I am trying to understand what a rule of thumb might be on a lender discounting a loan in a short sale situation. I assume this is not always a straight forward answer. Factors such as local market, the lender, number of mortgages (1st, 2nd), condition of property, would factor into the equation. Perhaps an example would help clarify.
Assumptions: average market, home in good condition, borrower in default, market value = $200,000.
Case #1: total amount owed = $200,000
Case #2: total amount owed = $220,000
In general, how much would a lender discount the loan in these two examples? Would the percentage usually be the same? If so, how much? Would the percentage be more in Case #2 due to being upside down? What would be a good, realistic starting point to discount in each case?
Zach,
This is different from lender to lender, and one of the most influential determination of price will be based off of the BPO.
I just finished today negotiating with Countrywide owed on the property is 1.3 million they will entertain offers at 800,000 or above( based off the BPO)
OCwen( before they stopped doing short sales) we have a BPO OF 540,000, and they will only accept offers above 500,000 :argue You have got be kidding me
We have still been able to negotiate Short Sale with Ocwen. They are just not negotiating with real estate agents and professionals of that sort. We have continued to deal with them with great success.
Most lenders are working around BPO and usually flexible because they can not sell the house themselves for more than it is worth so why are they going to expect the homeowner to sell it for more. Not saying that you were saying any differently. Just stating my agreement in the comments made.
Even if you have two with the same lender with very similar scenarios whereas the bpos come in close…the investors behind the scenes may be different so you will still get a different result.