Q about Mortgages and Short Sales

Flyingifr · 09-28-2006, 11:39 PM

I placed an offer of $135,000 on a house for sale. Terms are Cash sale, no contingencies except Inspection. The problem is that the seller has $155,000 in mortgages against the property (3 mortgages) as wella s 2 Judgments of unknown amounts. I like the property but I will not pay the seller's debts. I believe the $135,000 price is a bit low but I will not go above $145,000 so there has to be a short sale. The seller has been maintaining the mortgage payments so far but is obviously in financial trouble - 2 judgments entered against the seller in the past year.

Any idea on how to approach the mortgagees to accept the short sale? I believe the seller is close to the end of the line financially and has already moved out of the house. The seller knows he will get nothing out of closing except being off the hook from 3 mortgage payments.

jlynn · 09-29-2006, 12:16 AM

The problem (if AZ is anything like TX) is that the judgments will cloud the title, whether you can get the mortgagees to short sale or not.

Hedwig · 09-29-2006, 01:46 AM

Are the judgments leins on the title, or personal judgements?

You won't get a clear title until the mortgages are paid off. If he defaults on the mortgage (and why shouldn't he, if he doesn't own the house), the mortgage company could still foreclose.

I think you need to consult a good real estate attorney in Arizona (or whatever state the house is in) to see if there is a way around this. Maybe you can take possession and put the money in escrow, you get the title when he pays the mortage down to a point that your escrowed money covers it. In the meantime, if he defaults the escrow comes back to you. At that point, the mortgage company might take less to pay it off and avoid foreclosure.

But each state has its own laws about things like escrow accounts. I've heard of this being done, but you need some good advice before you put that much money at stake.

iwantbigcredit · 09-30-2006, 07:06 PM

while i havent had much success with a short sale in the mentioned situation i have been able to negotiate a reduced payoff with some to allow the deal to close. i have seen several credit card judgement liens against properties. where i have had the most success has been if i or one of my attorneys are friendly with the legal counsel for the credit card company. otherwise we havent had any luck. now working short sales when the people are headed to a foreclosure auction is a whole different story. no one wants to end up completely empty handed.

Flyingifr · 10-01-2006, 10:22 AM

The upshot of this (and conclusion) is that I was willing to pay off the recorded liens and judgments, the broker's fee and even the seller's closing costs, but the seller insists there is a $15,000 private mortgage (unrecorded) to a friend of his that he also wants paid off. Since I cannot verify this I assume he is lying to me and discussions ended.

Hedwig · 10-01-2006, 10:43 AM

That sounds like a valid assumption. If it were a real loan, it should have been recorded as a lien against the house. It sounds to me like the seller was trying to get some cash out, probably to pay off other debts he has.

I think you made the right decision to walk away. Too many business decisions are made based on emotions (I really like the place and am paying too much because I really want it, for example). Get the emotion out and the right decision usually becomes fairly apparent.

ilovemydogs · 10-01-2006, 03:15 PM

Quote:

Originally Posted by Hedwig

That sounds like a valid assumption. If it were a real loan, it should have been recorded as a lien against the house. It sounds to me like the seller was trying to get some cash out, probably to pay off other debts he has.

I think you made the right decision to walk away. Too many business decisions are made based on emotions (I really like the place and am paying too much because I really want it, for example). Get the emotion out and the right decision usually becomes fairly apparent.

While it could be a lie,it might not be, and what is the problem with giving the guy $15,000 as long as it is being reduced by total cost?
You can have a cashiers check made out to the person that is owed this money.
I lent a friend some money to get past some hard times with his mortgage,and there was no recording of the money lent, but when the property was sold I was issued a cashiers check for the amount I lent him.
All in all though when there are a lot of liens and problems it is wise to have a good real estate lawyer on the case, and like me not wanting to pay for a title search, I was told this is the way to go,you need the title search so another debt does not come up after and you have a cloud ont he property you purchased.
With the way they say real estate has gone down and is continuing to do so, lay low, and you probably will be able to get the house for less, as many people are wary want to buy a house with lots of liens.
ILMD

Hedwig · 10-01-2006, 05:53 PM

The problem is that Flying offered $135K and the guy wanted $155K, saying there was that much owed against the house. If the value was more than Flyihg was paying, giving him a check wouldn't be a problem, but if Flying paid him the $15K than it made the price more than he wanted to pay. He would have paid up to $145K, but the extra non-recorded loan was the deal breaker.