how little equity must there be in order to do a SS?

hey guys I was under the impression that there had to be no equity or negative equity in a property for a SS. it seems some people can obtain an SS if there is a littel equity. is there a general numbe or percentage this has to be or is it based on other things?

thanks,
ryan

hey guys I was under the impression that there had to be no equity or negative equity in a property for a SS.
I'm not sure I understand what you mean by "negative equity" but I'll give you an example of one of my SS deals. The owner has 2 liens... 1st is $88,000 and the 2nd is $12,000.=100K. The house is worth $104,000 based on comps. They had aprox. 4K in equity but fell behind in their mortgage payments. I SS the first for 70K and the 2nd for 6K. I didn't initially walk into a good equity position but after the SS the equity is there. But I'm walking into 28K after the SS. A lot of the time homeowners don't know they could actually just sell and avoid foreclosure or even make a profit. Hope this makes any sense for you. Good Luck

The problem is with only $4,000 in equity the homeowner doesn’t have enough equity to pay the cost of selling the house, doesn’t have enough equity for a refinance. May have some issues with the house, roof problems, plumbing whatever, The bank will not negotiate with the seller until they are in foreclosure and then will come back and tell them. Sorry, We can’t help.

what a short sell does is Create Equity for the Real Estate Investor?

hey guys…i’m sorry what i meant was No equity where more is owed on the house than the house is worth (your typical situation). i wanted to know if there was very little equity, if you could still negotiate a SS. it seems the answer is yes…so my question was…how little equity must exist to be elgible to SS? $5k? 10k? …that’s what i was eluding too.

thanks,
ryan

 I do have limited experience in SS, so others more experienced can possibly provide more info. 
 I typically try to negotiate the bank down enough to where I'm walking into at least a 20% equity position. (ex. house is worth 100K, I will want to pick it up for no more than 80K .) I like to keep this in mind whenever negotiating w/ the bank. Although,different scenarios can change my approach like if I'm going to flip the property after I aquire it vs. if I'm going to do a lease back with the original owner. I don't really go off a  amount, I try to go off a %. 

 As I re-read your post, are you asking what the bank looks for in order to "qualify" a property for a SS. Or are you asking when it is doable for the investor?

don’t know about now but at least in the early 1990s in southern calif. in order to qualify for a short sale, a homeowner had to prove that a hardship existed (typically loss of employment, illness, job relocation, etc). it wasn’t enough to just show that they had little or no equity in the property. and if they had additional assets, the lender would take those into account as well.

A short sale usually creates the equity. If there is enough equity in the present position then a refinance, or sale would be appropriate. usually when you do a short sale the homeowner is upside down in the property. Can’t do a loan, can’t sell the house because there is not enough equity to do anything. What the "Loss Mitigation Specialist does is negotiate the loans down to create equity.

that is correct. i was asknig what the bank looks for in order to “qualify”.

[quote author=ginasands]

A short sale usually creates the equity. If there is enough equity in the present position then a refinance, or sale would be appropriate. usually when you do a short sale the homeowner is upside down in the property. Can’t do a loan, can’t sell the house because there is not enough equity to do anything. What the "Loss Mitigation Specialist does is negotiate the loans down to create equity.

i also posted this in another post. i wonder if the bank takes into consideration the low market. what if there exists some equity but the HO does not quailty for REFI or another loan? they are just doomed for foreclosure?

Ryan