Short Sale vs. Discounting?

[JohnM]

Hey gang,

What is the difference between "discounting the mortgage" and a "short sale"?

Also, could someone give me an example or two of what sort of a situation would call for "discounting a mortgage" and what sort of situation would call for a "short sale"?

Thank you, thank you, thank you!

JohnMP

[tedjr]

When mortgages are sold they are sometimes discounted, some as much as 50% of the face value and more depending on the rate and term, condition of the property etc. I have been trying to get a mortgage company to discount the payoff one on of the properties that I currently  own that is coming out of bankruptcy. This too would be discounting the mortgage. If you can find notes where the seller financed part of the purchase price and wanted the income but later needs cash they may discount the mortgage to get that cash.

A short sale is totally different. You find a seller that owes more than the house is worth and with the help of the mortgage company discounting the payoff you can buy the property for less than the mortgage balance and the seller nets zero for their equity.  Usually these too are in default and or in bad condition. Hope this helps answer your questions

Good luck and thank you,
Ted P. Stokely Jr
11505 Sw Oaks
Austin, Texas  78737
512-301-9171 home
512-587-6177 mobile

[David Alexander]

both are clsoely related and then at the same time far apart...

How'd you like that answer... Lol...

No, really discounted mortgages is why I got into this game to begin with...  Notes as they are called are often sold at a discount for a variety reasons...  

Usually the noteholder is motivated for one reason or another....  It's in default...  Or maybe they want to do something else with their money... recieving payments is not what they had thought... for instance they took back a note for 100k and are getting payments of 877.57 a month for 30 years based on a 10% amortization...

Maybe an opportunity came up to start a new business and they need all or part of the money... maybe a family emergency... maybe a trip around the world...

Whatever the reason... the 100k note isnt important... they need cash... and to sell anything very, very quickly typically requires a discount...

Institutions rarely will discount the first mortgages(at least in my exerience)... but, seconds are discounted all the time... and private paper is bought at a discount all the time...

Short sales on the otherhand are becoming common practice... as defaults are rising across the country...

A short sale happens when a seller is selling his house below the payoff of his note.... and for that to work... the lender must take less as payoff for their note...

Although, the lender may or may not go after the seller for the remaining balance...

David Alexander