short sale ?

someone called me about a house her mother bought in march of 2007 she since have gotten ill and moved in with her daughter. she paid 155k for the house 1st 124000/ 2nd 31000. also she’s 4mos behind on the 1st and 3mos behind on the 2nd. i thought this might be a good short sale. this would be my first try at a ss. my ? is, i just submit the discounted offer to the first mortgage and if accepted, offer 2nd $2 or 3000 dollars. i don’t have to submit a ss package to the 2nd? right.

First of all, you need to take a look and establish what the current FMV is. She may have bought it at $155k, but what would it be worth to sell now? If $155k or higher, then you might have something. If it is now lower - because or market conditions, etc, then you probably have nothing.

The reason is - if the house right now has a FMV above $130k, then the 1st has zero motivation to SS - because they can foreclose and get their money back. AT $130k they probably won’t do it. If you can submit a case that the home is now worth only $110k or lower because of needed rehab then you might be in business.

As far as the 2d - they will probably deal if you can show them that they are about to be foreclosed out of their investment. But again - it depends on who has the 2d. If the home’s value is only $140k you can probably deal the 2d out with a small payoff. If the property is worth $175k then it is worthwhile for the 2d to pay up the 1st, foreclose on it themselves and get their money back. Of course, many 2d holders won’t do this, but some will.

So it comes down to the true value of the property. But probably, the 1st won’t budge, the 2d would cut a deal, but will it be a big enough deal to make it worthwhile?

Just because a property is a SS candidate doesn’t mean it is a good investment. If the house is overmortgaged and the bank will only SS to somewhat close to current FMV, then you have no good deal. You can buy stuff every minute of the day close to the FMV right off the MLS if you can negotiate at all. Normally several factors need to be present to make a SS worthwhile - Overmortgaged house, motivated seller and something wrong with the house (needs rehab, ect) so you can demonstrate to the lender that foreclosing is the last thing they want to do because the property cvalue is maybe 50% of ARV.

Then once you have it, you have to do something (rent, LTO, wholesale, retail) to make all of that work worthwhile.

Good luck.

We have been doing short sales for over five years and when we encounter two or more mortgages we negotiate the first mortgage first and get their offer in writing. We then submit a full short sale package to the other mortgage and lien holders showing them that the first is willing to discount. This lets them know if the property goes to sale they will probable get wiped out. At this point we have some ammunition in our gun and are in a better position to negotiate actively with the other lien holders.