I have a question to see if I proceed with a short sale, the lender is provident funding, they purchased the home in 2006 for 496,000 and they have a current mortgage of 395,000. The current market value of the home is 325,000 and they are current with the mortgage, so they are not in default. Also, they have about 5,000 in net income per month....YES NET INCOME. Is it still possible to complete the short sale or am I wasting my time??
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I believe that it may be possible if there is a hardship. With 5K NET each month, they are going to need to be prepared to contribute cash to the sale. If they are only $70K upside down, why not have the conversation of them paying the difference. It gets rid of a large mortgage payment and if they NET $5K per month, that is 14 months of NET income BUT they know no longer have a mortgage payment on this property so they would still have a NET each month.
This may be a totally legitimate short sale, but you are needing the following info. to determine that.
1. What is the hardship? Curtailment of income, job loss, medical, death, increase in expenses?
2. Have them fully fill out a financial worksheet-make sure they put in ALL expenses. On a home that they purchased for $496K, it's completely likely that their mtg. payments, HOA, taxes, Ins, living expenses, car loans, car ins., health ins. etc...etc...etc... adds up to more than $5K per month. Make sure they include ALL expenses they are responsible for regardless of their ability to pay so that they can clearly show their hardship.
3. If they are showing cash (over 2 mortgage payments) in reserves somewhere, the bank may not process them through an incentive program such as HAFA but they may be willing to review them for a traditional short sale. If they are showing cash, you will want to educate the seller that the bank may ask them for a cash contribution to participate-how much will need to be negotited IF it even comes up at all.
I wouldn't walk away without having a full picture, it's a decent price point and worth reviewing fully.
Good luck, let us know how it goes!
Keri :)
I wouldn't say the original balance has nothing to do with it, but very little.
What's the actual Hardship ?
The hardship seems like they want or have to move for a job or family (?) and that they can't afford to maintain both places (?) and that in order to sell their home they would have to pay 200,000 in order to have the lien released which is a hardship. Additionally, if the bank doesn't participate with the short sale the property may likely go into default.
I am assuming this is their hardship, or what is it?
Hi, yes. The balance, purchase price etc have nothing to do with a banks decision to qualify a short sale. The seller may have a net of 5k, but likely does not want to or can't bring the shortage to the table to close. The cannot afford to pay to sell the home.