I have a friend/client that would like to do a short sale. However, this client has strong income. He can certainly afford all of his monthly payments. He owns two lots that are upside down by about 70% and would like out. Is it possible to work him a better deal like splitting the deficeincy with the bank or a long term promissory note at a low rate? Is this worth pursuing or is it a waste of time? Any feedback would be greatly appreciated.

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HI Clayton, Strong income and enough money to pay his bills-- that seems he is not a candidate for a short sale. However, it depends on the bank. Some regional banks, like "Regions" may consider it.. Do you know who the bank is?
The loans are with Beach Bank. We are hoping that they may be interested in getting them off of their books? Your thoughts?

Thanks!
Clayton
This is one that I personally wouldn't touch given the facts mentioned above. I would definitely question the complete financial situation and make sure there is not a hardship because some people don't want to admit it freely I've learned. :-) If it turned out that he truly does not have anywhere close to a hardship we wouldn't take the listing. BUT I have heard stories of other people doing this successfully by negotiating a lien release. But to me if he has the money to pay it would be like selling stocks when the market is at a bottom. If he's already upside down that much I would question whether he should wait.

I'm interested to see what other feedback you get from others on here. :-)
I would have the homeowner call the bank and just outright ask, and relay the facts. Why not? They might say yes, smaller bank. Otherwise, I would not waste time.

Clayton Bonjean said:
The loans are with Beach Bank. We are hoping that they may be interested in getting them off of their books? Your thoughts?

Thanks!
Clayton
I don't believe this will fly. Any short that is simply "strategic" is weak from the start. The first rule of short sales is they have to have a true hardship. Sorry.

Update - I posted this question back in 2009.  Many things have changed and I have completed "no hardship" short sales.  In most cases the seller will be required to come to the table with some sort of cash contribution or note for a small portion of the balance.  Some lenders play hard ball and will require the full balance.  

I could get this closed all day long...as long as the seller was OK with a prom note or a cash contribution of some kind if necessary.

   This can be done, No Problem. The big issue your seller will have is that because it is raw land the tax consequences are very different. Unlike the fair debit act land is not a home. But do not shy away from someone that is making a business decision to short sale. 

With a STRONG negotitoar, youc an get this done. I have done them for doctors and others making WELL into the 6 figures.

Bottom line, you need to get this point across to the bank:

You can foreclose and lose $100,000
or
you can agree to my short sale and only lose $100,000 on the property, which do you prefer.

ALso, as some have noted, you will REALLY need top repare and pre-qualify your client. He/she MAY be required to bring cash to closing if he is doing really well financially, may be required to sign a prom. note, may be require to miss payments etc.

I am an ivnestor by heart, and, have often found that ANY of teh above makes sense to agree to if you can get out of a REALLY upside down property......

As always, case by case.....

I am shocked that anyone would say this scenario could qualify as a "short sale."   No hardship, no short sale.  Period.  End of discussion.  He has the obvious option to sell the property and make up the difference to pay off his loans at closing.  I'm not an attorney or tax adviser but I think he will have a tax write-off on the loss, too.  

 

When did this happen?  When did common sense and logic and ethical business practices pack their bags and leave town?  The "strong income" statment and "would LIKE out" I find appalling if he is actually asking you if you can convince his lender to take a short payoff.  Short sales exsit for distressed borrowers with real financial hardship brought about by circumstances beyond their control and appear to be long term. 

Didn't he/she make a promise with his/her signature that he/she would pay back the money loaned to them to purchase those properties?  Did anyone EVER promise him that the value would not change?  If the value went up, would he give the bank more money when he paid off his loan after selling the property?

 

I cannot find it within myself to sugarcoat my reply to this post.  I am going to believe that you have fallen into the abyss with everyone else, who don't realize that they are, basically, asking how to justify a way to break promise without any of the consequences which occur when one does.  Even better, by kicking a dog (the lender) when it is down.  I don't care what anyone says, I still believe in the old saying, "two wrongs do not make a right."  No matter how you hold that up, turn it around, look at it with your eyes squinted, you have to call it what it is and it is wrong.

When did the difference between right and wrong so completely disappear? 

Wendy said it much more politely than I am able to.  Just go to the Bank, have an honest conversation and work it out as ladies and gentlemen.  Better yet, speak to an attorney or financial adviser.  If he's got a strong income, why doesn't he ask the appropriate professional for advice?  Yes, he will need to pay them.  He's just wasting your time and you are allowing him to do it.  With all due respect to you, your friend is not giving you the respect you deserve.

 

Signed,

Righteously Indignant

Hi Brenda,

I really appreciate your opinion and you make some great points.  I asked this question back in 2009 and wanted to update it due to the changes that have taken place in recent years.

Banks are working out deals with people and they have been for years.  If someone works out a deal to short sale their property, it is a better scenario than just mailing the keys back to the bank as it saves the bank the cost of legal fees to foreclose.   In many cases, lenders will take this into account and offer an incentive to short sale or deed in lieu the property.  In some cases it makes good sense to stop the bleeding.

In many cases, you can do a short sale with no hardship, I have helped a few folks do this.  So technically, you can.  The ethical side is another issue that can be argued on so many fronts.  If banks are willing to negotiate, it becomes a smart business decision for the seller and I cannot blame them for that.

Best,

Clayton

I am shocked, SHOCKED I tell you, that some of you think that you have the power or knowledge to know what the lender will do. Lenders will absolutely, positively, do a shortsale without a "hardship." Will some say no?  Sure. Can there be strings attached like notes or contributions?  Yup.  Is it your job to play underwriter? No it is not.

You submit a package, tell the truth in your letter, and let a bank decide. I can't tell you how many times I thought there was no hardship, but when I dug deeper found one.

Also, technically, according to the new government guidelines, if the PITI iis more than 34% of gross income-it is considered a hardship.  Will all banks agree with this, no, but it's another thing you can use.  I very rarely have someone try to sell "just because." There is always a reason.

The definition of a short sale is simply:  If you must sell, FOR ANY REASON, and you owe more than what it's worth-It's a short sale. Period. Full stop. End of story.

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