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My client is doing a short sale on an investment property. Sales price is $175,000. The first mortgage, Citi, Is taking a short sale and allocating $4,500 towards the second mortgage which is 5th 3rd.

5th 3rd wants the entire remaining balance of $40,000 to be repaid by the seller. 5th 3rd wants the seller’s current 2^nd mortgage on the investment property to be transferred as a third mortgage on the seller’s personal residence. The seller may have maximum $5,000 to $10,000 equity in their personal residence, but not really if you factor in selling costs and closing costs.

5th 3rd demands, per some “policy”, to have the seller encumber his personal residence up to 140% of its value.

5th 3rd also disregards the seller’s financial statement. The financial statement shows about $2,000 monthly negative including the loans that are included in the short sale. After the short sale, the seller will be barely breaking even.

5th 3rd claims that according to his credit report he has $2,000 of discretionary income, even though the CREDIT REPORT DOES NOT REFLECT most of his expenses such as groceries, baby expenses (two babies), utilities and most of the expenses needed to run a household. 5th 3rd is plucking numbers out of air and is unwilling to explain their math.

The sellers refuse to jeopardize their personal residence and the roof over their babies’ head and are ready to pull the trigger on a chapter 7 bankruptcy to shake loose of the problem. They have spoken to a BK attorney who confirmed their chapter 7 eligibility. The BK attorney has sent a letter to 5th 3rd clarifying the situation.

5th 3rd also states they would rather get ZERO dollars in a foreclosure and bankruptcy rather than $4,500 now! Does 5th 3^rd get reimbursed more by TARP or other source if they get ZERO from the seller?

We have appealed and escalated to a manager, but 5th 3rd’s answer always comes back the same: FIRM DENIAL.

We now want to escalate as high as we can. Does the group have any experience, suggestions or contact info within 5th 3rd?

A similar situation was previously posted at http://shortsalesuperstars.com/group/fifththirdbank/forum/topics/lisa-i-am-in-the-same-boat-as . I have not been able to obtain the phone numbers that were offered in that previous post.

Any help would be greatly appreciated. I have not run into such a brick wall in the hundreds of liens I have negotiated.

A client is in Chapter 13

He wants to short sale his rental unit which is in bad condition (currently unrentable)

Comps show upgraded homes in the community as competition sold at average $115

Subject property needs $25-$30 work to bring to comp condition.

Several buyers are interested.

• Client needs to get an “Affidavit of Abandonment for Real Estate & Asset” from the bankruptcy trustee, (after he decides that he really wants to proceed with the short sale - That will be his decision after seeking legal advice)
• After the property is released by the trustee, the lender, would probably move fast to schedule a TS date.
• We would need a buyer contract ready to go
• We would need acceptance of the short sale from the lender

Should we find a buyer who is willing to hang in there through the negotiation with the lender first?

Then go to the trustee to request the release?

By not getting the release first, would that give the lender more incentive to negotiate, since if it stays in Chapter 13 it can sit there for another couple years?

Or should we get the release first and then work on the short sale?

I am still amazed at the number of REALTORS® that continue to list short sales and either attempt to process the short sale themselves and/or turn the file over to a third party title company. In many of these instances I have noticed the title company charging “short-sale processing fees” at closing in direct violation of the law. In fact, such a charge may be considered a felony as it violates Florida Chapter 494.

Federal and Florida laws involving short sales and their processing have continued to evolve over the past 2 years. Attorneys are now a most necessary and intricate player in the short sale process.

Florida Sellers be aware that it is unlawful for anyone other than a Florida admitted attorney to charge a fee in order to process a short sale. Real estate professionals and/or title companies are NOT permitted to charge any additional fees relating to the short sale and/or its’ processing. Only standard commissions and/or fees are deemed permitted.

Many title companies are attorney owned. However, such ownership does not make it lawful for that title company to charge a short sale processing fee. Title companies do not provide legal representation. Most typically, the title company’s attorney owner also does not provide legal representation to either the Seller or Buyer; their representation is typically considered transactional.

In the typical short sale all Sellers should consult with a competent attorney familiar with the short sale process and possible long term financial consequences. The short sale negotiations with the lender(s) should be handled exclusively by the attorney providing the Seller with legal representation. Such representation will typically be detailed in a representation agreement between the Seller and their attorney.

Our company routinely requires any and all short sale Sellers to consult with an attorney. Typically, we introduce the Sellers with a specific attorney that processes almost 100% of our short sale listings. This attorney has extensive short sale experience along with substantial real estate, litigation and bankruptcy experience. This provides for the best combination of professionalism and compliance with the law. Furthermore, our short sales are processed much more efficiently and to the benefit of all concerned parties.

I am not an attorney and this blog is not intended to provide legal advice. Quite to the contrary, my advice as a real estate professional and recognized expert is that all Short Sale Sellers should engage the services of an attorney to process their short sale negotiations. Do not reply on the REALTOR® and/or a title company to provide such important legal representation.