We are considering a short sale. Suntrust holds our 1st & 2nd mtg. Our 1st mtg has been modified through the gov program. Just received ppwk

Asked by Upsidedowninfl, Rotonda West, FL Sat Jan 16, 2010

from Suntrust to modify the 2nd. However, even after mod, we will still not be able to pay the 2nd (we're currently 4 months behind on the 2nd only). They sent me a short sale packet and told me it is an option. Problem is, we have 5 animals in the house and showing it with us still living there would be a nightmare. SO....we would have to move out in order to list it. How long would it take to sell and what are the odds that Suntrust would actually accept an offer? We owe $345k on the house and it is worth maybe $250k. The first mtg is $275k. If someone made an offer of $250k, would they even consider it? Thoughts?

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Jason Stevens, , Englewood, FL
Sun Jan 17, 2010
A short sale is never an easy thing for any owner but in some cases it is the right thing to try and accomplish. It does have a negative impact on your credit but not as much as a foreclosure. I've gotten this response from many lenders and mortgage brokers who qualify potential buyers. Far as offering your vacant lot as collateral for the second mortgage, my suggestion at this point would be no. I would engage the lenders with a straight short sale as this point. Depending on how much the NET proceeds will be from the sale of the property will determine how much you money you have to negotiate with both lenders. You owe $275K on the first so that means your second is for $70k. Should you be able to NET say $230,000 on the sale of the property then you are short on BOTH mortgages and therefor will need to request a short sale with both. So I would try and negotiate say giving the first lien holder $200,000 and the second lien holder gets $30,000 or something similar. This way the first lender is geting about 72% of what is owed to them and the second lien holder about 49%. I have had successful Short Sales closings where the lenders got much less than these percentages. I have also seen first lien holders only give a certain percentage of the proceeds to a junior lien holder as well, so anything can happen. Now both lien holders obviously has the right to say no but the short term goal would be to get the first lender to approve the short sale at $200,000. This way it gives us better negotiating power towards the second lender as if the property goes to foreclosure and eventually sells for less than the $345K or less than the $250,00 for that matter the second lender has a chance of getting nothing. So chances are they would be happy recouping 49% vs. nothing. If for some reason the second lender still wanted a little more than the $30,000 it's at that point you might consider offering the second lot by way of quit claim deed or offering to take out a promissinary note on a percentage of the shortfall with the lot as collateral. Of course all of these figures would change if you in fact couldn't get $250,000 for the house. The fact of the matter is without a buyer there can be no Short Sale. So you would have to price aggressively and as long as we contracted within a certain percentage of what the you lenders receive in market value by way of a BPO or appraisal we should be successful making the Short Sale happen. You can contact me directly at anytime at jasonstevens@embarqmail.com or on my cell at 941-662-0379. I live here in town and know Englewood/Rotonda/Port Charlotte very well. Thanks
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Upsidedownin…, , Rotonda West, FL
Sun Jan 17, 2010
Thanks again. We also own a vacant lot free & clear in a very desirable neighborhood in Englewood (where we eventually want to build our "forever home" and have contemplated, as part of the short sale offer, to offer them a lien on the lot and a promissory note of say $10k of the 2nd mortgage payable over 20 years or something. I think that would sweeten the deal for them. What do you think? Would that increase the chance of them accepting a low offer on the house, or would it open a whole can of worms? I really don't feel moral about walking away, but in the end, I think by staying we are just delaying the inevitable.
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Jason Stevens, , Englewood, FL
Sun Jan 17, 2010
UpsidedowninFl - Thank you for the additional information regarding your situation. You just solidified my initial comment that by having one lender (Suntrust) it reduces the amount of paperwork, (although it is still a lot of documentation) which does make it easier versus having two totally seperate lenders. Each lending institution has its own "short sale package" and I've yet to see any two lenders that are identical with what they require, similiar not identical. Just imagine how much more of a paper trail you would of had to provide if you had TWO seperate lenders each asking for different documentation. And this is just the beginning of the Short Sale process.

There is additional information that will need to be provided when you submitt the contract. You will need to provide a HUD-1 statement showing how much each lender or lenders will net after all expenses have been paid and that you as the seller are receving "$0.00" proceeds. Most lenders also require some type of document be sign by all parties (including the listing and selling agent) swearing to the fact that this is an "arms length" transaction and that no parties are related.etc...You'll also need to make sure that the bank if they accept the short sale DOES NOT make as part of a condition of giving you an approval letter, make it contingent upon you signing a promissionary note to pay the shortage amount. In other words the bank agrees to "settle in full" your account which may still have a negative impact on your credit but it's better than them persuing a deficiency judgement against you. So you want to make sure that the bank gives you something in writing that they will not go persue a deficiency judgement. I have a local Real Estate attorney that I have sent lots of business to over the years and in return he has given me some legal advice(without punching the clock :-) on Short Sales and he advises that all sellers that enter into a purchase and sale contract with a buyer make sure that in the contract the seller puts a contingency clause that states " the contract shall be contingent on the lender(s) waiving their rights to any deficiency judgement as part of or as a condition of it's approval letter." This covers you as the seller in the event that a lender approves the short sale but requires that you sign a promissionary note or files a deficiency judgement in order for you to get an approval letter. He stated the reason for this is that MOST contracts written today come with a short sale addendum and he feels legally that there is some gray area with the addenum that MIGHT NOT allow a seller to back out of a contract where the lender APPROVES the short sale and requires a seller to sign a note or files for a deficiency judgement.

Now regarding the person you are in contact with over the loan modification. From my personal experience chances are that this would not be the same person that would handle the short sale. These are usually two seperate functions within a bank. Did you ask this person if they would be handling the short sale should you decide this as an option?

It is true that a large percentage of Short Sales do not make it to the closing table and there many reasons for this. Remember once a lender files a lawsuit (forclosure) to collect or secure a debt the seller is automatically on the clock. A lot of sellers that end of trying a Short Sale are many months into the the foreclosure suit and with the amount of time it takes for a Short Sale they simply didn't leave themselves enough time. A lot of buyers who put in offers on Short Sales end up getting tired of waiting for an answer and walk away from the table after the first approval deadline expires. That means the seller has to start all over again. The price is lower than what the bank is willing to except and more than the buyer or buyers are willing to pay. Tha bank simpy is not cooperative or responsive to short sale request. The documentation required from the lender never gets completed , submited or gets lost. Seller and/or real estate are not aggressive enough or persistent enough with follow ups to the Short Sale department. Bank ask for too much money, which is funny because I've seen many homes that where short sales, the lender turned down an offer lets say for $100,000 only to foreclose on the house and ultimatley sell for $85,000 a few months later. I can go on and on... :-)

Regarding the possibilty that you may have to move back in. Again if you discontinue making payments on the second loan the lender will eventually file a foreclosure law suit. The entire process could take 3 months or as much a year plus..So your time will be limited. My suggestion is once the house is vacant leave it that way, unless you really enjoy moving.. :-)

Let me know if there is anything else I can do for you.

Jason Stevens, REALTOR®, GRI, ABR
Email: jasonstevens@embarqmail.com
941-662-0379
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Upsidedownin…, , Rotonda West, FL
Sun Jan 17, 2010
Thank you for your input. The 1st mortgage is a Fannie Mae backed loan, the 2nd is in-house with Suntrust. How can I know if it is investor owned? As for all the required paperwork, Suntrust already has *everything* since we just went through, and were approved, for a loan modification. We had to provide two years of tax returns, 4 months of pay stubs, a breakdown of all of our monthly expenses, etc etc. I would imagine they wouldn't need much more from us. In addition, I have the personal extension #, name, and address of my loan modification rep. Would she most likely be a short sale negotiator as well? She works in the loss mitigation department. They've actually been pretty helpful once we got started (it took a long time for all the paperwork to go through, though). I will be interviewing realtors and definitely want to find one who has done * a lot * of short sales. I got scared when I started reading that only about 10-20% of short sale listings ever go to the closing table. I don't want to move out of my home and then have to move back in. My dad has a rental house he would let us live in for free until the house sells. This is such an ugly situation, one I never thought we would ever find ourselves in. I am a builder and....enough said about my loss of income! ;) At this point, it's keep my business afloat, or ourselves, and I'm choosing the business.
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Jason Stevens, , Englewood, FL
Sat Jan 16, 2010
Kathy - Thanks for the additional input. I too have closed loans 2 with the same lender and even IF one was investor owned it was still was a easier process than dealing with two totally different lenders. I have also successfully closed three Short Sales with the same local lender (Suntrust) that the owner is dealing with. I did state that it SHOULD be an simplier process. There are no guarantees with any Short Sale.

For your information I am a local Realtor of over seven years and have close to 50 million in sales over the past 7 years so I consider myself a professional. Your comments suggested that I wasn't one.
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Kathy Weber, Agent, Murrieta, CA
Sat Jan 16, 2010
Upsidedown...........

I disagree with the previous answer.

I too, have done Short Sales. 2 loans with the same lender.

Problem??....the 2nd loan is with the same lender but "Investor Owned". Caused many problems throughout the whole process...even up to the day of funding.

I would honestly consult with a local Realtor, look under "Find a Pro" with Trulia. Meet face-to-face with them with all your documentation.

In a Short Sale, that's the whole purpose of going through the process....the lender takes "LESS" than what is actually owed.

Being with the same lender "DOES NOT" mean it will be a simplier process!!!!

Best of Luck!
Web Reference:  http://kathyweberhomes.com
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Jason Stevens, , Englewood, FL
Sat Jan 16, 2010
Upsidedowninfl - Great questions you ask. Having been involved with MANY short sales I can tell you having both mortgages with the same lender is definately a plus as you'll only require one approval from ONE lender. This should help speed up the process. As far as long it might take to get an answer really depends first how quickly you can get a contract on the house and how well Suntrust has streamlined their Short Sale process. What I would highly suggest if you plan on going the Short Sale route is to have all of the documentation that is requested from Suntrust ready to go. Part of the documentation that any seller will have to provide with a Short Sale package is a contract from a ready and able buyer. So I would suggest that any offers that are put on your house you require either proof of funds if a buyer is paying cash or if the buyer is financing then a pre-approval letter. This will go a long way in the eyes of your lender when making the decision. The next step is to have the house ready for the market. PRICING IT CORRECTLY is the biggest factor as to how fast you'll get it under contract. The house should also be clean and tidy. I would suggest that moving out with the dogs would a very good idea. If if fact a $250,000 price on your house is an aggressive price and you owe $345K on it then the bank after expenses would net approximatley $230,000 which is about 66.6% of what is owed to them. That is a pretty good % for the lender to recoup in a Short Sale situation and they would most likely accept it. Going back to the short sale package, you'll have to show that you are financially unfit to pay the mortgage. Seeing that you are 4 months behind on the second mortgage should already send a message. So are you continuing paying the first mortgage? I'd be happy to come and take a look at your house and give you a professional Broker Price Opinion and help you through the Short Sale process. I lived in Rotonda for over 4 years before my wife and I built a house on the water in South Gulf Cove. I've done a lot of business in Rotonda.
I look forward to hopefully meeting you. Please contact me if you are interested in my services.

Jason Stevens, REALTOR®, GRI, ABR
Graduate Realtor Institute
Accredited Buyers Representative
Real Estate Broker Associate
REOTrans Platinum Certified
Kevin Flynn Realty, Inc.
Cell - 941-662-0379
Email: jasonstevens@embarqmail.com
Home Office - 941-698-0973
Home Fax - 941-698-0973
Website: http://www.jasonestevens.com
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