No Hardship, Just Very Upside Down. Short Sell?

I have a potential seller who has a second home in California, that is 200K upside down, one loan. It is with Citibank. He has assets, good income, with no hardship. He may let it go into foreclosure. Has anyone been able to close a short sale when the seller has no true hardship, can afford the monthly payment, and has assets? I'm leary about seller providing tax returns and financials, just to have the bank decline, and pursue a judicial foreclosure. Any thoughts?

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Permalink Reply by Smitty on August 9, 2011 at 6:29pm

Ask youself why a lender would allow a short sale if someone can obviously afford their mortgage? Why has he stopped making payments? Is it because he can AFFORD his first home and not his second? Why wouldn't he rent it? I ask myself a series of these questions before I take a short sale listing.

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Permalink Reply by Bryant Tutas on August 14, 2011 at 8:14am

In the newsletter today

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Permalink Reply by Gabe Sanders on August 14, 2011 at 9:03am

While the bank may not agree to a short sale, it's probably worth a try. They may ask for money to close, but there's probably a good chance that it will be less than the full amount that they will go after in the case of a foreclosure.

If you're willing to do the work for a sale that may not happen, it may be in the sellers best interest.

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Permalink Reply by Jim Stewart on August 14, 2011 at 9:06am

Gabe's right. I bet there's a few folks on this site that have gotten it done but I'd say that generally speaking there needs to be a hardship.

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Permalink Reply by Roy Chambers on August 14, 2011 at 9:06am

If the seller is going to walk away & you are no deficiency state, similar to us here in the Seattle are, then it is about which option hurts the lender the least. If the seller has nothing to lose by foreclosure except their credit- the banl has very little leverage.

If the seller is not making payments they may also be able be to contribute at closing to make the short sale happen if their credit matters to them.

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Permalink Reply by Dawn Harmon on August 14, 2011 at 10:49am

I have had 2 short sales approved and closed without any true hardship. The bank is not getting paid and appears to accept a quick solution over the foreclosure option. Both were stand alone 1st with no option for deficiencies.....

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Permalink Reply by Kimberley Kelly on August 14, 2011 at 1:46pm

I'm with Dawn here. I'm in Palm Springs area of California and I will take a Short Sale like this, because depending on the area it's in, we are decimated. If the Seller is absolutely willing to foreclose, the notes will go away anyway. I can usually get the Lenders to see that if they leave it vacant in some areas, it will become a "crack house" and by the time they get it, it's ruined completely. Now..if they will net more by Foreclosing or even not..they WILL want money from someone. New law says they cannot DEMAND it from Sellers as a condition of close, so I prepare my Buyers to have a reserve because there WILL be money to be thrown in and it's not coming from me!

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Permalink Reply by Thom Colby 888-391-5245 CA Brkr on August 14, 2011 at 2:11pm

T -

I have closed several exactly like this one throughout SoCal - and mostly in Palm Desert / LaQuinta. Some were being short sold by owners with SIGNIFICANT assets.

Handled correctly, it can happen.

Best,

Thom Colby

Broker / Negotiator

Newport Beach, CA

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Permalink Reply by Brian Avery on August 14, 2011 at 2:15pm

Case by case it could be done, but if your client really has plenty of income and assets more than likely the lender will ask for a promisary note or cash contribution. I tend not to take these type of files due to the Realtor and seller not having realistic expectations. In many cases the bank will probably decline unless the seller has started missing payments for 3+ months.

my 2 cents

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Permalink Reply by Thom Colby 888-391-5245 CA Brkr on August 14, 2011 at 2:26pm

Under the newly signed law SB458, there is no deficiency or promissory note allowed as a condition of short sale approval in CA. However, the alternative is non-approval.

I still say, try.............

Thom Colby

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Permalink Reply by T Arnold on August 14, 2011 at 3:47pm

I appreciate the advise. I decided not to work with this one. The potential seller was not willing to provide any financial documentation to the bank.