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How do I make a short sale of a house?

Miami, FL |

I have a neighbor that owns 450,000 on his house to BOA, He doesn't paid the mortgage in the last 16 months, I would like to buy the house in short sale, the house is not on the market with any Realtor, I have spoke with my neighbor and he doesn't know how to start with the short sale... what will be the first step? in his branch no one is able to give any information about how to proceed...

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Attorney answers 4

Posted

The bank will require that the house be listed on the MLS for a certain amount of time before they will accept a bid. The idea being that the bank wants to receive the best and highest bid. If you really want to purchase the home, then you could ask the homeowner to quit claim the property to you OR you need to convince him to complete a short sale package with the bank. The point is - ALL parties need to agree to the short sale. The homeowner/borrower, purchaser and the bank. Very simple process actually. In many situations the bank will not accept a short sale unless the borrower has defaulted in their monthly payments. The catch 22 of the situation is that once the borrower defaults then the bank brings a foreclosure action. Any foreclosure defense lawyer can defend the foreclosure to gain you the time and leverage necessary to push the deal through.

Asker

Posted

What is the advantage if he quit claim the property to me? the mortgage is still there.

Charles William Franklin

Charles William Franklin

Posted

The advantage is clear. You cut him/her completely out of all future transactions and you can negotiate directly with the bank. If you are in the same state as my law firm (Florida), then you can also defend the foreclosure which will gain a tremendous amount of time and leverage against the bank for the sake of negotiations. I would not, however, invest an exorbitant amount of money in a quit claim because you obviously take the property subject to all liens and mortgages. That does not mean that you owe any of the money to the bank, unless of course you agree to assume the debt with the bank, it only means that there is a lien against the property.

Posted

Your neighbor should list the property with a Realtor who has done many short sales before. At that point you can purchase it if BOA accepts your offer. Good luck.

Posted

If the owner quit claims to you then the house will still have a lien for the full amount of the debt. You did not mention what the house was worth, but I assume it is less than the debt. So be careful. Your neighbor might want to talk to an experienced real estate attorney about their options. Beware that what is best for the owner might not be best for you.

This firm is in the business of helping people and companies file for bankruptcy protection. Therefore, the bankruptcy code requires that we call our firm a "debt relief agency." This information is provided for general information purposes only and is not intended to be a legal opinion, legal advice or a complete discussion of the related issues. Nor is this advice intended to create a client - attorney relationship. Every individual's factual situation is different and you should seek independent legal advice from an attorney familiar with the laws of your state or locality regarding specific information.

Posted

If your neighbor wants to start a short sale proceeding, he/she should contact a real estate agent who is experienced in short sales. The agent will likely know how to start the process with your neighbor's lender, even if your neighbor's bank branch cannot provide more information. As has been suggested by my other colleagues, though, it would be advisable for your neighbor to go talk to an experienced real estate attorney so that he/she understands his/her rights before starting the short sale.
Also, if you want to purchase your neighbor's house in a short sale, then your neighbor's lender will still have to approve your offer. Unlike with traditional sales, with a short sale the lender has to approve the amount offered by the buyer since the seller is selling the house short of his or her obligation to the lender. Since the lender will not be recouping all the money it lent and may forgive your neighbor of any deficiency, the lender will want to make sure they get the best offer for the house possible. It is not unusual for the lender to counter on an offer made by buyers.
Whatever you and your neighbor decide to do, however, make sure that you are seeking the assistance of experienced professionals. Good luck!

Please note that the response above is not meant to constitute legal advice and it does not establish an attorney-client relationship. You should contact an experienced attorney to assist you.

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