Anyone who closes short sales knows that these second mortgages can be tough to deal with.  When the first forecloses, the second can still go after the borrower for the full balance by suing on the promissory note, so they tend to want to hold out for as much as they feel they can claw back on the short sale and their behavior can potentially kill the transaction.

Readers of the Broken Credit Blog know that I purchase short sales in Florida and throughout the U.S.A.  Call me crazy but I like the challenge of orchestrating a perfect short sale strategy all the way down the finish line.  And along those lines, here's an example of how to successfully deal with a second mortgage on a short sale.

Bear in mind that the second can offer a full release of liability, a lien release only, or a partial release with signature loan.  The shorting second wants the seller to commit to paying back the deficiency while the seller wants a full release.  Solving this negotiation puzzle takes time and a calculated strategy.  Contrast this with the fact that the normal short sale submission involves a buyer who is extremely anxious and desiring/demanding to close within 30 days of contract.  This is why the short sale and the type of release need to be negotiated in advance of any end buyer.  Here's a follow up to Estoppel The Insanity:

HSBC Second Mortgage Crummy Short Payoff

Seller Counters By Crossing Off Crummy Terms

HSBC Gives In

I love a happy ending.

Has anyone seen the text on SB 2226?  Loan originators must be licensed in Florida which I agree with; however, here's the definition of 'loan originator':

"an individual who, directly or indirectly, solicits or offers to solicit a mortgage loan, accepts or offers to accept an application for a mortgage loan, negotiates or offers to negotiate the terms or conditions of a new or existing mortgage loan on behalf of a borrower or lender, processes a mortgage loan application, or negotiates or offers to negotiate the sale of an existing mortgage loan to a noninstitutional investor for compensation or gain." 

Basically, anyone who is negotiang Florida short sales must be licensed as a 'loan originator' and that would include real estate agents as of this date because there is no exemption or at least none that I could see.  I wonder if this is gonna sneak through unchallenged...??

C'est la Vie.

Let me dispel some myths here about short sales.  Not all short sale approvals are created equal.  Taking 30%, 40%, 50% off a mortgage balance is not that big a deal at this stage in the housing market.

You really see what dire straights the housing market is in firsthand when these extreme short sale payoffs are received. 

Here's a first mortgage of $253k shorted for a net of only $82,195 which is "full and final satisfaction on the first mortgage indebtedness". Nice!

This one is $186k shorted for $59,100.  Now, when the short payoff is silent as to the deficiency but references the purchase contract, then check with your attorney about including words to the effect of "this contract contingent upon (shorting lender) providing full release of liability with no rights to the deficiency" which may effectively produce the same result.

And I think we may have a new short payoff record.  One of my negotiators called me a few hours ago to let me know that HSBC is accepting $15,000 as their net on one of our purchases.  It's almost getting to where houses are cheaper than cars.

Thanks for tuning into this weeks episode of what's a short sale discount.

I hold a junior lien on a property where the first mortgage is in default.  The first mortgage is a rural housing loan.  One of my experienced loss mitigation negotiators worked with the seller for a couple of months to have the first mortgage verbally agree to a short payoff.  This was at the end of 2008 and this was communicated to the real estate listing agent.  The listing agent and my negotiator agreed at that time that the lender's value assessment was too high and that they would work together to challenge the value before requesting a formal short payoff and then closing.

Guess what?  The listing agent stopped returning calls for my negotiator and once the listing agent knew of the agreed short sale amount he decided to bring a buyer in for this ‘approved short sale' and circumvent my negotiator to make a 6% commission on a rural housing pre-foreclosure sale and leave my negotiator out in the cold.  Not nice and not ethical.

Here's the reason for my post.  The rural housing program mirrors the old FHA pre-foreclosure sale.  The required net is 82% but on the old FHA program HUD would allow $2,000 to discharge junior liens and presently that has been raised to $2,500.

For some reason the listing agent's title company decided to wait until the afternoon of the day before the closing to call me to request that I discharge the lien (free of charge no less) while the real estate agent makes an $8,000 commission and leaves my negotiator, who obtained the short payoff, out in the cold.  Now, not only is that not nice, that's also not a very bright move.

The rural housing program could have permitted the lien be discharged through the shorting lender's net and/or my negotiator could get paid for her work.  Instead, and at this point, the way that it will close is for the sales price to be reduced by a few thousand and the real estate commission to be reduced by the same amount and then the lien release fee will be listed on the buyer's side of the HUD1.  In essence, it comes out of the real estate agent's commission.  The buyer (who is a cash buyer) pays the same acquisition price for the house, the lender nets the same, the HUD1 is in compliance, and the listing agent makes half of what he intended.  This was not the intended way for this to close.  The real estate agent could have made max commission by working with my negotiator instead of trying to snake the short payoff.  But that's ok.  I forgive him.

So, this is a lesson for anyone that is working short sales on rural housing loans to be mindful of junior liens and for those realtors who take payoff letters from 3rd party negotiators and try to leave them in the cold, shame on you.

A mortgage with a $211,657 balance on a home that's worth considerably less.  A contract comes in at $100k, another at $120k, and another at $170k.  Which of the three contracts should the seller accept?

The logical answer is for the seller to accept the $170k contract, right? 

Let me tell you why I feel that's probably the wrong contract to accept to get the property sold.

The seller accepts the $170k contract and the listing agent puts the short sale package together to submit to the shorting lender.  The lender orders a BPO and, by the time the lender counters, the $170k buyer is gone.  Now what?

The shorting lender is looking for a $170k buyer.  Why shouldn't they?  You've already shown them that there was one buyer who (for a moment and before he came to his senses) was willing to offer $170k.  He's since changed his mind and made offers on other properties or closed on another one similar for $155k.

This is a subtle problem with short sales that doesn't get talked about much.  Lenders are debt collectors.  They don't care about customer service.  They don't care about anything but generating the highest net present value on the disposition of this property.  The lender wants you to bring another buyer at that high price and you can't.  Plain and simple.  The property is headed to foreclosure.

Had the seller accepted the contract from an honest, ethical investor at $100k who was willing to play the games that the shorting lender likes to play, then the short sale could have been pre-approved at a lower amount and prepared for any buyer that wanted to offer the lower amount.

The result would be that the $211,657 mortgage debt could be negotiated down to $103,625 and sold to a buyer with FHA financing at $116,500.  This one closed yesterday. 

This is what I do.  I buy, process, and close short sales with a team of a few dozen employees and contractors in Clearwater, Florida.  I also provide FHA financing to buyers of short sales.  I have seven different exit strategies and among my favorite is to purchase the property for cash, although we have a fail safe of terminating our contract and substituting another buyer that purchases directly from the seller.  You make the real estate commissions. 

If anyone reading this has any single family homes for short sale and there is a documentable hardship story that can be presented to the lender in order to obtain a full release of liability, then contact me and we'll see how we can work together.  But whether we work together or not, please make sure you are giving your sellers a fighting chance to sell their short sale by avoiding the subtle and not widely discussed pitfall that I have described above. 

Paul 702-988-2560

Call me anytime or visit my blog for free information on how to get your credit issues resolved.

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             Click Here: Contact Paul's Short Sale Team

Hello Floridians,

Do you have a Florida short sale?

I am currenty purchasing Florida short sales!

So, if you have a Florida short sale for sale, then let's talk!

Paul@SellerHelpsBuyer.com

(702) 988-2560

We are also hiring experienced short sale processors to add to our dream team in the Tampa Bay area of Florida.

Hello Florida real estate agents and Florida sellers,

I am interested in talking with you about purchasing your Florida short sales.  I am a cash buyer.

Do you have a Florida short sale listing on a single family home with total indebtedness of $400k or less?

Is the seller past due and experiencing a documentable hardship?  Let's get that property sold!

I own a loss mitigation company with professional short sale negotiators that have decades of experience, so you will handle the real estate side and my people will deal with the bank.

I also own a mortgage company that provides financing to short sale buyers throughout Florida.

You can send an email to Paul@SellerHelpsBuyer.com to schedule a phone call.  Don't delay!

Paul Jerome Porvaznik

(702) 988-2560

Paul@SellerHelpsBuyer.com

Hello Active Rain Community,

If any of you have short sales in Florida, you'll be pleased to learn that I'm purchasing short sales throughout the state of Florida. 

I am a cash buyer and I'm presently looking for single family homes with $400,000 or less total indebtedness.

I have the dream team of short sale negotiators working under Loss Mitigation Time, LLC at my expense to handle all of the negotiations with the bank so that you won't have any of the headaches.

I also own a mortgage company and provide financing to buyers of short sales in Florida.

Call or email me today and let's get your short sale/s sold!

Paul

Paul@SellerHelpsBuyer.com

c/o Seller Helps Buyer

(702) 988-2560