The newest short sale negotiation strategy of a second, or junior lien holder, in their quest to obtain the maximum return on their debt is to offer a waiver of deficiency language in exchange for cash, or promissory note from the sellers at close.
These Jr. lien holders, which are most likely to receive a minimal amount at closing, have become more cooperative in their release when they are able to recover more than the first, or primary lien holder offers them for their cooperation to close a transaction.
Confusing…let me clarify a bit by example:
Seller owes a first and a second loan on a property, which he is selling. The offer from a buyer is less money than the first loan balance owed, let alone any money to pay towards the second. The first lien holder agrees to accept the offer, and in order to gain cooperation, or release of the lien from the second lien holder, offers a nominal amount to them. The second lien holder takes the money offered by the first lien holder (normally $3,000, unless both notes are held by the same bank), and then is in a position of negotiating for a “full release†on his balance with the seller.
They have already agreed to accept and close the sale, but with the right to sue the seller for the deficiency (difference between the $3,000 and the actual balance owed.) In order to gain a full release, they want…you guessed it—more money! The average they are seeking to obtain is 20% of the balance owed, less whatever money they will receive from the first lien holder.
The most important thing to note is that the bank will accept cash (no surprise there), OR an UNSECURED PROMISSORY NOTE in settlement of this debt. The notes are typically for 3-20 years depending on the financial circumstances of the seller, and the amount owed. If the seller is in a position to pay the cash, typically it is ½ the promissory note amount if paid at close of escrow.
The benefits of a short sale to the seller are:
- Dignified exit from the property
- Less effect on the credit score
- 18-20 months sooner than foreclosures for credit score renewal
- Repayment of debt at reduced expense
When you are in a situation that calls for an expert, be sure you have an experienced and accredited short sale and foreclosure agent working on your behalf. The art of negotiation is one that is honed through practice!
A hui hou…
Erik Hinshaw
November 5, 2010
Pam your only error is how clear and simple you make this all sound which is precisely why you are the master.
Erik Hinshaw
November 5, 2010
Pam your only error is how clear and simple you make this all sound which is precisely why you are the master.
Beth Robinson R(B)
November 5, 2010
Mahalo for keeping all our short sales on track while I was on vacation! I am in awe of the tenacity and negotiating savvy you brought to bear on each and every one. And you still found time to write this blog post to share your experience! I’m planning to send it out to every Short Seller with a first and second mortgage.
Beth Robinson R(B)
November 5, 2010
Mahalo for keeping all our short sales on track while I was on vacation! I am in awe of the tenacity and negotiating savvy you brought to bear on each and every one. And you still found time to write this blog post to share your experience! I’m planning to send it out to every Short Seller with a first and second mortgage.
Katie Minkus, R(BIC)
November 5, 2010
Pam, have you lost a short sale yet? By my estimation you have a 100% closing rate. Don’t know how it’s possible to be more of an “expert” than that!
Katie Minkus, R(BIC)
November 5, 2010
Pam, have you lost a short sale yet? By my estimation you have a 100% closing rate. Don’t know how it’s possible to be more of an “expert” than that!
Heidi White, R(S)
November 6, 2010
Wow, Pam this really blows my mind. I give you so much credit to be able to talk to these banks every day (morning) I would go insane. You are the master! It is clear that the ‘on the job’ experience you have obtained makes you superior Short Sale negotiator. Your Sellers really are fortunate to have you.
Heidi White, R(S)
November 6, 2010
Wow, Pam this really blows my mind. I give you so much credit to be able to talk to these banks every day (morning) I would go insane. You are the master! It is clear that the ‘on the job’ experience you have obtained makes you superior Short Sale negotiator. Your Sellers really are fortunate to have you.
Catherine Klug
November 7, 2010
Pam, you are definitely a skilled and experienced short sale practitioner. I keep learning from you everyday!
Catherine Klug
November 7, 2010
Pam, you are definitely a skilled and experienced short sale practitioner. I keep learning from you everyday!
Diane Chavez
November 8, 2010
Pam,
Thanks for elaborating the process in you blog. It helps all of us to gain insights about how Banks opperate in this market.
Thanks for the information.
Diane Chavez
November 8, 2010
Pam,
Thanks for elaborating the process in you blog. It helps all of us to gain insights about how Banks opperate in this market.
Thanks for the information.
Daniel Hanna
January 17, 2011
Great work Pam.. I would like to follow up a little more with you on some hot topics on short sales in Hawaii. We have been having great success as well on Maui. When you Have a minute please send me a email at premiernego@gmail.com.
Thank You very much for your time!!
DH
Daniel Hanna
January 17, 2011
Great work Pam.. I would like to follow up a little more with you on some hot topics on short sales in Hawaii. We have been having great success as well on Maui. When you Have a minute please send me a email at premiernego@gmail.com.
Thank You very much for your time!!
DH
Kathy Awai, R(S)
July 13, 2011
Pam, thanks for clariying how the 1st and 2nd lien holders operate. The advice is invaluable; mahalo.
Kathy Awai, R(S)
July 13, 2011
Pam, thanks for clariying how the 1st and 2nd lien holders operate. The advice is invaluable; mahalo.
Pam Deery R(B) Big Island
July 13, 2011
Kathy; it changes all the time. The fact that the Bank of America is finally allowing substitution of one buyer/contract for another if the first buyer “walks” is a monumental achievement on the bank’s part. Can’t believe it took them this long, but hey…it’s achievement and appreciated!
Pam Deery R(B) Big Island
July 13, 2011
Kathy; it changes all the time. The fact that the Bank of America is finally allowing substitution of one buyer/contract for another if the first buyer “walks” is a monumental achievement on the bank’s part. Can’t believe it took them this long, but hey…it’s achievement and appreciated!
Katie Minkus, R(BIC)
July 14, 2011
I wonder if we’re already seeing the results of Act48? Improvement on time frame to process short sales seems to have begun…
Katie Minkus, R(BIC)
July 14, 2011
I wonder if we’re already seeing the results of Act48? Improvement on time frame to process short sales seems to have begun…
Pam Deery R(B) Big Island
July 14, 2011
Definitely Katie; Now that the Foreclosure law has changed in Hawaii with regard to the moratorium on nonjudicial foreclosures for owner-occupants and allowing those currently in the process of a non-judicial foreclosure to convert to a judicial foreclosure, which will take 18-24 month at least to complete…we will be seeing fewer foreclosures coming on the market. Hopefully more owners will be able to work out modifications during the lengthy delays to be able to keep their homes!
We are, however, seeing more of the short sale properties receiving multiple offers with the prices actually starting to rise as the supply has diminished. The good news is that “some” of the banks have adjusted their processing to actually allow completion of a short sale via a streamlined process and are even referring the negotiations directly to the investors rather than having to go through the process with a servicer or middle man (my personal favorite due to expeditious negotiations of course). Stay tuned…always something new in the process..almost daily.
Pam Deery R(B) Big Island
July 14, 2011
Definitely Katie; Now that the Foreclosure law has changed in Hawaii with regard to the moratorium on nonjudicial foreclosures for owner-occupants and allowing those currently in the process of a non-judicial foreclosure to convert to a judicial foreclosure, which will take 18-24 month at least to complete…we will be seeing fewer foreclosures coming on the market. Hopefully more owners will be able to work out modifications during the lengthy delays to be able to keep their homes!
We are, however, seeing more of the short sale properties receiving multiple offers with the prices actually starting to rise as the supply has diminished. The good news is that “some” of the banks have adjusted their processing to actually allow completion of a short sale via a streamlined process and are even referring the negotiations directly to the investors rather than having to go through the process with a servicer or middle man (my personal favorite due to expeditious negotiations of course). Stay tuned…always something new in the process..almost daily.