Author Topic: Short-Sale/Pre-foreclosure advice?  (Read 825 times)

maz_phil

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Short-Sale/Pre-foreclosure advice?
« on: August 01, 2018, 01:10:38 PM »
Hello Mustachians,

I am looking to buy a property that is listed as having defaulted on their mortgage payment(s), but has not yet been repossessed by the lender. I want to reach out to the owner of the property, and ask them if they would potentially sell it to me.

Is there a way to find out how much their mortgage is for, and how much they still owe on the property? I am also interested in learning how far behind they are on their payments? Do any of you have advice or past experience with these sorts of sales?

Thanks,
Maz_phil

Mother Fussbudget

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Re: Short-Sale/Pre-foreclosure advice?
« Reply #1 on: August 01, 2018, 04:18:58 PM »
I did a short sale 8 years ago.  The owner has to have the house up-for-sale.  The owner has to get the bank servicing the mortgage to agree to the amount offered.  In my case, I had to show I had put the house up for sale, and dropped the price until I got an offer.  I had to go down to half what I paid for it before getting an offer (bought in early 2007, sold in early 2010).  The bank agreed to accept that amount, and the sale went through. 

In any case, the sellers will have to list the house for sale, and get the bank to agree to accept whatever the offer is in exchange for the house.  The bank then writes off the loss, and the former owner gets a bad mark on their credit report that doesn't drop off for 7 years.  But it's not as hard on the owner as a foreclosure would be. 

maz_phil

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Re: Short-Sale/Pre-foreclosure advice?
« Reply #2 on: August 02, 2018, 10:46:36 AM »
I did a short sale 8 years ago.  The owner has to have the house up-for-sale.  The owner has to get the bank servicing the mortgage to agree to the amount offered.  In my case, I had to show I had put the house up for sale, and dropped the price until I got an offer.  I had to go down to half what I paid for it before getting an offer (bought in early 2007, sold in early 2010).  The bank agreed to accept that amount, and the sale went through. 

In any case, the sellers will have to list the house for sale, and get the bank to agree to accept whatever the offer is in exchange for the house.  The bank then writes off the loss, and the former owner gets a bad mark on their credit report that doesn't drop off for 7 years.  But it's not as hard on the owner as a foreclosure would be.

This was incredibly helpful. Thank you for taking the time to share this.

Lmoot

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Re: Short-Sale/Pre-foreclosure advice?
« Reply #3 on: August 06, 2018, 04:19:18 AM »
 I would tread carefully. I can only assume someone in pre foreclosure is feeling quite emotional and defensive, and still trying to figure out their next step (are they going to fight it? Are they going to short-sell it? Let it fall into foreclosure? Bankruptcy? They are also probably getting inundated with similar requests, possibly from individuals but most likely from investors. Foreclosures can last for a really long time. My neighbor has been in pre-foreclosure for over a year.

Also, as someone mentioned before, pre-foreclosure is essentially a Lena. And you will be at the mercy of the lienholder (the bank/lender), even more so than homeowner. I purchased a pre-approved short sale, meaning the price listed it was already approved by the bank. I was able to negotiate a bit lower, but it was within the wheel house of how low they would go, and I negotiated directly with the bank, not the owner. Preapproved short sales go through much quicker. I had the keys in my hand 30 days after submitting my offer.

Even if the homeowner gave you the information you wanted, and the bank agreed to work with you, it could still take well over a year before you could take hold of the property.

Dicey

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Re: Short-Sale/Pre-foreclosure advice?
« Reply #4 on: August 14, 2018, 08:47:43 AM »
^^This^^ We bought our home on a lender-approved short sale. We outbid all other offers (12) because the lender only wanted to see the best offer. It still took eight months to close, because the lender sold the loan while we were in escrow. Then the new lender wanted more money. We said no and the house finally closed. It was a nightmare, but at least we had a place to live in the interim. Proceed, if you dare, with great caution. Also, don't forget to check for back taxes owed.

Krolik

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Re: Short-Sale/Pre-foreclosure advice?
« Reply #5 on: August 16, 2018, 11:03:29 AM »
I did a short sale 8 years ago.  The owner has to have the house up-for-sale.  The owner has to get the bank servicing the mortgage to agree to the amount offered.  In my case, I had to show I had put the house up for sale, and dropped the price until I got an offer.  I had to go down to half what I paid for it before getting an offer (bought in early 2007, sold in early 2010).  The bank agreed to accept that amount, and the sale went through. 

In any case, the sellers will have to list the house for sale, and get the bank to agree to accept whatever the offer is in exchange for the house.  The bank then writes off the loss, and the former owner gets a bad mark on their credit report that doesn't drop off for 7 years.  But it's not as hard on the owner as a foreclosure would be.

This is our story as well (even the same dates of purchase and sale.).
Just remember that you will be dealing with a bank in reality and not so much with the seller who has very little to say. It is the bank who approves the sale and it is a slow process.

J Dough

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Re: Short-Sale/Pre-foreclosure advice?
« Reply #6 on: August 16, 2018, 12:14:11 PM »
There isn't a public source of information where you can find out how much they still owe on the property. Which is good -- I'm pretty happy that type of financial information isn't public record. However, if you go to the county recorder's office and look up the property, you might be able to make a pretty good guess. The mortgage lien will be filed, and depending on the county, might have some information about the original loan amount and interest terms. If you can get that information, you can extrapolate to know how much would be left on the loan if the payments were current. Of course, you won't know when the payments started to fall behind. The county recorder's website might have some helpful information. Some counties put a lot more online than others.

You might get a decent ballpark with more guesswork. You can find the owner's original purchase price and purchase date. Google historic mortgage rates for that date. Run the numbers with 20% down, and again with $0 down and a higher rate. You'd still be guessing about when the payments stopped.

Of course, you could ask the owner. I agree with the advice to be careful in approaching the owner, and that even if the owner is willing to sell, you will likely be dealing with the bank more than the owner. It would be a good sign if the current owner has been in the property for a long period of time, maybe 10+ years. Just because the owner can't make payments now doesn't mean the owner doesn't have positive equity. If the owner needs to get out of the situation, the bank won't care about the sale as long as the purchase price is more than the loan.

FIRE@50

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Re: Short-Sale/Pre-foreclosure advice?
« Reply #7 on: August 16, 2018, 12:23:58 PM »
Hello Mustachians,

I am looking to buy a property that is listed as having defaulted on their mortgage payment(s), but has not yet been repossessed by the lender. I want to reach out to the owner of the property, and ask them if they would potentially sell it to me.

Is there a way to find out how much their mortgage is for, and how much they still owe on the property? I am also interested in learning how far behind they are on their payments? Do any of you have advice or past experience with these sorts of sales?

Thanks,
Maz_phil
I would say that this information isn't relevant. The bank is going to try and get current market value for the home regardless of what the original mortgage was or what they currently owe.

Lmoot

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Re: Short-Sale/Pre-foreclosure advice?
« Reply #8 on: August 16, 2018, 04:49:51 PM »
Hello Mustachians,

I am looking to buy a property that is listed as having defaulted on their mortgage payment(s), but has not yet been repossessed by the lender. I want to reach out to the owner of the property, and ask them if they would potentially sell it to me.

Is there a way to find out how much their mortgage is for, and how much they still owe on the property? I am also interested in learning how far behind they are on their payments? Do any of you have advice or past experience with these sorts of sales?

Thanks,
Maz_phil
I would say that this information isn't relevant. The bank is going to try and get current market value for the home regardless of what the original mortgage was or what they currently owe.

I disagree. Thatís why short sales exist. Itís literally the lender taking a loss on the amount owed, just to get rid of the property. They are not in the business of real estate, they are in the business of money. And often times it cost much more to maintain a property especially one in which no one is living or taking care of it, then to sell it at a deep discount. If all they cared about was market value then there wouldnít be short sales, auctions, and foreclosure markets.

Dicey

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Re: Short-Sale/Pre-foreclosure advice?
« Reply #9 on: August 17, 2018, 01:10:26 AM »
Hello Mustachians,

I am looking to buy a property that is listed as having defaulted on their mortgage payment(s), but has not yet been repossessed by the lender. I want to reach out to the owner of the property, and ask them if they would potentially sell it to me.

Is there a way to find out how much their mortgage is for, and how much they still owe on the property? I am also interested in learning how far behind they are on their payments? Do any of you have advice or past experience with these sorts of sales?

Thanks,
Maz_phil
I would say that this information isn't relevant. The bank is going to try and get current market value for the home regardless of what the original mortgage was or what they currently owe.

I disagree. Thatís why short sales exist. Itís literally the lender taking a loss on the amount owed, just to get rid of the property. They are not in the business of real estate, they are in the business of money. And often times it cost much more to maintain a property especially one in which no one is living or taking care of it, then to sell it at a deep discount. If all they cared about was market value then there wouldnít be short sales, auctions, and foreclosure markets.
Yes and no. In our target rental area, we're seeing banks asking for market price. Um, no, assholes. Your property is a neglected POS with unknown problems and the recent sale you're comparing to was pristine, on a prime lot, with upgrades galore. They sit until the bank lowers the price, typically months later.

FIRE@50

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Re: Short-Sale/Pre-foreclosure advice?
« Reply #10 on: August 17, 2018, 11:55:38 AM »
Hello Mustachians,

I am looking to buy a property that is listed as having defaulted on their mortgage payment(s), but has not yet been repossessed by the lender. I want to reach out to the owner of the property, and ask them if they would potentially sell it to me.

Is there a way to find out how much their mortgage is for, and how much they still owe on the property? I am also interested in learning how far behind they are on their payments? Do any of you have advice or past experience with these sorts of sales?

Thanks,
Maz_phil
I would say that this information isn't relevant. The bank is going to try and get current market value for the home regardless of what the original mortgage was or what they currently owe.

I disagree. Thatís why short sales exist. Itís literally the lender taking a loss on the amount owed, just to get rid of the property. They are not in the business of real estate, they are in the business of money. And often times it cost much more to maintain a property especially one in which no one is living or taking care of it, then to sell it at a deep discount. If all they cared about was market value then there wouldnít be short sales, auctions, and foreclosure markets.
Your response doesn't make sense to me. I agree with the bolded part, but the servicer is not interested in selling it at a deep discount.

In no way do those facts support the italicized part. Short sales and foreclosures happen because the homeowner hasn't paid their mortgage and they are most likely also underwater on their mortgage. The servicer is still obligated to get as much money for the property as they can which is current market value.

FIRE@50

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Re: Short-Sale/Pre-foreclosure advice?
« Reply #11 on: August 17, 2018, 12:01:58 PM »
Hello Mustachians,

I am looking to buy a property that is listed as having defaulted on their mortgage payment(s), but has not yet been repossessed by the lender. I want to reach out to the owner of the property, and ask them if they would potentially sell it to me.

Is there a way to find out how much their mortgage is for, and how much they still owe on the property? I am also interested in learning how far behind they are on their payments? Do any of you have advice or past experience with these sorts of sales?

Thanks,
Maz_phil
I would say that this information isn't relevant. The bank is going to try and get current market value for the home regardless of what the original mortgage was or what they currently owe.

I disagree. Thatís why short sales exist. Itís literally the lender taking a loss on the amount owed, just to get rid of the property. They are not in the business of real estate, they are in the business of money. And often times it cost much more to maintain a property especially one in which no one is living or taking care of it, then to sell it at a deep discount. If all they cared about was market value then there wouldnít be short sales, auctions, and foreclosure markets.
Yes and no. In our target rental area, we're seeing banks asking for market price. Um, no, assholes. Your property is a neglected POS with unknown problems and the recent sale you're comparing to was pristine, on a prime lot, with upgrades galore. They sit until the bank lowers the price, typically months later.
In the scenario that you laid-out, the bank was asking for above market price. As you have essentially pointed out, that is not an effective way to sell a home.