I have been working on a short sale with wells for the last 7 months. At first the BPO came in for almost 500k and our contract is for 455k. I successfully challenged the BPO based on realistic values and the property being in a distressed market area, the east new york section of brooklyn which has the highest foreclosure rate in nyc. However, wells is insisting that freddie mac is requesting either 50k at closing or a 100k note from borrower. The borrower lost everything, this is a 3 unit property and from day one he had problem tenants and several evictions already which in nyc can take up to 6 months to remove a tenant. This was a new development of 6 houses and wells has the mortgages on all the properties and each one of them is in foreclosure.
The borrower went from making over 100k when he bought the home to making 16k a year which is basically the poverty level. Despite this fact they are insisting on the borrower participating in the loss. I went as far as contacting freddie mac directly only to be told that wells is delegated in this matter, however wells is insisting its the investor requiring this.
Has anyone had success eliminating the request for a note? This is truly a hardship case and they dont seem willing to work this out. We even offered them a 10k cash contribution at closing which the seller would have borrowed from family members but that was rejected as well. The seller cant afford to pay over 800 a month, he barely makes that and doesnt want to just sign a note that he will never be able to make good on. Any advice is well appreciated.
Without knowing all of the circumstances nor the risks related to it, one can not make an informed decision.
Are you suggesting there is never a case where accepting a release of lien and a note is better than a foreclosure? I would never advise making such a decision without counsel, from both a qualified CPA and Attorney.
In what cases are you aware that a Federal Tax lien is "dischargeable" in a BK?
I am of the understanding investor loans do not fit under the IRS debt foregiveness act... Secondly... have we decided if NY is a defienciency state?
There are multiple layers to the determination of Tax Liability from Cancellation of Debt. MDRA is one of the minor ones. Recourse and Insolvency are much more critical to the analysis.
yes, you are correct, there is not enough information to make an informed decision, hence my response to you.
No, of course I am not, the point is, with a legal analysis of deficiency risk and tax risk, there should be no suggestion as you offered. "To Just" do anything.
Further, if the Tax debt is for a tax year three years ago and filed greater than two years prior, yes it is dischargeable in BK. We are a BK and Tax firm and we very often, discharge federal and state tax debt in this fashion.
Great information! Thank you.
Hi Kevin - great advice. Are you a practicing attorney in California? I need both an attorney and CPA who work in the Thousand Oaks area, who SPECIALIZE in advising distressed sellers as to the legal and tax consequences of her options. My sister is about to do a short sale after 3 years of trying to modify her loan. She NEEDS the names of two top-notch professionals. She just signed a Short Sale Contract to sell her condo. I'm in Realtor in Arizona and absolutely know the pitfalls of not having proper consultation by both. Thanks. I'll be reading this column all weekend for your response.
Scott - I was given that info by my personal RE attorney and passed it along to a client who spoke with him and got great results. I suggest you try again tomorrow during business hours.
No, we are in AZ.
Excellent advice!! We can never make or help our sellers make these decisions. It's their money and their financial future.
Sometime when I get a negotiator that is being unreasonable, I cancel the shortsale, waited a week or so and reinitiate the short sale again.
Yes you would need to start all overagain but you have nothing to lose at this point.
I did this a couple of times once when the lender wanted the seller to participate towards closing costs and once when the values came in crazy. In both files the negotiators were unresonable, not willing to negotiate any further and kept telling me the investor on the note is the one who is making the decisions they are just the servicer.
It took more time but it was well worth it. In both cases, I was able to get a better negotiator and we were able to close the transactions without the seller contributing and within a reasonable value.
Unfortunately, some servicers are hiring people who have no clue not do they care, that it would be in the best interest of all parties to get these transactions close. There is no sense of urgency with some of the employees of these servicers and lenders because they are getting paid hourly and that's really all they care about.
But I'm sure if the servicers and lenders realize that some of the people that are put in the positions of making decisions for them are not making the right decisions, they would take some sort of action. Or at least I would hope they would.