SHORT SALE

Submitted by CC from CA - 04/05/2010 - 9:44pm

When it comes to a short sale that has a first and second with same lender and the first is foreclosing with an estimated bid at $430K. Would the price for a short sale be discounted below the first ($430K) or both loans together of the original purchase price?

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Comments

Submitted by Michelle - 04/06/2010 - 8:23am

The short sale is negotiated independently of the foreclosure. In a short sale all liens need to be cleared from a property. In a traditional sale you would order payoff demands on all loans and liens so that title could be conveyed and the new owner given a clear title policy. In a short sale the liens need to be released and they must agree to release the lien and take nothing or accept a "short pay" amount and agree to release the lien. The lenders would approve a short sale based on the loss mitigation package submitted by the seller which outlines their financial condition and hardship. The other major consideration is fair market value of the property. The lender is looking at this as a business decision. Should they accept the short pay amount and release the lien or should they foreclose and then sell the property.
Keep in mind that the Short Payoff may release the lien on the property but may not release the borrower from future obligation on that debt.

Submitted by bobinspira - 04/06/2010 - 10:58pm

CC from CA 4/5/10 -

Fair Market Value is what the bank will look for in a short sale. The bank will hire a Realtor to complete a Broker Price Opinion (BPO) and/or complete an appraisal. Once the the FMV is determined the bank will evaluate whether it makes economic sense to approve the short sale. Banks do NOT want to foreclose. It is a lose-lose situation. When a short sale occurs the damage is not as severe as a foreclosure for the bank and homeowner.

So, Bid Price, how much is owed, original purchase price are not factors or are minor factors in the banks decision making.

There are several areas on these forums that explain the advantages of a short sale.

Anyway, if you or anyone you know wants specific feedback on their situation feel free to e-mail me at bob@inspiragroup.com.

BOB, MBA, CDPE, ePro
bob@inspiragroup.com

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