Hello all, newbe here, lots of study. found home thinking of Short Sale but there is well over $12,000 in back taxes and still need to check federal and state and any other liens. Sheriff sale disclosure asking 60g less than estimate resale value but home needs lots of work from looks of outside. Is it common to find homes with lots of taxes owed? from what i understand a short sale, you offer LESS than the forclosure notice is asking correct??? how much less, is there a formula? sould i take heavy tax dept into consideration? If it goes to foreclosure and the bank buys it at auction, are they responsible to pay off taxes BEFORE they resell it? THANKS FOR YOUR HELP AND INPUT, i look forward to your responses and ANY advice you have. THANK YOU , TLJ
You’ve got a lot going on with this one! Often times the lender will pay off the back taxes to protect their 1st lien position. If they amount to pay off the loan does not include these taxes this is something to consider in your numbers. A offer is considered a short sale when you are offering the lender less than what is owed. What ever price you offer them you are going to have to show them why you are offering that price, detail the hardship, and paint a picture that shows that discounting this note and selling it, is a better option than the cost of foreclosure and having to sell the home as an REO.
Hope this helps.
All the best,
Shawn
THANK YOU! I appreciate your reply. great addvice. any recommended books or sites to study short sale process in more detail?
tljmmm
I don’t know one off hand. My training has been progressive. If you do choose to work this investment path by yourself, make sure you educate yourself FIRST. If you go in with guns blazing, the person on the othr end will know you’re green and if you are difficult may note your name in the computer, making every deal thereafter difficult if not impossible.
Smart investing,
Shawn
Or, you wait until you think you know everything you need to know and then by that time you never get started.
A simple formula that works for me is:
80% of fixed up value
minus fix up costs
minus taxes and other liens
equals what I would offer
The 20% allows me to pay for finance costs, maintenance including interest and utilities, marketing costs and still give me a reasonable profit.
Then I would need to convince the owner to accept what I had offered and sign a contract subject to a short sale.
Last, but certainly not least, would be to compile a complete and well documented package for the lender explaining why it would be beneficial to them to accept my offer.
Good Luck
Consultant,
Could you please provide some insight to the verbiage you use in making a contract subject to a short sale? I assume this verbiage is in an addemdum to the RE contract?
I use a Realtor to whom I pay a nominal fee. The addendum simply states that this sale is subject to the lender approving a short sale of $???
I was just reading the “how much can you charge them?” thread that caught me off guard. After a short sale, is the homeowner still responsible for the unpaid balance of the loan? I thought the whole premise of a short sale was that the mortgage company agrees to take a hit and relieve the remaining balance of the debt operating on the bet that they will end up taking a bigger hit if they foreclose. Is there language that could be in the RE contract that would protect the seller from the mortgage company trying to collect the balance?
Usually there is no obligation to the previous home owner from a short sale. On rare occasions, I have seen the lender ask for a note.
There can be income tax consequences however.