can be done by a homeowner without a foreclosure date if they are being relocated by their Company more than 50 miles but in this group we are real estate investors and it is hard to target a “list” of those home owners who may have received a job promotion AND think their home is worth less than the total debt. So for me for 14 years I do the ones who have missed a payment (both those with a foreclosure date and those that don’t have a posted foreclosure date Yet), that is my experience.
Pre-Foreclosures / Foreclosures fit into several groups and are done under each State's laws. It varies by State.
Primarily there are Judicial & Non Judicial foreclosures. Out west and midwest are typically Non Judicial, that means they don't have to go to court to foreclose. East coast is typically Judicial, it involves the lender suing and going to curt to get the right to foreclose.
I like to say that Pre-Foreclosures are before the "Notice of Trustee" / "Notice of Sale" is recorded and
Foreclosures are after a "Notice of Trustee" sale has been recorded and a sale date is set.
"Recorded" means that paperwork has been filed and accepted at the County recorder's office. There will be several dates you want to track depending on the state you are buying these in.
These all involve different approaches and techniques to purchase the property. More on that later.
@Account Closed Your last statement:
"There really aren't that many pre-foreclosures comparatively speaking right now."
Yes,it seems due to the Cares act and moratorium that ended 7/2021 we are only back up to about 78% of the number of monthly foreclosures of about 35K a month but yet there are over 2 million delinquent loans currently because they are not actively foreclosing. Hmmm that is nearly 5 years backlog if NO new homeowners miss any payments.
But in real estate investing, Short Sales only need "1 house payment" missed. So FOR ME over the past 14 years I only needed about 1 per month to have over $3M cash in my retirement accounts.
My point to MY opinion is Short sales are still a valid real estate strategy to consider now.
@David Randolph: I think of "short sales"
as being "buying a property for less than the amount owing, with the agreement from the lender and the seller."
"The seller is not allowed to profit from the sale."
The property can not be refinanced for greater than the amount purchased for at least 6 months
Are we using the same definition or do you have another one or some other variation?
Ken, pretty close to it except in full disclosure, I am not a Lawyer, accountant, Realtor, Broker or even an Actor. I am a real estate investor that buys distressed property, NOT houses on the MLS retail. Although in 14 years I have never seen or signed a Arms Length affidavit requiring no refinance within 6 months. There are some FNMA 90 Days deed restrictions. I have rehabbed many short sales and never had a problem getting a refinanced loan and certainly have sold most to a retail buyer within 6 months at a HUGE profit. They have never had a problem buying it with a new retail lender.
I would say the seller not profit is correct but the lender will usually pay them a $1500-$3000 Seller Incentive on the HUD.
I like your definition of:
"buying a property for less than the amount owing"
Most investors MISTAKENLY say that a short sale is selling/buying a house:
"when the loan is more than the house is worth"
I've bought a couple of short sales, but it's been quite a while. I was just curious if anything has changed, not much it seems. ;-) I didn't know there could be a seller incentive. Good info.
Actually alot has changed.
1 the rules are very well regulated now vs 2009 -2012 when it was the wild cowboy days and banks were screwing families all over the place (which is why my wife and I started doing short sales - help families out).
2. The banks are dumping houses because they have to many for too long, to high number of days of missed payments, way higher than the great recession. Last month my group member made $132K profit on a $280K house that he sold , his first short sale
Pre-Foreclosures / Foreclosures fit into several groups and are done under each State's laws. It varies by State.
Primarily there are Judicial & Non Judicial foreclosures. Out west and midwest are typically Non Judicial, that means they don't have to go to court to foreclose. East coast is typically Judicial, it involves the lender suing and going to curt to get the right to foreclose.
I like to say that Pre-Foreclosures are before the "Notice of Trustee" / "Notice of Sale" is recorded and
Foreclosures are after a "Notice of Trustee" sale has been recorded and a sale date is set.
"Recorded" means that paperwork has been filed and accepted at the County recorder's office. There will be several dates you want to track depending on the state you are buying these in.
These all involve different approaches and techniques to purchase the property. More on that later.
@Account Closed Your last statement:
"There really aren't that many pre-foreclosures comparatively speaking right now."
Yes,it seems due to the Cares act and moratorium that ended 7/2021 we are only back up to about 78% of the number of monthly foreclosures of about 35K a month but yet there are over 2 million delinquent loans currently because they are not actively foreclosing. Hmmm that is nearly 5 years backlog if NO new homeowners miss any payments.
But in real estate investing, Short Sales only need "1 house payment" missed. So FOR ME over the past 14 years I only needed about 1 per month to have over $3M cash in my retirement accounts.
My point to MY opinion is Short sales are still a valid real estate strategy to consider now.
@David Randolph: I think of "short sales"
as being "buying a property for less than the amount owing, with the agreement from the lender and the seller."
"The seller is not allowed to profit from the sale."
The property can not be refinanced for greater than the amount purchased for at least 6 months
Are we using the same definition or do you have another one or some other variation?
Ken, pretty close to it except in full disclosure, I am not a Lawyer, accountant, Realtor, Broker or even an Actor. I am a real estate investor that buys distressed property, NOT houses on the MLS retail. Although in 14 years I have never seen or signed a Arms Length affidavit requiring no refinance within 6 months. There are some FNMA 90 Days deed restrictions. I have rehabbed many short sales and never had a problem getting a refinanced loan and certainly have sold most to a retail buyer within 6 months at a HUGE profit. They have never had a problem buying it with a new retail lender.
I would say the seller not profit is correct but the lender will usually pay them a $1500-$3000 Seller Incentive on the HUD.
I like your definition of:
"buying a property for less than the amount owing"
Most investors MISTAKENLY say that a short sale is selling/buying a house:
"when the loan is more than the house is worth"
Pre-Foreclosures / Foreclosures fit into several groups and are done under each State's laws. It varies by State.
Primarily there are Judicial & Non Judicial foreclosures. Out west and midwest are typically Non Judicial, that means they don't have to go to court to foreclose. East coast is typically Judicial, it involves the lender suing and going to curt to get the right to foreclose.
I like to say that Pre-Foreclosures are before the "Notice of Trustee" / "Notice of Sale" is recorded and
Foreclosures are after a "Notice of Trustee" sale has been recorded and a sale date is set.
"Recorded" means that paperwork has been filed and accepted at the County recorder's office. There will be several dates you want to track depending on the state you are buying these in.
These all involve different approaches and techniques to purchase the property. More on that later.
@Account Closed Your last statement:
"There really aren't that many pre-foreclosures comparatively speaking right now."
Yes,it seems due to the Cares act and moratorium that ended 7/2021 we are only back up to about 78% of the number of monthly foreclosures of about 35K a month but yet there are over 2 million delinquent loans currently because they are not actively foreclosing. Hmmm that is nearly 5 years backlog if NO new homeowners miss any payments.
But in real estate investing, Short Sales only need "1 house payment" missed. So FOR ME over the past 14 years I only needed about 1 per month to have over $3M cash in my retirement accounts.
My point to MY opinion is Short sales are still a valid real estate strategy to consider now.