All Forum Posts by: James Harkness

Huh?

Personally, I doubt that the banks had this lightbulb go off all of a sudden and realized that they could make more off of a mortgage insurance claim than by selling the property. The mortgage insurance was always around. I'm not arguing with you that there may be less short sales going on, but I doubt the reason is because of mortgage insurance.

A bank is in no way obligated to sell a property for less than what is owed on it. They do it when it makes financial sense. If they will make more money by taking it to foreclosure, of course they will not do the short sale. Banks are in the business to make money, just the same as anyone else.

That does make perfect sense for PA as well. I think we have to pay the sheriff 2% of the sale price in PA. That is certainly a valid reason for wanting it to sell for as little as possible. It isn't like that in every state though, and I was given a vague explaination related to tax advantages that I didn't fully understand. Good point though, Steve.

In regards to the opening bid at the auction, depending on the state, the lender may put in a "specified bid" or a "competitive bid". A competitive bid starts at the minimum bid allowable by law for the jurisdiction, and will continue to increase until the maximum bid amount is reached. The maximum bid amount represents the minimum that the bank will take at foreclosure. A specified bid is the maximum bid, and will be the only bid submitted by the bank in those jurisdictions that require it.

This has to do with certain tax advantages that I don't fully understand, but I believe that if the bank is going to take a property back, they want it as cheaply as they can get it.

Scott,

Nothing that I have said is "theory". I am the asset manager that you negotiate with on the phone. I am telling you the facts.

That is all.

As an Asset Manager, I would just like to support Vikram's assertions. Everything he said is spot on.

When evaluating a short sale, there is only one thing that matters: Does the NPV of the short sale scenario beat the NPV of the foreclosure (sell as REO) scenario. This is where the time value of money comes into play, and why it is possible to get a bigger discount on a short sale.

In no situation will the bank accept an offer where the NPV of the short sale loses to the REO sale NPV. Of course these numbers are based on what the bank thinks the property is worth, how long they think it will take to market the property before it sells, and several other metrics. The equation is established by the bank, and is what makes investors heads spin (because the investor does not know what the bank's calculations include/look like).

Start by googling the word "hyperinflation". Get yourself a definition. Then you will see why it will be difficult to achieve.

Lots of people mistake modifications for refinances...

You are right Tim. We both did misunderstand eachother. Sorry bro.