Hi, I am new to short sales and I have a possible listing with the following scenerio:

1st = $455k 2nd =113k. Value of home is $460-$470k. Does the first have to get paid in full or can you short the first to pay more to the second? What is a resonable amount to offer the second?

Any advice would be much appreciated.

Keep in mind that the 1st wants at least 80% of the fair market value of the home. I would show some marketing time. I usually start high if there is time and become aggresive the closer to auction date. They will usually only pay 5% I will use 6% in the contract and try for it. That way they don't try and get you for 4%. I would call the 2nd, keep them up to date on what your doing, I try and get the same rep everytime. When you get an offer say its 450,000 -27,000 (Realtor fees) 80% of fair market value would be 90,000 you now have 63,000 to work with. I would offer the 2nd 30,000 and ask them to accept this, act like you know that 1st will offer less if they don't. Get this accepted and send this acceptance with a Hud and the contract to the fist. They will call you back and say they only pay 5% O well 4,500 is more money going to the 1st. Make sure in the listing contract that the 3% offered to the buyer is "subject to lien holder"

Usually the first will want to get paid in full. If there is money left over then the second will get it. Remember the first is in the highest position so they have the control. My experience is that the first offers the second $1000-$5000 if they are not getting paid in full. But you have no control over which bank gets what amount, that is all up to the first lien holder. You can try to negotiate more for the second but the first won't give up too much.

However both lenders still need to agree to the terms. That is the difficulty...

Seeing that you are new to short sales, I would target properties that the first and second mortgage are held by the same lender. This simplifies everything. If you can pay the first position off in full, it gives you room to negotiate the second position. I prepare a net sheet for the lender, showing all seller costs being paid and what the lender will net, if they accept your offer.

The scenerio that Johnny has said is about the only one working right now. The 2nd trusts have become much more aggressive and resistant to allowing the short if they are not the same as the 1st. Short sales are hard work for little money it seems but there is not any shortage of leads in this area and if you learn how to do them effectively and can get a lot of them it can be rewarding and lucrative.

Thanks for the advice- so you would recommend starting with the second before working with the first?

The first could care less about the second.The first only gives 1k to a few k for the second to go away otherwise the first forecloses and tells the second where to go.

If they can get paid in full the first isn't going to be nice and say here mr.second we want you to have more so we can have less!

To me it looks like your listing would be a waste of time.

First let's analyze the deal:

1st = $455k 2nd =113k. Value of home is $460-$470k.

How do you know these numbers are accurate?
Is the seller behind on the first or the second or both?

Usually sellers give the agent there monthly statement which means NOTHING on what the balances actually are!

Your seller needs payoff amounts from both lenders good through a certain date so if you list it in February they can give you one good through about 30 to 60 days out.This will give you the real figures to work with on principal balance,late payments owed,penalty fees,and attorney fees owed on the loans.

So let's say with payoff the first is 465k and the second is 120k for a total of 585k and your value is 460k to 470k.

Okay the first is a 465k at 5 percent commission that's about 24k then take about 10k for buyer closing costs and your at 35k in this scenario the first would go for it but only throw a few k to the second otherwise it would be cheaper for the first to foreclose and wipe out the second.

The second looking at this would not want to accept this proposal generally the second can sell of there note for 30 to 40 cents on the dollar to an assett recovery company to collect against the seller.The sellers troubles do not end after foreclosure!!!The assett company uses an attorney to obtain judgements,allocate assetts,and garnish wages to repay the debt.

This is why if the seller cannot make payments in filing a bankruptcy and is using as a stall tactic it is better to WAIT until after foreclosure and when the 2nd or first comes after them for balances owed or judgements then file for bankruptcy because you cannot add them in later.

I have worked many of these and it's always the second that kills the deal.

no legal

I have never had a property that I didn't offer the 1st less than what was owed. Just closed one that I offered

Balance- 2nd lien(Central pacific) 69,850 offered 4989.07

After I recieved the acceptance I offered

Balance- 1st Lien (EMC) 289,950 offered 224,980

Even though the 2nd gets nothing if you give them something and the 1st sees the acceptance than the are more incline to accept if the 80% value is there.

I know everyones experience is different, but this works for me everytime. I have only had one 2nd say no but they were the previous owners that had no idea about lien holder position when the took the note. They made it personal! Instead of getting 2,500 of 40,000 they recieved nothing because the home foreclosed.

MOST IMPORTANT THING IS TO HAVE THE SHORT SALE PACKAGE COMPLETE AND A NET SHEET.

I also include a short letter and market time. I keep a small log to show the 1st that there home is not worth it.

They may decide to accept but still have the buyers liable for the dept, most of the people I deal with are going to claim bandruptcy anyways.

I don;t kno wif this is still open but I agree with the above its tough if not inmposssible to get it done it there are two different lein holders.
I just lost one today after working it 6 months. Got a good offer and sent the complete package to CW. made contact thought everything was going well. Turns out they let it go to sale with contacting me. Afte tons of call today I got someone who told me they had tried to contact the seller. I asked why did you not contact me and He told me we did not have your number until jan 29th. Mind you I sent the original paper work in in June and sent a new package Jan 1. They had my number. In Jan when I submitted the offer Customer service actually called me and told there was a sale date in Feb. two days later she called me back and gave me the negoiator. I sent him several emails with out a reply. Today I send another and low and behold he calls me and tells me He does no longer does default services and someone esle has the file. Later I learn after 20 calls or so that serveral people had reviewed the file and it went to Sale with out contacting, first becasue they did not have my number, WRONG, and second they tried to contact my seller. Bottom line tough.

Does anyone have a good email address for a VP or head screw zat CW default services. I would like to hear from them if there has been a policy change and they no longer feel it necessary to contact Realtors who are trying to do short sales with them, especially one who knows what they are doing. Don't worry i will be nice when I contact them but just ticks me off.

Would appreciate any help. You can email me a lh@larryhollingsworth.com-Thanks

Join the club.

I've found working with CW (but pretty much with any of these banks) a very frustrating experience. They may say this and that, but they don't seem to want the deals and/or are not set up for it.

I have a property destined for foreclosure on the 18th after receiving and submitting *four* offers, one from a very, very good buyer. CW wasn't interested because it didn't match their desired net by $20k. Now the property is worth $50k less than it was 5 months ago and will be even less by the time they put it back out there as an REO (but who knows, I might get it!).

What's really bad is that the agent is really working... for them! On their behalf. We get little support and even less respect.

The way I see it, if CW and all those other clowns out there lose billions of dollars this year, it will be their own doing and well deserved. Too bad the execs will still get paid their millions while the ones that will suffer are their working minions.

And yet just another list of reasons why I don't do short sales.

Thank you everyone for your advice and comments. But since there is such a flood of REO/Short sale homes on the market now, don't the banks HAVE to become more accomadating? Or else they will end up with a huge inventory of REO properties that will go for a fraction of their original value.

That doesn't bother *me* at all. I'm in the REO business.

If the 1st forecloses the 2nd gets nothing, but I have seen few 2nds foreclose. Some large banks have already written most of their firsts off already.

Market, thanks for your input. When you make an offer to the 2nd, do you do it in writing or verbally over the phone, or both?

Thanks,
Mike

I send the short sale package my marketing proof and a HUD 1 with the amount to them. If they try and say they will not accept this I let them know that the 1st is taking a huge loss. If they do not I can assure them that the 1st will only offer them 1,000 dollars. I want them to feel that I am working for them. This will not always work, if not stay calm and start working with the 1st. Then offer them what ever the 1st is willing to give. I always list these homes for 6% that way if they want me to take a percentage off I am already prepaired to take 5%. Make sure in the commision comments of the listing I I have "3% subject to lien holder" That way you will not have to take the full cut if you need to reduce to make everyone happy.

BAY, If this is your 1st SS, you might want to pass on this. It's REALLY, REALLY tough to get a SS approval when the Junior lienhold is different from the Senior lienholder. If you want to pursue it for experience sake, go for it, but warn your seller that this is definitely a long shot!

Also, have you told your seller to talk to their CPA or tax advisor about tax ramifications if they get the 1099? Sometimes the seller doesn't want to even do a short sale once they realize how much it may cost them in taxes. Just proceed cautiously!
(chk out the other post about WAMU Short Sale... alot more info there on the Short Sale topic).