Short Pay-Off Has Anyone Ever Done a "Short Sell-Payoff (not a Short Sale)

I put a deal under contract and she is 3 months behind. The house is not upside-down but all m investors need a bigger discount.

If anyone has done any can you share what you did? I’ve done SS’s but not note discount pay offs.


First thing to keep in mind is the legal owner is entitled to any equity profits over and above the mortgage debt, even in a foreclosure the owner get's all net proceeds over and above the money owed to reconcile the note, most lenders could not legally do a short sale when the legal owner would recieve cash back regardless of whether it's sold retail or goes to foreclosure and is sold!

You really need to check on state law in the state where this home is as it might explain a lot, if there is not a mandatory compelling law protecting the equity and requiring the owner to recieve any net proceeds then you could make an offer but I think ethically the lender would turn down any offer knowing Mr. or Mrs. John Doe would still recieve $17k even after all cost’s of a foreclosure and foreclosure sale!


If the property is not upside down, the lender will NOT take a short payoff.

When the banks sell their notes they may take a small discount but it is rare that they would sell one note. When they sell notes (defaulted or not) they sell it as a package. A lot of hedge funds buy defaulted bank notes.

Not knowing more about your deal, maybe what you can do instead is buy it Subject-to. You can offer to reinstate the loan (by catching up the back payments) and inform the owner that the loan will remain in their name for 2 years (as an example, it could be for whatever time frame) before you can put in another loan in replacement.

Inform them that the advantage of this is it prevents further damage to their credit and a faster sale because you do not need to get a new loan to do the deal. You will make the monthly payments on their behalf and maintain the property.

Once the owners agrees to this, you can then rent out the property (again not knowing more about the numbers) and create a monthly cash flow for yourself.

This is a very similar deal I did where the owner had a job transfer and need to get rid of the house fast. He did not want to be an out of state landlord. The property was not upside down yet every RE investor he talked to (I was the 5th or 6th one) was advising him to do a short; I know any type of short would not fly. I took it subject-to, gave him a little cash upfront with the balance on the back and close the deal in 5 days.

Not every deal unfortunately will offer big discounts. Don’t overlook these base hit deals in your search for the home runs.