Are underwater properties considered a hardship? NO, unless it was due to the fault (fraudulantly)of experts involved in the transaction IE, Mortgage broker. Appraiser
Any interested investors out there? Yes but hopefully smart enough to stay away from this.
Must a short sale be offered for sale on the MLS? I have not found a lender that will work with a FSBO.
Please let me know if there is currently any legislation prohibiting this: http://www.fbi.gov/publications/fraud/mortgage_fraud07.htm
Mortgage Fraud is defined as the intentional misstatement, misrepresentation, or omission by an applicant or other interested parties, relied on by a lender or underwriter to provide funding for, to purchase, or to insure a mortgage loan
I do not want to even address the Fraud but there are some potential problems with your scenario.
1.) If you short sell your property you will not be able to get another new loan to purchase any property for a minimum of three years.
2.) What happens if the home goes down in value even further than it has already and when you want to buy it back it will not appraise for $262,500
3.) No investor in their right mind would take on this risk for a potential 5% return.
4.) My understanding is that for the short sale to be approved you will need to prove a hardship, just because the property went down in value does not constatute a hardship.
5.) If you do not use a Realtor then who is going to negotiate with the existing lender to get your short sale approved?
Rachel, may I ask a question? Did you not know when you took out this mortgage that the payment could go up that much? If "yes", what did you plan on doing when it did?
It's certainly acceptable to think outside the box.....but in doing so it's important to stay on the right side of the law.
I've just been talking to the FBI about this very topic. Want to hear what they have to say?
Visit the "contact me" page of my website (address below) and email me directly.
Freelance Journalist, Real Estate
I do need to clarify that we do have a bonafide hardship: the first mortgage has already adjusted by 2 points, thereby increasing the the mortgage payment by almost $1200 per month. If the lender approves the short sale because of this hardship, how is that fraud? The fact the property is underwater just makes the situation worse.
I read your link to the FBI report but cannot determine exactly what is fraudulent about my proposition? Please clarify?
The only risk to the investor is the decline in property values in the short term, which we both should know is highly likely. Therefore, we would need to agree on such terms as length of agreement, determination of purchase price, etc. beforehand. This is our due diligence. These are contingencies that any investor would have to consider in any deal. In the current environment, Investors are purchasing REO and short sales all the time. What's wrong with renting it back to the homeowner, and then selling it back to the homeowner, if both parties are so inclined? Fannie and Freddie are already leasing back foreclosed homes to existing tenants, as well as to previous homeowners. What's wrong with private parties doing it?
So, please clarify the "fraud" in my proposition. You know, I have to admit the entertainment value of these forums. I didn't realize there were so many 'fraidy cat real estate "pros" out there--afraid to venture out into uncharted real estate waters. Everything I have proposed so far has been of the utmost integrity. Just because something hasn't been done before doesn't mean it's fraud. That's why they call it the art of the deal.
Of course, everything would need to be approved by our respective attorneys.
So, any REAL "pro's" out there? Or are most people weak, scared, quick to judge, and lack the courage to pursue and investigate an opportunity because of their own ignorance and lack of wherewithal? (This is more of a philosophical question.)
Our servicer is Countrywide and my understanding is they will not pre-approve a short saleâ€“â€“they will only review the short sale offer after it is actually submitted for approval. So, as long as they approve the short sale offer (with absolutely no fraud, of course), why should it matter what the real estate investor decides to do with the home, including renting it back and/or selling it back to the previous homeowner? Please let me know if there is currently any legislation prohibiting this.
What's in it for the investor is interest income of almost 10 percent per year ($2,000 rent x 12 months = $24,000, based on purchase price of $250,000), less any financing costs if the investor decides to obtain outside financing, less real estate taxes and insurance, numerous tax benefits, a premium over the purchase price, and best of all a hassle-free tenant and buyer . This beats any jumbo CD currently paying a paltry taxable 2 percent. There is a risk that the property value may continue to decline for the near term; however we can overcome that with a pre-agreed TBD purchase price. Ideally the investor will finance the sale back to the previous homeowner, thus eliminating any waiting period for the previous homeowner to qualify for a government loan due to the short sale, and the investor will continue to earn interest income on the loan . Of course, all terms are negotiable and we both should do our due diligence.
This is an opportunity for an experienced investor who appreciates creative dealmaking and thinking outside the box. You would think that lenders would simply allow homeowners to short refinance their home and remain in the home; however my understanding is that lenders are extremely reluctant to reduce principal on an existing loan. Yet, they are willing to reduce principal via a short sale if you are a NEW buyer. Brilliant, isn't it? By the way, the Hope for Homeowners program is a joke.
So, any investors out there willing to make a deal? Or any agents out there willing to facilitate this deal?