Replies to This Discussion

Permalink Reply by Dianne Slutsky on January 3, 2011 at 8:51am

You will need to escalate the file and prove that your seller has no ability to pay the balance of the 50%.  Inform them, that 10% only is available for the short sale and that without it, a foreclosure will likely follow and then they will receive nothing.  If the property is in California, check the new law that took effect January 1 regarding deficiencies on purchase money loans.  Unfortunately, I did have a similar case last summer and my client had to do a bankruptcy to discharge the Chase loan and then they were willing to take 5% to release their lien on the property.

Good luck!

Permalink Reply by Sylvia Barry on January 3, 2011 at 9:05am

Thanks, Dianne, for the suggestions.  Appreciate that.  On the CA law - I think it's clear for first lien, but not so clear for 2nd lien that's purchase money.  Do you have the specific law?

Permalink Reply by Steve Early on January 3, 2011 at 9:10am

Hi Sylvia:

As is true with all short sales - every one is unique. You might want to start by taking a realistic look at why they are asking for 50% of what they are owed. My guess is your client has assets. If there is room to negotiate, the answer probably lies somewhere between 10% and 50%.

What can your client afford to give them ... honestly? I know, they are probably saying they don't have any money, but I think the investor probably sees a different picture. It is typically the investor or an MI company that is looking for a payment (in this case probably the investor because it is a 2nd). Your success in being able to negotiate this down has a lot to do with the seller's finances in my view.

We recently knocked a $30,000 payment for full debt forgiveness down to $5,000 but we showed the lender legitimate revised financial information to achieve this - all of it legitimate. The investor discovered that the seller owned several commercial buildings. What they didn't know is that they were all upside down and he had a negative net worth of over $1.4M.

In another recent situation, a demand for $37,000 was reduced to $32,000 and that was the limit they would drop to. This client had a lot of cash in an IRA, and the lender obviously knew about it. They wanted 30% of what they were owed, and ended up taking about 25%. This ate up only a very small portion of this seller's IRA, and I think they were lucky the lender gave them full debt forgiveness based on what they did have tucked away.

In the end, the client has to decide if paying them something is worth getting a full release of the second. If s/he claims they don't have any money, then look to see if something has changed. The investor may be looking at outdated information.  If the client showed an influx of cash in their bank account, was this earnings, or was s/he selling off what little stock they owned in order to pay bills? 

If they won't take 10%, then you should try to come up with a figure that your client can afford and is willing to pay to get rid of the second completely, and see if they will accept it.

Permalink Reply by Sylvia Barry on January 3, 2011 at 10:59am

Thank you, Steve, for the very detailed explanation.   I will ask my client to get a clear picture of what she has! 

  

Steve Early said:

Hi Sylvia:

As is true with all short sales - every one is unique. You might want to start by taking a realistic look at why they are asking for 50% of what they are owed. My guess is your client has assets. If there is room to negotiate, the answer probably lies somewhere between 10% and 50%.

What can your client afford to give them ... honestly? I know, they are probably saying they don't have any money, but I think the investor probably sees a different picture. It is typically the investor or an MI company that is looking for a payment (in this case probably the investor because it is a 2nd). Your success in being able to negotiate this down has a lot to do with the seller's finances in my view.

We recently knocked a $30,000 payment for full debt forgiveness down to $5,000 but we showed the lender legitimate revised financial information to achieve this - all of it legitimate. The investor discovered that the seller owned several commercial buildings. What they didn't know is that they were all upside down and he had a negative net worth of over $1.4M.

In another recent situation, a demand for $37,000 was reduced to $32,000 and that was the limit they would drop to. This client had a lot of cash in an IRA, and the lender obviously knew about it. They wanted 30% of what they were owed, and ended up taking about 25%. This ate up only a very small portion of this seller's IRA, and I think they were lucky the lender gave them full debt forgiveness based on what they did have tucked away.

In the end, the client has to decide if paying them something is worth getting a full release of the second. If s/he claims they don't have any money, then look to see if something has changed. The investor may be looking at outdated information.  If the client showed an influx of cash in their bank account, was this earnings, or was s/he selling off what little stock they owned in order to pay bills? 

If they won't take 10%, then you should try to come up with a figure that your client can afford and is willing to pay to get rid of the second completely, and see if they will accept it.