this is my first post on this forum. Please forgive me for posting such an elementary question but here it goes:
I'm a relatively new agent who completed the SFR course a couple of months ago. An acquiantence of mine has an investment property that is underwater. It is to a point where he very much wants to dump it as in a few months we wont be able to make the payments on this property.
my question to the forum is under what circumstances will a bank approve a short sale for a property that is an investment property, not a primary residence. I've tried to find the specific answer but could find none thus far. I have learned that short sales for investment properties have been approved and closed on other forums but the details were not provided.
If someone could help shed some light on this matter, I'd appreciate it.
Depends on the investor of the note.
If he has a true hardship, then most likely he would qualify for a short sale, but there are a TON of other variables that affect the "approvability" of a short sale.
Hi Jerrold Yes investment properties can be short sold too
however, if you don't really know how to do them
you may want to let an experienced negotiator handle them
and you just handle the sale
he still must be underwater and have a hardship
Yes, Investment properties can be short sold. Is this a SFR, condo, residential property or commercial property. An example of a hardship on residential investment property may be the loss of a tenant / rent, a defaulted tenant with months of non-payment of rent, etc. Basically loss of income on that property.
However you said something in your question that caught my eye:
".....is to a point where he very much wants to dump it as in a few months we wont be able to make the payments on this property."
Are you one of the owners?
Best of luck.
Thanks to all for the input.
No, I am not one of the owners. I know the owner socially. His property is a 2 flat building in which his only paying tenant just left. The other unit is occupied by his daughter who is in financial straits. so he his only means of supporting the debt on the property is gone and, as far as I know, he is unable to pick up the slack. In short, he lost the income on that property.
I don't know how many BR pere unit, but we are doing very well on our investment properties by renting some of the units as rooms, with rent coming in weekly. The cash flow is actually much higher.
It sounds to me like a true hardship "loss of income" with no ability to service the debt. Is the owner unable to re-rent the vacant unit? What about movign teh daughter out and renting that unit as well? Quite frankly, if it were my client, I would submit the short sale request ASAP.
Best of luck,
I agree with Thom Colby summit the short sale.
Why don't you have the seller contact his lender and ask them? If this is your first time at it, maybe it would be a great idea to team up with someone who knows the process. Or do a referral and get this seller in competent hands.
Initially, I did team up with another more experienced agent but he(experienced agent) suggested to the owner (my social acquaintance) that he more than likely would need to bring cash to the table, things fell apart. This was a few months ago. Just last week, the owner came to me, mentioned his only paying tenant left so now he's a bit more motivated. However, bringing cash to the table is not an option. The more seasoned agent has moved on to bigger fish now so can't get him back on board.
He may not necessarily have to bring cash to table- but good to warn them ahead of time. I am 2/2 on investment properties (don't usually handle these). Both were approved with no cash contribution with deficiency waived. The seller had clear and convincing hardship that was well documented (2 investment properties). In one the property was approved for a sale price of only 20% of the note b/c the property was so devalued. Same situation- renter left (was evicted for non-payment) but if he cannot rerent to cover mortgage or rental market week...definately a hardship. He doesn't have the income or savings to cover deficit. I like to think of it as imminent hardship, although he approached me on the short sale once he had already missed a payment and knew he was in trouble. My seller gave his hardship letters explaining the situation and what his efforts were. It took over 3 months but they both got approved. He had MI on both also.
So yes, it can be done.
The seasoned agents in my office wanted bigger fish too so I helped this seller :) I credit Short Sale Superstars for helping me get those approvals. They were hard and long, but in the end he paid nothing and got full deficiency waiver. You should advise them to speak to a tax professional though about the tax consequences, as they will likely get a 1099-C.
I second Thom- get the short sale package in ASAP. Things have a way of turning south for a seller quick- the review process takes a long time and you don't want to battle a foreclosure while trying to close.
we are in Illinois. I wanted to make sure this is doable before I had the owner unpack all the info. In addition, the owner is unable to bring cash to the table which is another reason why I am researching whether a short sale is a option for him or not.
Jerrold, I am in IL too. PM me and I can help you with this. Larry, that's not really an option that will bear any fruit. What would you ask the lender?