Possible Short Sale?

I have a friend who has not made a payment on her house since May, 2006. Her house is being auctioned off in April. She bought the house for $135,000 in 2004 and in my opinion it is probably still worth that today. (no appreciation) She owes $107,000 on the first and $28,000 on the second. She has filed Chapter 7. She has given me all of the bank info that I need to contact them, but I have not had her sign anything yet. What should I have her sign before moving forward. Would this even be a candidate for a SS? If not, what would be a better move?

If she is already in bankruptcy she cannot transfer deed to you - illegal.

You can talk with bank about a short sale (not illegal) but w/o deed you may be working for free.

Course when the chapter 7’s discharged, she’ll be right back in the same spot.

I have contacted the banks and they have given me a list of things they need. The first mortgage is $107,000 and the second is $28,000. I plan to offer $1000 for the second and $80,000 for the first. What are your thoughts on those amounts? I also have heard a lot of people saying that they aren’t wholesaling the ss. Isn’t that why you do a short sale? I plan to find a buyer before the auction and sell it to them for a profit. Is there a better option?

You’re going to get in a world of trouble if you don’t talk to the trustee first.

If she’s in chapter 7, she can’t sell anything without the court’s permission.

I was told that when I see the short sale will be successful then I talk with the trustee to release the property from the bankruptcy. That is from the Ron Legrand “Short Sales Made Easy” course. Is that not correct? Thanks for everyones help!

This all depends on personalities

The trustee might not like you going over his head

The bank might not like you going over the trustee’s head

The bank might not be happy about you negotiating with one of their debtors when they’re not allowed any contact

But the bottom line is, if you negotiate the contract with the seller, then negotiate the SS with the bank, then go to the trustee and he says no, you just did a load of work for nothing

Make sure you have a release of information and or the person and talk to her lawyer. Tell the lawyer what you want to do (maybe not the price but process), and see what they tell you. Each state will be different in some way or another but from what I have been told by my lawyer that would be the correct way to do it. This is not legal advice just what I was told to do if I find a house that is in bankruptcy that I want to work with.


for ch 13 I know you can request that the house be released from BR, but I don’t know about ch 7, ask the BR lawyer. Be careful, do not give legal advice to people in BR

If I recall corectly, you need to send a notice of abandonment to the chapter 7 trustee to ahve him sign and fax back to you.

I just found out the house is no longer in bankruptcy. I have spoken with both lenders and they have given me a list of things they want to see. I am having my title company work up a pre-lim HUD and I am writing a sales contract. I am trying to determine who I put as the buyer. I have someone who wants to purchase the house from me after I get it. I plan to do a double close for the first time and need some help. The only thing that I have had the seller sign at this point is a Release of Information for the lenders. So my questions are:

Do I need to put the house in a land trust first?
Who do I put as the buyer in the sales contract and Hud-1?
How does the double close work exactly?

Thanks for all your help!

No you don’t need a land trust, but it’s entirely up to you for tax reasons

You are the buyer

You go to the closing, and buy the house from the seller, immediately you go to the next closing and sell the house to your buyer, you then go back to the first closing and give them the check from your sale, they give you a check from your purchase

Robert’s your father’s brother

I just got off the phone with my title company and they said there may be a “seasoning problem” with the title. I will only have title for a few hours and some lenders require you to have it for 6 months or more. Have any of you gotten around this?

The seasoning problem is not yours, you aren’t taking out a loan

Seasoning is when someone takes out a loan and must then make payments on it for a minimum length of time before paying it off

The seasoning problem would be with the seller, if she bought the house last May and then never made a payment on it, the seasoning might not run out until May this year

Legally you won’t hold title at all

As I understand it the seasoning is on a mortgage not the owner ship of the house. At a back to back closing you pay cash for the house to the foreclosing bank. They only see a cash transaction and the house should be the buyers (investors) free and clear. Then the investor’s buyer is buying a house that is free and clear of all loans. Other than the time period of ownership buy the investor this should be no different than buying the house from some one who has paid off there loan after many years.
I have not run across this problem but have heard others talk about the bank saying something about seasoning. I learned that the chain of title is what the investor should be most concerned with is this true?


My buyer is getting a bank loan to purchase this house. I was told that they may not be able to get financing because of the seasoning issue. How do I get around not having the title in my name? Won’t the title go in my name at the first closing? Would a land trust help me in any way?

There is no seasoning issue with your seller, she bought the house three years ago :banghead

There is no seasoning issue with you, you are paying cash, (from the second closing). :banghead

There is no seasoning issue with your buyer, they didn’t buy the house yet. You can only have a seasoning issue once you buy the house and start paying the mortgage. :banghead

Your seller has no mortgage, it’s being foreclosed, no seasoning. :banghead

You have no mortgage, you’re paying cash, no seasoning. :banghead

Your buyer doesn’t have a mortgage until they sign on the dotted line, no seasoning. :banghead

Have I made that clear? There is no seasoning issue. :banghead

If your title agent says there is, find another title agent. :banghead

:banghead :banghead :banghead There is no seasoning issue. :banghead :banghead :banghead

I have talked to several real estate attorneys and lenders and they all agree that the buyer will have a problem if she goes with FHA or any other government loan. They require the seller to have had the title for at least 90 days. If the buyer goes with a conventional loan there is no time requirement. I realize that I will not have a seasoning problem, but the problem comes the day I get title for the property will be the same day I am selling it. I have decided to do seller financing for 90 days if she does go with an FHA loan.

I submitted the short sale package today and will let everyone know what happens with the deal.

I was rereading over the previous posts in this topic and I noticed that JDS stated that I won’t have title for this property. Is there a way to get around holding title? The way I see it I will have title after the first closing when I buy the property from the seller. Am I just missing something?

It’s a technicality, and might depend on your whereabouts, but in some jurisdictions, when you do a double close, you never legally hold title to the property, that’s why I figure there’s no seasoning.

I might be wrong.