Foreclosure University Short Sales

Question:  My mortgage company, PNC, has accepted a short sale offer on my house. I owe approximately $149,000 and the accepted offer is for $115,000. Coinciding with my application for short sale, PNC moved forward with foreclosure. The court, in Pennsylvania, granted judgement in foreclosure for the owed mortgage balance plus legal fees. Based on what I have read, because I do not have a second mortgage, HELOC and have not refinanced I am at low risk of being sued for the deficient balance after short sale. My concern is that PNC will, however, pursue me for legal fees involved with the foreclosure even though the short sale was accepted post hoc. Can you provide any insight or advice?

Answer:  - Most of the time banks won’t come after you for just legal fees, if they come after you, they will file a judgment for the amount they lost because it costs them a great deal more to pursue someone for a deficiency. So unless they are confident you can pay, they typically will 1099 the homeowner instead. And if you’re like most homeowners, the debt relief act will counteract the 1099 or you could claim insolvency. Best to talk to you accountant if you have specific questions.

Question: I’m trying to purchase a short sale with three liens. A first at 600,000, a second at 80,000 and a third HELOC at 117. The bank holding the first two loans accepted the offer, which is coincidentally exactly what the house appraised for. The first and second have been zero’d out and forgiven. The bank holding the third in line HELOC, which I’m not giving the name of (although I should because they’re very inconsiderate) are holding the short sale hostage even though they are getting ten percent of the HELOC balance. We have offered 10,000,in addition to what the first bank is passing through (5,000). I thought they would rather finish a short sale than go into foreclosure. Nothing makes sense. Recently we offered them 15,000 on top of what the first bank is passing thru, bringing it 5,000 beyond what the house is appraising for, which means it’s not in the loan it’s out of my pocket. The retailer informed me the bank negotiator said if we give the bank 22,000 they’ll sign off today on the loan, otherwise, we’ll just have to wait. This is almost extortion, because it brings the price well over the appraisal. Is this all legal?

Answer: – Unfortunately yes… and it makes no sense at all because if it goes to foreclosure the 3rd gets nothing because no one will bid more than what it appraises for.   And if they don’t agree to satisfy or release the lien, then it will continue to go to foreclosure.  So you have to be persistent and prove to them again and again that what they are asking for is unrealistic.

Sometimes lenders will have 3rd party collection agencies handle the negotiations once it passes a certain time frame.  This is typically when you’ll find a great deal of resistance and difficulty in negotiating the price you want.  These collection agencies tend to be very unrealistic in their requests.  We had a situation where they were being so unrealistic that after 6 months of negotiation and getting no where, we complained to the lender and told them how unprofessional, rude and dishonest this collection agency was.  So they pulled the file from them and we were able to get the short sale approved and completed in less than 30 days.

So don’t give up, be persistent, stick to your offer, make them see that they are being ridiculous in what they are asking.

Question: Can a 3rd party, acting on behalf of a 2nd mortgagee prevent the closing of an approved Short Sale by refusing to accept the amount offered them by the 1st mortgagee?

Answer: – Yes they can… Many times mortgage companies will have 3rd party collection agencies deal with negotiating payoffs.  If they don’t like the offer they don’t have to accept it.  Sometimes they can very difficult to work with.  They only way is to either give them what they want by handling it outside of closing or negotiate with them more until they decide to accept.

Question: I made an offer to short sale a home. Now after all the months of waiting, bank couter offered my offer.  Can I counter offer or do i have to just accept the price the bank wants for the short sale home?

Answer: -Absolutely…a lot of being successful in this business is your ability to negotiate.  Your ability to negotiate and negotiate well literally will make you thousands more or cost you thousands.  If they countered with a higher price, this means they believe the house is worth more than what you proposed in your offer.  You will need to explain to the lender why you believe it’s not worth that and you’ll have to back it up with comps, repair costs, market conditions, pictures, etc.  You may need to even ask for another BPO (Brokers Price Opinion).  Now…if it’s only a few thousand dollars and your end buyer is all lined up and as it is you stand to make a large profit from it, you might want to consider just doing the deal and moving on to the next one.  You don’t want to wait another 2 months before they accept your offer because you might lose your buyer.

Question: Looking at short-sale, foreclosure, or bankruptcy… only is Social Security Disability, VA Disability (100%), and disability insurance monthly payment… what should I do? can they come after any of my income in a deficiency judgement? will they even come after me? how will bankruptcy affect me… I currently have NO assets at all except for about 15,000 dollars in savings. thanks Tom from FLORIDA

Answer: -Tom, I have to make the assumption that you’re planning on or you’ve already stopped making payments on your home or you wouldn’t be asking these questions.  A short sale in my opinion is by far the best option if you can’t sell your home for what’s owed, rent it out or can’t work out something with the bank like a forbearance or loan modification.  A short sale will affect your credit but will eliminate a foreclosure on it.  If done properly will also eliminate the possibility of a  deficiency judgment.  If a short sale is not accepted an ultimately your home ends up at the foreclosure auction, then you will either receive a 1099 or they will file a deficiency judgment against you.  If they file a deficiency judgment and you can’t pay, they can garnish wages.  Depending on the amount of the judgment, this forces most people to file bankruptcy to eliminate the judgment.