Replies to This Discussion

Permalink Reply by Bryant Tutas on September 5, 2010 at 10:16am

Teresa. If there are enough proceeds to pay off the first line holder then they are not involved in the short sale. Just order the payoff. If the first lien holder is in the process of foreclosing then the seller should seek legal advise on how to postpone the auction.

Permalink Reply by Ann Trieb on September 5, 2010 at 10:48am

We need to know what auction you are referring to. Has State Farm set a foreclosure date for non-payment of the 2nd? Do you have reason to believe they will go through with the auction? Which state are you in? I presume that any sale of the property will be subject to paying off the first note in full. Would someone want to purchase the property at auction for the sum total of both liens and then go through the eviction process of the occupant? The answer to this COULD be "yes", however, it's a rare thing to find in today's market anywhere.

As far as your short sale list price, have you calculated the settlement costs on the property? If you can pay all settlement costs, pay Bank of America in full, and then pay State Farm in part, you might want to consider a different approach to this transaction. Instead of looking at it as a traditional short sale, you may want to get aggressively involved in negotiating a short payoff only on the 2nd. That means you keep calling State Farm until you can work with someone who will authorize the amount you are offering to them to release the lien on the home.

In that case, you wouldn't be involving Bank of America at all. Your settlement agent (in my state it is the title company, but I am not sure where you are) will order a payoff for closing and would send Bank of America's wire to them when the transaction closes.

All this presumes that the auction you are worried about has been initiated by the 2nd mortgage.

Permalink Reply by Teresa Lett on September 6, 2010 at 3:15am

Bryant and Ann,

Thanks to both of you!!! I am so thrilled with this site, I can't believe my good fortune with being able to come here with my problems and insecurities.

Having said that, yes, basically the fact that BofA loan would not be shorted is the reason they told me they would not be involved so there's no reason to give them anything about the attempted short on the 2nd. I guess I just keep thinking that although the borrower on this property just received a few weeks ago a "letter of acceleration" from BofA, and we have a few months before any auction would be imminent, I thought they should be aware of our efforts. Guess not.

Ann, I'm in Kansas and we close at the title company too. I have been in touch with the 2nd lien holder, called them while I was with my seller to get their requirements for the short sale package but didn't ask them what they would authorize for an acceptable settlement to them. Basically I have a property here that needs a little love, not a lot. The FMV is a little higher than both liens combined but with all settlement charges and a 6% realty fee, it would never sell at that price in time to avoid a foreclosure auction (about 4 months). One more fact is that this borrower absolutely plans to file bankruptcy but has been advised to attempt a short sale first to try to avoid having both on her record. What I was thinking was that this 2nd would love for her to try in good faith to get them anything and she should state her plans explicity about filing bankruptcy in her hardship letter. So what you're saying Ann is to talk with the 2nd lien holder about what they would accept to make sure we are on track to a successful outcome? If 50% is not acceptable, I don't think I'll get an offer if I were to bulk it up for them and I'm just a little nervous about the 1st-BofA not know anything about this and going through with the auction. We can still sell the property in the ensueing 90 redemption period and the 2nd lien would be GONE, hence my thinking that the 2nd should be grateful for this borrower's good faith effort since their lien would be wiped out anyway in bankruptcy. It is a real trick even after a successful redemption period short sale to remove a foreclosure from your credit record and I haven't helped anyone with that type of thing yet, but I know it can be done.

I am advising her to be completely honest in her hardship letter to explain her plans to file bankruptcy thinking they will jump on this. Maybe I'm being naive, but I thought this was a good plan of action. Maybe I should call State Farm Bank back and establish these facts over the phone, because we won't be sending in the short sale package with the hardship letter anyway until we get an offer.

Again, I appreciate you Bryant and Ann, for responding to me, you are awesome.

Teresa Lett

Permalink Reply by Ann Trieb on September 6, 2010 at 6:44am

OK...
1.Most likely the 2nd will accept far less than 50%. That number was only brought up because you said you could pay them that. Don't forget about settlement costs! :)
2.Send 3rd party authorization to Bank of America. Make sure that you AND the homeowner are staying in touch with them and advising them that you are trying to sell the home to avoid foreclosure. Just have them put it in the notes. When the collections calls come, have the borrower tell the bank he is trying to sell the home. It is POSSIBLE that the foreclosure action will be held off to give you time to sell. That four month window doesn't have to be your doom and destiny.
3. Aggressively price this home to get a buyer now. Period.
4. Determine what type of loan the 2nd mortgage is and what the funds were used for. Keep talking to someone at State Farm until you can come to a settlement agreement. They may be able to accept 10% of their outstanding balance. They need to know what the alternatives are - the first could foreclose, the borrower could file bankruptcy. Work with the homeowner to determine whether they can offer any additional funds to the 2nd, whether through cash at closing (if they aren't making payments don't they have some cash reserves?), a promissory note, or a release of the lien but not of the debt. Again, all that depends on what type of loan it was.
Good luck!
Get that house sold!

Teresa Lett said:

Bryant and Ann,

Thanks to both of you!!! I am so thrilled with this site, I can't believe my good fortune with being able to come here with my problems and insecurities.

Having said that, yes, basically the fact that BofA loan would not be shorted is the reason they told me they would not be involved so there's no reason to give them anything about the attempted short on the 2nd. I guess I just keep thinking that although the borrower on this property just received a few weeks ago a "letter of acceleration" from BofA, and we have a few months before any auction would be imminent, I thought they should be aware of our efforts. Guess not.

Ann, I'm in Kansas and we close at the title company too. I have been in touch with the 2nd lien holder, called them while I was with my seller to get their requirements for the short sale package but didn't ask them what they would authorize for an acceptable settlement to them. Basically I have a property here that needs a little love, not a lot. The FMV is a little higher than both liens combined but with all settlement charges and a 6% realty fee, it would never sell at that price in time to avoid a foreclosure auction (about 4 months). One more fact is that this borrower absolutely plans to file bankruptcy but has been advised to attempt a short sale first to try to avoid having both on her record. What I was thinking was that this 2nd would love for her to try in good faith to get them anything and she should state her plans explicity about filing bankruptcy in her hardship letter. So what you're saying Ann is to talk with the 2nd lien holder about what they would accept to make sure we are on track to a successful outcome? If 50% is not acceptable, I don't think I'll get an offer if I were to bulk it up for them and I'm just a little nervous about the 1st-BofA not know anything about this and going through with the auction. We can still sell the property in the ensueing 90 redemption period and the 2nd lien would be GONE, hence my thinking that the 2nd should be grateful for this borrower's good faith effort since their lien would be wiped out anyway in bankruptcy. It is a real trick even after a successful redemption period short sale to remove a foreclosure from your credit record and I haven't helped anyone with that type of thing yet, but I know it can be done.

I am advising her to be completely honest in her hardship letter to explain her plans to file bankruptcy thinking they will jump on this. Maybe I'm being naive, but I thought this was a good plan of action. Maybe I should call State Farm Bank back and establish these facts over the phone, because we won't be sending in the short sale package with the hardship letter anyway until we get an offer.

Again, I appreciate you Bryant and Ann, for responding to me, you are awesome.

Teresa Lett

Permalink Reply by Teresa Lett on September 6, 2010 at 8:33am

Ann,

You're a real sweetheart to answer my questions for me on a holiday no less!!

This sounds better than what I thought in regards to dealing with this file. Because this is my first time out with a 2 lien deal, I really was doing this on the fly so to speak. My training with America's Home Rescue gave me plenty of good info about 2 liens, but as you know, each one is so different from any of the others. What threw me off was how close we are with this particular deal not having to treat the transaction as a short sale in the first place. But, with all things considered with this market and local conditions, in that neighborhood, and all the facts with this particular borrower, I thought the initial price I put in was good. For about 2 weeks. I cut the 2nd's take directly in half and grossed up the price a total of 11%, 8% for settlement charges and commissions, another 3% for negotiation buffer. If we get no serious bites, I'm gonna take your advice and find that majic number. Time is of the essence you are so right we need an offer NOW. Unfortunately, the borrower I'm dealing with is so broke I've added her to my prayer list, so I don't think any contributions from that source is gonna happen , in a million years.

Thanks for reminding me how to handle the 1st, which in this case being BofA I actually might be in better shape with them mentally this time and avoid becoming suicidal (I know, not funny). But I will shoot them the authorization and make sure to get this borrower involved with the process too, in the manner you suggest in addition to me communicating with BofA. Great idea. That way, we won't have to stress out over them bringing the axe down while we're trying to work something out with the 2nd.

Thanks again Ann, I'll be calling them both tomorrow after I've faxed over the 3rd party authorization!!!



Ann Trieb said:

OK...
1.Most likely the 2nd will accept far less than 50%. That number was only brought up because you said you could pay them that. Don't forget about settlement costs! :)
2.Send 3rd party authorization to Bank of America. Make sure that you AND the homeowner are staying in touch with them and advising them that you are trying to sell the home to avoid foreclosure. Just have them put it in the notes. When the collections calls come, have the borrower tell the bank he is trying to sell the home. It is POSSIBLE that the foreclosure action will be held off to give you time to sell. That four month window doesn't have to be your doom and destiny.
3. Aggressively price this home to get a buyer now. Period.
4. Determine what type of loan the 2nd mortgage is and what the funds were used for. Keep talking to someone at State Farm until you can come to a settlement agreement. They may be able to accept 10% of their outstanding balance. They need to know what the alternatives are - the first could foreclose, the borrower could file bankruptcy. Work with the homeowner to determine whether they can offer any additional funds to the 2nd, whether through cash at closing (if they aren't making payments don't they have some cash reserves?), a promissory note, or a release of the lien but not of the debt. Again, all that depends on what type of loan it was.
Good luck!
Get that house sold!

Teresa Lett said:

Bryant and Ann,

Thanks to both of you!!! I am so thrilled with this site, I can't believe my good fortune with being able to come here with my problems and insecurities.

Having said that, yes, basically the fact that BofA loan would not be shorted is the reason they told me they would not be involved so there's no reason to give them anything about the attempted short on the 2nd. I guess I just keep thinking that although the borrower on this property just received a few weeks ago a "letter of acceleration" from BofA, and we have a few months before any auction would be imminent, I thought they should be aware of our efforts. Guess not.

Ann, I'm in Kansas and we close at the title company too. I have been in touch with the 2nd lien holder, called them while I was with my seller to get their requirements for the short sale package but didn't ask them what they would authorize for an acceptable settlement to them. Basically I have a property here that needs a little love, not a lot. The FMV is a little higher than both liens combined but with all settlement charges and a 6% realty fee, it would never sell at that price in time to avoid a foreclosure auction (about 4 months). One more fact is that this borrower absolutely plans to file bankruptcy but has been advised to attempt a short sale first to try to avoid having both on her record. What I was thinking was that this 2nd would love for her to try in good faith to get them anything and she should state her plans explicity about filing bankruptcy in her hardship letter. So what you're saying Ann is to talk with the 2nd lien holder about what they would accept to make sure we are on track to a successful outcome? If 50% is not acceptable, I don't think I'll get an offer if I were to bulk it up for them and I'm just a little nervous about the 1st-BofA not know anything about this and going through with the auction. We can still sell the property in the ensueing 90 redemption period and the 2nd lien would be GONE, hence my thinking that the 2nd should be grateful for this borrower's good faith effort since their lien would be wiped out anyway in bankruptcy. It is a real trick even after a successful redemption period short sale to remove a foreclosure from your credit record and I haven't helped anyone with that type of thing yet, but I know it can be done.

I am advising her to be completely honest in her hardship letter to explain her plans to file bankruptcy thinking they will jump on this. Maybe I'm being naive, but I thought this was a good plan of action. Maybe I should call State Farm Bank back and establish these facts over the phone, because we won't be sending in the short sale package with the hardship letter anyway until we get an offer.

Again, I appreciate you Bryant and Ann, for responding to me, you are awesome.

Teresa Lett

Permalink Reply by Teresa Lett on September 6, 2010 at 8:46am

Oh I forgot to say, 2nd is a HELOC, used to start the business which she just closed, failed

Teresa Lett said:

Ann,

You're a real sweetheart to answer my questions for me on a holiday no less!!

This sounds better than what I thought in regards to dealing with this file. Because this is my first time out with a 2 lien deal, I really was doing this on the fly so to speak. My training with America's Home Rescue gave me plenty of good info about 2 liens, but as you know, each one is so different from any of the others. What threw me off was how close we are with this particular deal not having to treat the transaction as a short sale in the first place. But, with all things considered with this market and local conditions, in that neighborhood, and all the facts with this particular borrower, I thought the initial price I put in was good. For about 2 weeks. I cut the 2nd's take directly in half and grossed up the price a total of 11%, 8% for settlement charges and commissions, another 3% for negotiation buffer. If we get no serious bites, I'm gonna take your advice and find that majic number. Time is of the essence you are so right we need an offer NOW. Unfortunately, the borrower I'm dealing with is so broke I've added her to my prayer list, so I don't think any contributions from that source is gonna happen , in a million years.

Thanks for reminding me how to handle the 1st, which in this case being BofA I actually might be in better shape with them mentally this time and avoid becoming suicidal (I know, not funny). But I will shoot them the authorization and make sure to get this borrower involved with the process too, in the manner you suggest in addition to me communicating with BofA. Great idea. That way, we won't have to stress out over them bringing the axe down while we're trying to work something out with the 2nd.

Thanks again Ann, I'll be calling them both tomorrow after I've faxed over the 3rd party authorization!!!



Ann Trieb said:

OK...
1.Most likely the 2nd will accept far less than 50%. That number was only brought up because you said you could pay them that. Don't forget about settlement costs! :)
2.Send 3rd party authorization to Bank of America. Make sure that you AND the homeowner are staying in touch with them and advising them that you are trying to sell the home to avoid foreclosure. Just have them put it in the notes. When the collections calls come, have the borrower tell the bank he is trying to sell the home. It is POSSIBLE that the foreclosure action will be held off to give you time to sell. That four month window doesn't have to be your doom and destiny.
3. Aggressively price this home to get a buyer now. Period.
4. Determine what type of loan the 2nd mortgage is and what the funds were used for. Keep talking to someone at State Farm until you can come to a settlement agreement. They may be able to accept 10% of their outstanding balance. They need to know what the alternatives are - the first could foreclose, the borrower could file bankruptcy. Work with the homeowner to determine whether they can offer any additional funds to the 2nd, whether through cash at closing (if they aren't making payments don't they have some cash reserves?), a promissory note, or a release of the lien but not of the debt. Again, all that depends on what type of loan it was.
Good luck!
Get that house sold!

Teresa Lett said:

Bryant and Ann,

Thanks to both of you!!! I am so thrilled with this site, I can't believe my good fortune with being able to come here with my problems and insecurities.

Having said that, yes, basically the fact that BofA loan would not be shorted is the reason they told me they would not be involved so there's no reason to give them anything about the attempted short on the 2nd. I guess I just keep thinking that although the borrower on this property just received a few weeks ago a "letter of acceleration" from BofA, and we have a few months before any auction would be imminent, I thought they should be aware of our efforts. Guess not.

Ann, I'm in Kansas and we close at the title company too. I have been in touch with the 2nd lien holder, called them while I was with my seller to get their requirements for the short sale package but didn't ask them what they would authorize for an acceptable settlement to them. Basically I have a property here that needs a little love, not a lot. The FMV is a little higher than both liens combined but with all settlement charges and a 6% realty fee, it would never sell at that price in time to avoid a foreclosure auction (about 4 months). One more fact is that this borrower absolutely plans to file bankruptcy but has been advised to attempt a short sale first to try to avoid having both on her record. What I was thinking was that this 2nd would love for her to try in good faith to get them anything and she should state her plans explicity about filing bankruptcy in her hardship letter. So what you're saying Ann is to talk with the 2nd lien holder about what they would accept to make sure we are on track to a successful outcome? If 50% is not acceptable, I don't think I'll get an offer if I were to bulk it up for them and I'm just a little nervous about the 1st-BofA not know anything about this and going through with the auction. We can still sell the property in the ensueing 90 redemption period and the 2nd lien would be GONE, hence my thinking that the 2nd should be grateful for this borrower's good faith effort since their lien would be wiped out anyway in bankruptcy. It is a real trick even after a successful redemption period short sale to remove a foreclosure from your credit record and I haven't helped anyone with that type of thing yet, but I know it can be done.

I am advising her to be completely honest in her hardship letter to explain her plans to file bankruptcy thinking they will jump on this. Maybe I'm being naive, but I thought this was a good plan of action. Maybe I should call State Farm Bank back and establish these facts over the phone, because we won't be sending in the short sale package with the hardship letter anyway until we get an offer.

Again, I appreciate you Bryant and Ann, for responding to me, you are awesome.

Teresa Lett

Permalink Reply by Ann Trieb on September 6, 2010 at 9:05am

Being that she has no additional funds, the second is a HELOC, and the HELOC was used for business purposes, I would urge her to thoroughly discuss this with an accountant and an attorney.
The HELOC in this (and most) cases is like a credit card. It doesn't go away easily. They expect to be made whole, and in hardship circumstances they can be made a large settlement offer or the debt can be restructured to be removed from the house and kept on as personal debt.
If you cannot get a reasonable payoff acceptance from the 2nd, it is quite possible that bankruptcy will be the best route but this should really only be determined by consulting with and attorney and accountant, because of the very real legal and tax consequences your client will be facing.