Hi all,
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.
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"under what circumstances will a bank approve a short sale for a property that is an investment property, not a primary residence."
This is simple! Under the same condtions as any other short sale when there are no goverment incentives invovled!
IE: When settling is in the best intrest of the bank!
A short sale is a privlage the bank (Not the defaulter.) has when it's a better option.
Bill
On one investment short sale I successfully negotiated, the contribution required by the PMI (which was non-negotiable as the PMI company would've preferred paying out much later after a lengthy foreclosure) was allowed to come from anyone in the transaction. In ours, the buyer ended up paying some of it.
Hi Jerrold - I'll weigh in on this, as I just experienced this situation. Yes, if there is a hardship - like loss of a tenant - you can do a short sale on an investment property. BUT, please double check the type of loan and find out if there is mortgage insurance on it. If there is, the PMI company will likely require a seller contribution. There were a good many 90% LTV investor loans at the peak of the market, many requiring PMI.
You can do the short sale but they need to check on taxes consequences before. It will depend on their income. You don't pay taxes only if it is your primary residence
it really doesn't matter at all. I am 18/18 on investor properties the last few months, all with full releases. Sellers have income and assets, so in some cases there were cash contributions ranging from $1,000 to $7,500.
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.
Thanks Bonita,
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.
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.
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