Are my chances of convincing the loss mitigation to release the property to me better or worse if the balance exceeds the market value?
And one that I’m working on has two liens since she did an 80/20 when the seller purchased it several years ago. Both are with the same lender. Do I need to add anything to my short sale package to account for the second lien or do I just tailor the package around getting the first lien paid off?
Kinda confusing here…does the house have 2 liens and 2 mortgages?
If you’re talking about 2 mortgages from the same lender…that’s common. A short sale is called a short sale because the lender takes a dollar amount “short” of what is owed. Many times the payoff is more than what the homeowner paided for the house in the first place. So…make an offer well short of what is owed, the total of both mortgages. Do you have all the other paperwork in order so that you can negotiate with the lender?
Here’s an example of a couple of scenarios that hopefully someone can comment on…
Take a typical starter home in Charlotte worth $100K. Let’s say I’m looking to negotiate 20% off the market value. Am I more likely to get the bank to agree to release the property to me if…
a) the balance on the mortgage happens to be $105K and I offer $80K?
or
b) the balance on the mortgage happens to be $85K and I offer $80K?
I’m just trying to determine how big of a factor the balance is to the bank. Obviously, they’re losing more money in the first scenario so it must be the overriding issue.
All other things being equal, the balance should not matter because that has no bearing on the value of the property or what it will bring in a quick sale.
Having said that, and having worked in a loan workout group, the amount of the loss certainly has something to do with how easily your offer will be approved.
If you’re offering $80K to pay off an $85K note, that’s a small loss for the lender, something like 6%. Your contact should easily be able to go to his boss and get that approved. He may even have authority to do that on his own since the loss is small.
If the loss is going to be larger, though, like the 25+% that you mentioned, then the lender is going to analyze the deal more carefully to ensure that this is really a reasonable offer. They will want to guarantee themselves that this is the best that they can do given the situation.
Another factor will be how the group’s charge-offs are running versus what they have budgeted. If charge-offs are running behind schedule, they may take your deal more easily, with the inverse applying, too. In other words, there’s a possibility that upper management could say, “We need to manage our numbers and NOT take that loss this quarter (or this year, whatever).”