I have a seller where a short sale would be necessary. They have 2 loans on the property. One for 140k and a second for 30k. I would need to get it down to 130k total for it to make sense to buy it. Which lender do I negotiate with first? I was thinking I should call the second and see what I can get them down to before sending the P&S at 130k to the 1st. Any suggestions would be most appreciated.
Thanks
John,
Since no one has responded, I would take that as a hint that no one knows. I do. The first is probably in a very secure position. Like 80%? These deals are almost impossible unless… it’s the same lender. Which is unusual because they sold the 2nd to someone else. What you will find is the first will not delay the sale and the second will not be very negotiable either.
I think that is because the second has bought the note “with recourse”/and or some kind of reimbursement if the note goes into default. I’ve seen it enough to know not to try a short sale in this situation.
As a matter of fact I wouldn’t try any short sale unless there is serious damage to the property. They are taking them back and selling for 90% of fair market value in many cases.
EH
When the 1st TD is below FMV they (1stTD) will only allow the suborinate lenders $1K. Negotiate with the 2ndTD first, providing (among other things) a market analysis and a prequal letter. Let them see clearly that their money is gone, it ain’t coming back, and that the right thing to do is accept the offer. If they ask what the 1stTD is saying simply state that the 1stTD will only allow 1K. By the way, I haven’t run into a subordinate lender yet who doesn’t already know this… asking for more is just a negotiation tactic. It never hurts to ask.
Regardless of whether or not you have a release from the 2ndTD you can start talking to the 1stTD. I only say talk to the 2nd first because they’re the ones with the more bitter pill to swallow.
I feel that EH is correct in calling this a tough situation, but that does not preclude the potential for making money on it.
John08-
How much is the place worth (FMV)? Make sure your comps are auccurate.
How far behind on the 1st is the homeowner?
You should be able to get that 2nd down to 1k if you can convince them that the place is worth less than what the first is owed. Send them whatever they require for a short sale and also include mls comps supporting your position. I also include the notice of lis pendens (court papers showing mortgage foreclosure preceeding have started). increditably they sometimes ACT as if they did not know this.
Once you secure this make your pitch to the 1st. According to you all you need is a 8% discount from what the 1st is owed to bring you to 130k. What’s the FMV?