short sale me................

:help I am new to real estate short sale investing.
My seller is behind in payments about $20k. Trustee (auction) sale is on March 12. Has a 1st and 2nd loan with the same bank. Total owe is $624k. Properties in this are are taking 90 days to sell. Comps around this area are for $690,000.
What are my option?
How much should I offer the banks? What are my profits and my expenses?? How much should I get it for and List it for once the bank accept my offer??
What happen the the behind payments of the seller? Is the seller liable for anything or he is free of the home debt???

Thank you Very much

You may or may not have time to do a short sale. There is only a month to go before the auction. Short sales require multiple layers of management to approve, so you need to get going.

You have an uphill battle as the second mortgage is owned by the same company as the first. If it were different, then that second mortgage would probably be willing to settle for 5 cents on the dollar. Probably not going to happen here, though.

First thing I’d do is get a written, signed authorization from the borrower to discuss the loans with the mortgage company. You can then open a dialogue with them and tell them that you’re trying to buy the property, but you will need to do a short sale.

Figure out how much you’re willing to pay for the house, and write a formal contract for that amount. Then prepare a memo that discusses why you offered what you you…the value of the property in its current condition, the repairs you will have to make, send photos of all the problems with the house…make it look really bad.

Then you will need to prepare a package of information about the borrower to show why they are in financial distress. You will need the borrowe to write a hardship letter.

Then, prepare a HUD-1 to show the lender how the settlement would look if your deal is accepted. You probably do not want the seller to get any cash here. Lenders don’t like taking losses and seeing their borrowers walk away with someone money.

You can negotiate to ensure that the shortfall between your price and the debt is forgiven by the lender, but the lender will then issue a 1099 for that difference and it could be taxable income to the borrower. However, if the borrower can show that he was insolvent when the debt was forgiven, the IRS can make it non-taxable.

You’ve got a lot of work ahead of you! Short sales are not all that easy…