Find Your Gold Mine in 2nd Loans on Short Sales
Posted on October 20, 2015 byI am so excited to tell you about a trend that I am finding on short sales that I am negotiating! You have read in my previous articles and I also mention in my Home Study Course about an interview that went worldwide on 60 Minutes which named Wells Fargo, Chase, Citibank, just to name a few, as Lenders and Banks who were falsifying documentation regarding Notes that Docx Company had destroyed. The interview referenced all of the “Robo Signings” that were occurring. After this was announced to the Public, the Lenders and Banks that were involved in falsifying documentation were fined big time. However, the Lenders and Banks were very smart on helping Homeowners who were taken advantage of. What they did was they looked at 2nd loans on properties that were in default and forgave them. When choosing the loans that were in default, they were able to add all their interest and late fees on top of what was owed, so that when they forgave the debt, they were forgiving a loan that probably would have been put in their collection department and eventually written off anyway. I would recommend that each of you go to www.60minutesovertime.com and type in Robo and find the airing of the show so that you will know all the Lenders and Banks that you should be looking for on 2nd loans. The Lenders and Banks would just file a discharge of lien against the property and as to whether or not they really notified the Homeowners, I am unsure about. The reason I state this is that many Homeowners who aren’t paying their loans on the 2nd mortgage, they probably aren’t paying their loans with the 1st mortgage either. Meaning that the property is probably in foreclosure on most transactions. The Homeowners who are in default have probably moved from their homes and they would ignore all the paperwork that’s coming in their mail and would never even see a notice if their debt was actually forgiven.
Recently, I assisted my cousin on a property in West Virginia that has a 1st and a 2nd mortgage on the property. She had sold it on an installment for contract and the Vendee/Buyer wanted to pay it off. She was behind on the 2nd mortgage and contacted the Lender in an attempt to do a short sale. They informed her that they would take half of the amount that was due in order to settle the debt. I researched the property and found a Discharge of Lien on behalf of the 2nd mortgage and informed her that she doesn’t have to pay them anything.
I also had two short sales that I have worked on wherein the Lender had filed a Discharge of Lien on a 1st Mortgage and on the other property on the 2nd Mortgage. When I got the deal that had the 1st Mortgage paid off I was shocked because I had gotten all the paperwork as if it was a short sale. Once title work came in, I had to redo all my paperwork for a straight sale. What this meant was that the Seller could receive money for this transaction. Since I partnered with a student, I did not do the research on the property so I would not have known this for sure if it wasn’t for title work. That is why you need to research the mortgages on the property and look for Discharges of Liens to make sure that the Lenders and/or Banks didn’t just forgive the loan even though it was due to them.
On the 2nd deal where the Lender filed a Discharge of Lien on the 2nd mortgage, the student and I researched the property together. We were excited because we thought that there was equity in the home. There was 2 ways we could have done this deal, we could have just reinstated the 1st and/or paid it off in full and this transaction would not have been a short sale at all. Unfortunately, the 1st Mortgage was still more than what the property was worth and the home was in poor condition. Again, to verify this information, we had to order title work on the property which everyone should order as soon as they have a signed contract with the Sellers/Homeowners.
I am writing you this article to teach you that there are deals out there that are not really short sales that will have equity in them, if you will take the time to do some research to determine if the Lenders and/or Banks mentioned in the Interview with 60 minutes were involved. So … take the time to talk with a Seller/Homeowner and fill out the Seller Information Sheet found in my Home Study Course. Take the time to go online to the County Website and research where all the Deeds and Mortgages are filed. I would suggest that you sort this search by date. You can determine from the time that they bought the property to the present which mortgages are on the property and, if by chance, any have been either Assigned to any of the Lenders and Banks mentioned in the Interview and if any have decided just to write off the Loan by filing a Discharge of Lien.
What would I do when I find a deal like this? I would still sign the short sale package from my Home Study Course with the Seller and my offer would be low! I would order a rush on title work (title commitment) to make sure that my research is correct. I would go to the house and take loads of pictures so that I know what would be a fair price for this property. I would order a payoff letter from the 1st Mortgage Company so I have the exact numbers. I would then order a HUD Settlement Statement from the title company to make sure all closing costs were included in the amount that I first offered, and then I would look at what the Seller/Homeowner would receive on the deal. Obviously if there is lots of money to work with, you can renegotiate on the price and have them sign a new contract. Would I educate them that this is not a short sale and that this is a straight sale? Well… I am not an attorney or their realtor so … I would let them know exactly how much money they will get at closing and I bet they will be happy with whatever you think is fair because you originally told them they might get no money and it was up to the bank. Remember though, BE FAIR…..what comes around goes around.
Thank you so much to all of you who continue to send me your questions and topics that are most helpful for you to read about. Your Success is important to me, please let me know how I can help!!!
Happy Negotiating!
Kimberlee Frank
Kimberlee Frank is a Master Negotiator who has closed over 600 deals since 1998. She is a Mentor, Trainer, Author and Real Estate Broker teaching Investors and Realtors how to creatively purchase and sell short sales with her Step-by-Step System. She has helped Investors and Realtors earn hundreds of thousands of dollars.
