1ST Deal Need Help Please!!!!!!!!!

Help!! This is my first possible deal ever let alone a short sale. I am not trying to flip this property I am interested in it as my primary residence. Here are the facts so far:

House was built in 1999, 2200sqft, 4/2/2, owner wanting $190,000.00 (has about that in mortgages and liens against the house) comps in the area $220,000. Has been vacant for more than a year, 1st mortgage holder Washington Mutual (Wamu) is in the process of foreclosing. House has been in foreclosure for more than a year…product of divorce (couple are the builders) first the husband thought he signed over to wife, then wife later files chapter 7, then the lenders knock on his door, he apparently did not take his name off the title. Neither of them are interested in the house and just want this problem to go away. I have already been on the phone with Wamu and they are willing to work with me, just have to get owners permission. Which is my first problem…this property is listed with Coldwell Banker so I give the listing agent my proposal, the works, with no sales price, just contingent upon short sale from existing lenders. She is all happy (she has had this listing more than a year…apparently pain in the rear because owner is asking to much for the house in the condition that it is in, but won’t accept less because this would leave him still in debt). She calls later and says “Question…How am I gonna get my commission?” good one cause I don’t know, It is listed with the owner who has NO money and I sure do not have the money to pay $12,000.00 in commission fees…so is there a way I can go around her. I know that the owner has had the listing for more than a year…can he just cancel it, although I have not exactly even talked to the owner yet, only the realtor. Scared about this.

Here is what numbers I know

Wamu: $151, 000 current balance 1st mortgage. $14,000. 00 in additional late fees oh yeah the interest was at 7%. Already said will work with me!!

Citibank Mortgage: 2nd Mortgage in 2002, $20,500.00 at 20%. Don’t know late fees or anything, Only the wife took this loan out after their divorce in 99, she only signed the loan and she filed ch 7 in 2003, but I do not have the details, maybe she listed this debt, I have searched public records for all of this info and only Wamu is foreclosing, not a single notice of default listed from citibank. So maybe its protected under ch 7 by her or something??

Lien against the house from a bond company, $5,000.00. The husband did not show in court and this was for his 3rd DUI, which he still had not been sentenced yet ( Thought that might have some negotiating room with the lenders since he may go to jail for 5 or more years.

Lien against the house from the Homeowners assoc. dues of $175.00 not current I am sure they owe more by now.

These were the things that I found in public records, there could be more, but I just thought that since the 1st mortgage was so low that maybe this was a possible deal. Also Wamu is a branch in Fl and we don’t have any local. This property is a beautiful home in a really great neighborhood, however it is an eyesore at the moment, and I am sure the community has plenty of objections. I have really spent a ton of time researching this and I love the house, however the price is way out of my price range. The house is in livable condition at present guess about $15,000.00 in repairs needed. I am currently pre approved for a loan for $135,000.00. Does anybody see a workable deal here??? Please help.

Oh yeah there is already a tentative auction date set for April 13th.

Amy in Louisiana,


First, let me say that I since I haven’t personally seen the condition of the house, I can only go on what information that you give.

Now that that is on record, I sorry to inform you that I have bad news. There is no way that you’ll be able to get that house for $135K or less. If you’re looking for a primary res, I’d suggest going down in the price range a bit.

Let me explain. The 1st mortgage is in a pretty stable position. By your comps, the property’s FMV is about $220K with the 1st only needing $165K or so to cover all their costs. There is simply no reason for them to do a short sale. Even if you add in your estimated $15K in repairs, that’s still at 80-85% of FMV. That’s not a bad starting price for a REO.
The 2nd mortgage will likely be wiped out with a foreclosure (and it sounds like that they have already written it off as bad debt anyway). This also holds true for the bond debt. But while it’s possible that they would negotiate BIG discounts (and they would have to before the 1st would discount any, in most cases), it’s still the 1st that matters. The homeowner’s association fee may or may not be removed by a foreclosure. It depends on your state’s laws concerning that.

Finally, if a lender preapproves you for a certain dollar amount, like $135K, don’t go looking for that price house. It would be best if you stayed in the $100 price range. That pre-approved figure is the MAXIMUM loan that they will give you based on your bills and income now. If you get the max now, then the least bit of change in your financial picture, either an added bill, or a reduction in income, and you’ll soon be the one heading into foreclosure.

Look at it this way. Suppose that you did manage to get this house under contract for $135K, what then? Do you have $$$ for the down and the closing costs? Do you have the $15k to do the repairs that you said needed to be done? If not, then you’re already in the hole before you even buy the place.

Oh, and the real estate agent’s fee is the least of the concerns. My standard response would be that a) the agent (if this is the listing agent) would have to agree to only 1/2 of the commission as, under normal circumstances, she would have only gotten that much anyway (90% or so of MLS listed properties are sold by someone other than the listing agent), b) the bank would have to approve and pay the agent’s fee out of the proceeds, and c) she should be lucky that it gets sold at all, and she gets ANY commission, because by her on admission, it’s overpriced, and she shouldn’t have accepted the listing at that price anyway.

hope it helps,



Roger is right–this may be over your head to do. With that said—if you still want to try and get this home you need to get fully approved for your maximum price you are willing to pay. Maybe you qualify for a “stated income” loan which would allow you to get a larger mortgage.

BUT, you need to answer the question—do you have the funds to put this house back together (you said $15K). If not–don’t try to buy this one. (or you need to work rehab into price–paid directly to rehab company by seller at closing).

Again, ignoring the above–if you STILL want to try and buy this. you MUST work on the liens on title–starting from the back end. The FIRST mortgage is in the best position. They will be the hardest to negotiate down----you have to show them that the 2nd (and other liens) are willing to take a DEEP discount in a payoff. Don’t forget to verify if prior year taxes have been paid (1st mortgage company may have paid–in the $14,000 late fees). The first may reduce some of their $14K in fees–but why if they know the house is worth $220K