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Interest only land loan, from Bank of America is killing this client.

Posted by Steve Loynd on October 22, 2009 at 4:06am
The Short sale and the Sole ProprietorI have been working on a short sale for several months, and the seller is truly in a hardship position…stuck between a rock and a hard place.He is paying an interest only note on land at 8%; he was able to arrange a 90% loan when the property was purchased directly from a developer (not from a Realtor) for $400,000 three years ago.The current market value is approximately half the purchase price, or $160,000 less than the existing mortgage. I advised the seller to list at $200,000 subject to acceptance of his lender allowing the short sale. We have an offer pending and have been through the financials …the seller is currently underwater with his income to expense ratio (making less than his obligations).The seller owns a business and needs his credit to run it.Yesterday after two months of paperwork being compiled and completed, the seller suddenly says I can’t go forward with the deal. If the short sale closed his credit rating would take a big hit, and it would affect his ability to continue in his retail business. He knows the interest only loan is not reducing the principal, he knows there is no way to predict if he’ll ever be able to sell for an amount that will clear the note, and he knows that every month that his cost exceeds his income puts him closer to a total melt down.I have advised him to seek a loan modification, but with the value of the property and his current income it will be nearly impossible to work out better terms. His bank has suggested he do a short sale, but if he does his business will be affected, if he doesn’t he’ll go broke rather quickly...but still own his business. He is stuck with a loan he can’t afford, but must keep making payments (in his mind) to remain in business.The seller has asked me to put the property back on the market for 10% more than he owes…but no one will buy it for that amount. I didn’t sell him the property but feel as though I must make every attempt to find a solution for my client. Any thoughts?
Tags: America, Bank, Propietor, Sole, a, dealing, interest, land, loan, of, only, sale, short, with
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Comments

  • Pam Jank November 7, 2009 at 7:32am
    Steve, you’ve done above and beyond. You have given him great representation. From this point forward... you will just be spinning your tires and losing all your tread! Don't list it over market value and don't list if seller is not willing to short sale at market value. You'll need whatever tread you have left on those tires to make it happen for the next Seller that needs your professional help!
  • Steve Loynd October 22, 2009 at 1:14pm
    Bryant..We spoke of that, he is his business, personal credit and personal signatures no reasonable separation but I like the thought...thanks for spit-balling that one, many issues are solved just this way.
  • Bryant Tutas October 22, 2009 at 11:57am
    Steve, Has he received legal advice? Maybe he can file a personal BK that won't affect his biz?
  • Wendy Rulnick October 22, 2009 at 11:26am
    It's too bad he changed his mind after all your work.... If business was under corporate name, not his individual name, would not hurt him...
  • Steve Loynd October 22, 2009 at 10:23am
    Thanks Wendy...It is a huge weight to hold a seller's expectation on a sale when you know its not going to happen under the current terms.
  • Wendy Rulnick October 22, 2009 at 9:58am
    Steve - I would not continue with the listing. It needs to be market value.
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