My first short sale.

Hey guys,
I started another thread on this topic but decided to start this one so we could all follow along on this adventure. I will try to post step by step what I’m doing on this deal and you can give advice or comment and maybe we can learn some things together. Let’s hope this goes through. Here’s some backdrop…

I ran into a guy at work the other day that just got divorced and is now in foreclosure. I talked to him about doing a short sale and he seemed interested.

His house is(was) worth 160k when he purchased it. He has removed 10k in landscaping and a fence that went around the back yard. He owes 144k, has a second for 6.6k and has not paid his taxes or mortgage for a year. Once I get the questionare back I will have more details.

We met today and I gave him a mini packet with a questionare, 8 options when in foreclosure sheet (thanks matt), authorization form and hardship letter outline. As I was speaking with him I was getting the impression that he was not reall into this idea as much as I initially thought. I think he is still in revenge mode against his ex and thinks this might somehow relieve her debt also.

One problem that I might have is getting ahold of his ex. He says he would have to talk to her attorney and try to track her down. What can I do to help this along? How do you convince someone in a bitter divorce to help their spouse short sale their home? I thought about contacting the lawyer myself after I get the letter of authorization, but dealing with the spouse may be a different story.


Divorce situations are by far one of the most difficult short sale scenarios. Getting past the authorization letter alone can be one of the most frustrating things in itself. It never fails, you always end up having one spouse (generally the wife, sorry ladies, but women are just plain mean and vengeful when in a divorce) who will refuse to work with YOU because every being of their fiber wants the other to suffer. They feel that if they cooperate with YOU then they will be helping the other spouse, and they are generally in the petty mode, or like you said, the revenge mode.

I suggest asking the husband for the wifes contact info, if he does not have her info I’m pretty confident he has her attorney info. If not, look it up in the court records. If you do have to go through her attorney, it would behoove you to try to get his mind set in favor of your short sale as well. If he believes it is in his clients best interest (the wife) then he will strongly suggest to her that she should cooperate.

All in all, Divorces are among the hardest situations to deal with when it comes to Foreclosure and short sales.

Good Luck! :beer

P.S. I’m glad to hear those documents are working out for you. Your welcome!

It’s been a couple of days and I haven’t heard back from the homeowner yet. I will call him on monday and ask him if he has thought about all his options.
In the meantime here’s more info.
The loan is through countrywide, the amount that was originally financed is $144k in 2005. Taxes are $2115/year. HO says he hasnt paid homeowners insurance for a year either. Does that mean that the lender has be paying that also?? Once I get the questionare back I will break down the numbers and show him how much he will be saving in cancelled debt ie… the second mortgage, missed house payments, taxes and such. Hopefully this will sway him to take action and agree to the short sale.


from my understanding when dealing with homeowners explaining how much you are saving them may sound like a load of crap since they are in a tight jam.

the best thing you can do is find out whats going on and fix the problem. what is there more important to save their credit, some money on fees that they don’t have or their good name? don’t get caught up in the numbers because most of the time it will only confuse them.

let them talk while you solve the problems they talk about. constantly reassure their issues and move towards the solution.

As someone that works as a short sale negotiator for a major bank, I would check to see if those property taxes have turned into a tax lien. When I’m looking at a HUD I will allow property taxes or only minimally trim up, but if it’s a tax/personal lien or judgement (builder, courts, landscaper, etc.) it won’t even be touched until homeowner has taken care of themselves.

If he hasn’t paid his homeowners insurance, it’s been placed by the lender and his escrow account balance has gone up increasing the debt owed on the property.

Another thing to consider is that if both their names are still on the mortgage she’ll also need to be aware that they will be getting a 1099 from the bank. I’m sure you know all this, but when I call the borrower to introduce self it’s the first thing I have to mention. Depending on investor it’s taking about 6-8 weeks for a short sale, from my experience.

What do you mean here? Phantom tax?

Sorry for the delay of updates but with the holiday everything was on hold for awhile.

Well I did find out some more information and took some more steps to complete the SS. I found out that the house was appraised and sold at $144k in 05. The payments are $1093/mo and the homeowner is behind about 14 mos. There is a late fee of 4% on every late payment so I figured that the loan is in default for about $16k. I got the guy that I’m working with to sign the letter of authorization but I still have to track down the ex wife. Would it be better if I contacted her atty. or tried to talk to her myself? I found out that she already filed bankruptcy before they got married so I’m not sure if she can file again already. This may be a leverage point to get her to sign. Should I submit the SS packet without her signing the auth. form? I have attached a copy of the hardship letter, please let me know what you think of it. I hope that I didn’t include too many details. Should this letter be hand written or typed?

Hardship letter
To whom it may concern,
I am writing this letter to tell you why I can no longer afford to live in my home. On July 22, 2006 my wife and I were out to dinner. While we were eating she began to tell me that she no longer wanted to be married, and that she had been in contact with here ex husband for a while without my knowledge. An argument began and she got up and walked out on me. In the following months she tried to take everything I own. She stopped paying on her car that I had cosigned for leaving me with a $7600 debt with GMAC, she ran up the lowe’s charge for about $3k, left me with a $6600 second mortgage and broke into the house taking the refrigerator, microwave, recliner and most of the furniture in the home. Due to the condition of the house I lost visitation with my daughter from a previous marriage. I now have limited visitation only at my mother’s house and cannot even spend time with my daughter in my own home. All of this has caused me to suffer from terrible depression and anxiety. Finally she filed for divorce in May/07.

I have taken 2 extended periods of leave from work due to the stress that I am facing. My whole life has been turned upside down. The only thing left is for me is to file bankruptcy. Frank told me to wait until he contacts you about a short sale before I file. He said that I could possibly avoid it altogether if I could get the house sold. I have a friend that has offered to take me in until I get back on my feet, so I probably won’t be here for the entire winter.

When all of this first happened I tried to sell the home through century 21 it was listed at $163k and had no offers, we reduced the price to $158k and then again to $149k yet we still received no offers on the home. All together the property has been on the market for a total of 12 mos. I now have it listed for sale by owner and still no one has come to look at the property. Please work with Frank on the short sale of my home so that I can move on with my life and we can salvage what is left of this mess. I am very sorry that all of this happened and just wish that it could be over. I don’t want to file bankruptcy but I don’t see any other way.


Remember my first offer will be 80k but I will go up to 90k on this sale.

90k is pushing it. You might be able to buy it for 95-98k.

The Hardship letter sounds very good. Type it and have the homeowner sign it. Personally, I would stick with the first offer of no more than $80k. Depending on the condition and situation of the property I would even be ‘ballsy’ enough to offer less…maybe $50k. The worse they can say is no. Then you either get a counter offer or you just submit a higher one. Besides, if you are willing to pay them $50k for it, then it’s a legit offer.

If the wife is on the mortgage note then I would probably say the bank will in fact require her signature on the authorization form. Try submitting it without and don’t bring attention to it. See if it slides. If not, then I would suggest contacting the wifes attorney. It will be safer to have her attorney approach her about signing it than it would be for you to get in the middle of what sounds kind of messy.

GooD Luck! :beer


Called countrywide, got HRD (loss mit) dept phone and fax number, spoke to rep who told me what information to fax to him. Turns out that the loan is an FHA. Hopefully that doesn’t complicate things, rep told me that once I fax over all the financials with the hardship letter and auth. form I will be assigned a negotiator.
After I hung up with them I called an appraiser/BPO agent that I have worked with before. He is also a realtor/broker, he is going to give me a BPO that I can send with my packet. I told him the situation and that I needed the BPO to be on the lower end of market value due to situation of the property. The first thing he told me to do is get a title and tax lien search, he said that he deals with countrywide every day and that they are very shady. He wants 6% or $2700 whichever is greater to list the property. I don’t mind this because he will take care of locking up the property and handling the purchase agreement and also answering questions along the way, plus I’m hoping that the bank will pick up the commision.
The homeowner has a good job so the financials could be tricky, they asked for paystubs and bank statements. What will happen when they see that he makes pretty good money? Will they go after him with the difference of what is owed to the primary mortgage after the short sale? I don’t want to put this person in jeopardy of getting his wages attached or sued for the difference. Would bankruptcy protect him from this?

This is getting exciting, Thanks for the help.

Hi all, I’m still working on this deal so I thought I should give an update. I have recieved all financial docs from the homeowner, I also had him sign a listing agreement with my realtor, so the home will be on MLS soon. Right now it is for sale by owner. What I did was drew up a purchase agreement between him and I for the SS offer price. Meanwhile the realtor will have a higher sale price on his listing that wil hopefully find a buyer before I close.
So far I’ve talked to 2 different title company’s, one said that they would do a simul close and the other acted as if they didn’t know what I was talking about so it’s obvious which one I will be using. Tomorrow I will call them and see if they will take our purchase agreement and draw me up a prelim Hud and do a title search. I will have to notify them that the sale is contingent on the SS going through.

No contact from the ex wifes attorney yet. I faxed an authorization form to him so she could sign it. I think this will be crucial to this deal, in fact I should of had this done by now but either way it’s a good learning experience. For now I will try to present everything to countrywide without her signature and at least try to get the payoff letter.

My SS package is coming along. So far I have the cover letter, LOA, Purchase agreement, owner financials, BPO w/Mls comps, listing history, hardship letter, sexual offenders within 1m, preapproval letter, and listing agreement. House is newer so there aren’t many defects but I inluded some photos anyway. As soon as I get the HUD filled out I should be ready to send in the packet. Cross your fingers.


Just a side note: The property that I’m working on I am offering 80k, I know it will sell for at least 120k, if I can’t get it off the market before I close my other exit strategy is to purchase the property and do a lease option and if that doesn’t work I will make it a rental. It might not cashflow but I should have some nice equity built in if nothing else. This has relieved me somewhat of my fear of not being able to do the simul close or finding an endbuyer in the allotted time. I could also pay the holding costs and keep it on the market until it sells for the asking price.

The pre approval letter is just a basic letter from the bank that says that you qualify for xxx amount of money for a loan. Usually you want this letter to show that you are approved for what your SS offer will be or a little above it. This is so the lender that you are dealing with knows that you can close the deal if they agree to your price.
The listing agreement is what a realtor has you sign when they are hired to sell your property. It’s basicly a contract that states that you give them permission to sell. How much you are going to sell for and how long they will represent your property. I learned this from matt “foreclosure negotiator”, instead of using a trust to lock up the property he uses a realtor to list and disables the buyer from selling to another investor or endbuyer without you knowing.
Purchase agreement the realtor could provide also, or you could download one off of the internet. Just make sure it’s ok in your state, some states require different elements to be present in the contract. I’m in ohio, PM me and I’ll email what I have.
The sexual offenders list is something that I am sending to the bank to show that they may have trouble selling the home if these vile child molestors live only a mile away.

Thanks for reading, I’m posting step by step to help others like myself that have no idea what they are doing.


Update: Countrywide accepted the Letter of authorization without the divorced wife’s name. I talked to Loss Mit and faxed over the SS packet. I was going to wait 24hours and call to make sure that they received it. I will be getting a negotiator assigned and we go from there.

Is there anything I should expect from the negotiator? Do they usually ask a lot of questions about who is buying the house, who will live there, do I plan on flipping? I would like to be prepared as possible when I speak to them.

Thank you

there’s a lot of properties out there, walk away :biggrin

you have to have a willing seller to work with you not someone you have to chase around

what did the BPO come out to?

g whiz,

I am coming in late, so I need a little help to catch up.

You say the husband is divorced and is interested in selling you the property.

My question is who is on title to the property as a result of the divorce? If the husband got the property in his divorce settlement then the ex-wife should be out of the picture, right? Maybe the husband has a quit claim deed from the ex-wife that has not been recorded.

If the situation is reversed and the ex-wife got the property, then you are dealing with the wrong spouse.

If the property remained jointly owned, then the two ex-spouses would have to cooperate in the deal, or it won’t happen. I believe the same holds true if the property is in a community property state, or a “dower rights” state but I don’t know for sure.

Questions to address to your attorney when the title search is done.

I had my own BPO done through a realtor who is also a BPO/appraiser, it came back at 120K. If it goes to auction and the appraisal is close the opening bid should be about 80k(2/3 value).

The property remains in both of their names. I think I got lucky by having only the husband’s signature on the authorization letter. I am going to wait until I talk to a negotiator and try and get the payoff letter before I get the ex wife involved. I didn’t want to have to contact her to sign documents more than once. If my offer is accepted I will go to the attorneys office myself and then to the ex wifes house myself to have her sign the purchase contract.

If it falls through I could always try to pick it up at the auction…

Hey Frank. I just got into reading about your deal and I want to get all the way caught up before I add anything. Before I forget to ask, would you be willing to share the 8 question questionaire you eluded to early in the thread? That would be great! Thanks a lot.

Frank, sounds like your moving along nicely. Keep plugging away and you’ll get it done. Have you found an end buyer yet? Have you checked into seasoning issues with the end buyer and their ability to obtain a loan? I am also very curious as to your agreements with the Realtor that you use. It sounds like the Realtor is paid the 6% (or other bank agreed amount) on your successful short sale purchase, with the bank of course paying the commission. If you don’t have an end buyer lined up before you close on your deal and it has to be re-listed with the Realtor, do you pay the another Realtor commission when it eventually sells to the end buyer? I am just trying to figure out the best of the Realtor involvement. It seems like more and more banks are requiring a listing agreement with the ss package. Keep us posted in your progression.