I got a call on my marketing letter and the homeowner told me that the bank is already ok with a short sale and has started telling the homeowner how to do it. I’m kind of new to short sales but I thought banks didn’t allow the homeowner to do their own short sale on their own house. Has anyone else had this happen? I’m going to get the authorization today so after I talk with the bank, I’ll know more.
Generally the bank will not allow the homeowner to conduct their own short sale because there is too much of a possibility that the homeowner will profit while the bank takes a loss. The bank will try everything possible to collect the debt from the homeowner.
This is the first I’ve heard of a bank allowing, let alone helping, the homeowner to conduct the short sale themselves. But, things change.
With the way things are going, I’d be surprised if the mortgage companies would not let a homeowner negotiate his own short sale. After all, you see it all the time where a Realtor has taken a listing and then markets the property as “short sale approved.”
The lender is still going to require a draft HUD-1 (or net sheet) that shows the homeowner is getting zippy, though.
I would think the bank would renegotiate the terms instead of taking a loss. Keeping the homeowner in the property keeps open the possibility the loan will get paid. A short sale is a guaranteed loss.
I agree with BLL that the banks tendency would be to negotiate the terms/debt instead of working toward the short payoff directly w/ the homeowner.
RE-Maverick, I would explain to the homeowner that they are facing an up hill battle if they intend to facilitate a short sale on their own property. Even if the bank considered it, like already mentioned their intentions would truly be geared towards a work out. Plus…doesn’t it seem like a conflict of interest for the homeowner to facilitate a short sale against their own prop? The better they do at negotiating down their own debt, the greater the potential deficiency or tax liability they have created for themselves! I can’t see how a lender would allow this??
The question is does the homeowner truly know how to work a short sale? Do they understand the ppwk? Do they have a buyer lined up for their property? If so, do they have a P&S. Can they produce a pre-lim HUD? Do they know what a BPO is?? I would assume they will definitely need help…
The good news is that you have a homeowner who is over leveraged, is aware of it, and is willing to allow the short sale. I would approach the homeowner as a consultant whereas you are the mitigator who is in direct contact w/ the bank. Make sure you have the homeowner sign off on all CYA docs indicating they understand the potential for a deficiency judge or tax consequences (1099c) and that you will be held harmless if either or if the SS does not work out and they go to foreclosure etc etc.
As a consultant, you can get paid a fee on the HUD which, the lender pays, not the homeowner!