I received a question from a REALTOR today, who read:
A Realtor's Guide to "PMI & Short Sales"
Let's call her Susan. She explains:
I have done several successful short sales in my career but recently felt the "sting" of the bank claiming they will submit our current offer on the table for approval... providing the seller agree to sign a note to the PMI company for 15K for 10 years at $125.00 a month. If he refuses they claim the short sale will be denied.
The outstanding loan balance is 132,000
Offer amount 117,500
Offer amount will net the bank 104,980
BPO 119,000
My seller is refusing to sign such note and sees no alternative except to file bankruptcy. In your experience, what are my chances or choices If can get the bank to agree to a lesser amount of say.....half of what they are asking for to satisfy the PMI company.
Susan, I see three options:
1- Calculate the net present value of the "note" the PMI company wants (using a 6% return, that number is about $2100). Propose that the lienholder take a $2,100 hit to the payoff and offer that amount up to the bank). You may have to contribute part of your commission and the buyer's agent's commission to get the first lienholder to agree to this.
2- Figure out the net proceeds to the bank if the home were to be acquired through foreclosure (and subsequently sold asa REO). Sales costs, at $119,000, would be about 8%, which is about $9,500. This means that the "net proceeds" would most likely be $109,000...BEFORE foreclosure costs. The first lien holder and the PMI company would probably split up those foreclosure costs so you're awfully close at the current sale amount. Present these numbers logically to the first lienholder and the PMI company.
3- Walk from the deal and abandon the listing. It sounds like the seller is ready to do just that and file bankruptcy in an attempt to eradicate the loss. The threat of BK (or actual filing) may force both the lienholder and PMI company to look at this scenario differently.
DISCLOSURE: I'm not an attorney nor do I play one on television. You may want to seek advice from your Broker's counsel. Most of the time, however, the PMI company is "playing chicken" with you; they want to see if you can help them "get a little something". I think option one is a good one.
Comments (49)Subscribe to CommentsComment