I have a motivated seller who owes $153,000 on his house. He is going into foreclosure. I ran comps on the house and they come out at around $191,000. The problem is that this house is old and needs a lot of work. I have never done a short sale and I am really scared to take on the wrong house. If we can talk the bank down significantly, we are willing to buy the house and flip it ourselves. Other fixed up houses in the area are going for around $200,000. Do you think the bank would settle for 100k, then I could put in about 30k-50k in repairs and sell it for market value in the 200k’s? What is the first step of the short sale? I have gotten such conflicting info on what to do. Do I call the bank first? Do I have the homeowner sign the contract with me? Any help and advice would be greatly appreciated. Thanks. 
Assuming there is just a 1st TD and no 2nd then you should definetely try for the 100k which would make the deal prosperous for you. Every lender is different on what they will take, depending on the location, repairs needed etc. You will not know unless you ask! The 1st step from my understanding is get authorization to speak on the account so the bank will recognize you as a representative of the borrower then get your disclosures, contract, deed executed( dont forget to take pictures of the property for you record) make sure the bpo contacts you for access. The borrower is pleading for the lender to work with the buyer( you) if you were the borrower how would you want the bank to look at you?) hope that helps( i have not done a short sale yet.) haha
Thank you for responding so quickly. I believe there is a 2nd on the house. The original loan was for 83k and from what I know, the 2nd is what brings the total to 153k. I am going to speak with the homeowner tonight and get more specific answers as well as have him give me auth to speak on his behalf with the bank. Yeah this is my first short sale and I am sooo nervous to mess it up. Thanks for your help.
Okay. I spoke with my homeowner on the specifics. He has a 1st Mortgage for $151K and a second for $18k. Do I want to negotiate the first one down as low as the bank will go? and just figure the 2nd into what I will end up paying for the house? The mortgages are thru different lenders, i’m kinda lost as far as what to do now. Any advice is greatly appreciated. Thanks.
Yes you want to negotiate the first down as low as possible first before taking on the second. The second is easy to deal with cause they are getting nothing anyways so they will deal. I think your up against it on this one.
I can see the second taking 1-2K which brings you down in the 133K range. I don’t see the bank taking a 33K dip to get you around the 100K mark unless if what you say is true about the repairs then maybe they will get near that. Don’t worry about screwing up short sales. They are pretty hard to screw up. Just follow the loss/mitigation departments requirements, get them, fax them, and then play the waiting game. Its not hard but it is time consuming. Might as well try it and get your feet wet. The worst that can happen is that your SS gets denied. Most do so not to worry.
Nate-WI