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Old 10-19-2010, 08:20 AM
 
Location: Tempe, Arizona
4,511 posts, read 13,595,655 times
Reputation: 2201

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Quote:
Originally Posted by HX_Guy View Post
Can you guys expand a little more on the process of a short sale (as the seller)? What is this promissory note you guys are talking about?

We currently turned in a short sale package with our lender and are not really sure what to expect. The original loan amount is for $280,000. The lender had a BPO done that came back at $165,000 and that is what the offer from the buyer is for. The lender (well, one of their customer service people) said that the offer is good and that a negotiator has been assigned and it should take about 60 days for a decision.

Again though my main concern is this promissory note and such. I mean if you short sale and the lender accepts, doesn't that mean you are not responsible for the loan any longer?
You should consult with an attorney as to the all the legal ramifications of a short sale that may affect you in your state. Unfortunately, you may still end up on the hook for the difference of the loan amount and the sale price. The bank may ask for a promissory note that requires regular payments towards the defaulted amount, or some lower negotiated amount. They may also have the right for a deficiency judgment for the difference. If possible, you should try to negotiate in your bank approval documentation that the bank considers the debt paid in full. If you are dealing with more than one lien holder, then the problem gets magnified.
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Old 10-19-2010, 09:09 AM
 
Location: Rural Michigan
6,341 posts, read 14,712,563 times
Reputation: 10550
Quote:
Originally Posted by HX_Guy View Post
Can you guys expand a little more on the process of a short sale (as the seller)? What is this promissory note you guys are talking about?

We currently turned in a short sale package with our lender and are not really sure what to expect. The original loan amount is for $280,000. The lender had a BPO done that came back at $165,000 and that is what the offer from the buyer is for. The lender (well, one of their customer service people) said that the offer is good and that a negotiator has been assigned and it should take about 60 days for a decision.

Again though my main concern is this promissory note and such. I mean if you short sale and the lender accepts, doesn't that mean you are not responsible for the loan any longer?
Some lenders will tuck a promissory note into the closing package - if you sign it, you're on the hook, even if they "agreed" to a short-sale. That's one reason to hire a lawyer to review anything you plan on signing. Lender's contract "addendums" are often longer that the standard arizona purchase contract, and basically gut it's protections for the buyer - even well established ones, like unpaid leins.

If they're that hard on buyers of these properties, I can only imagine what little surprises they would tuck into a short-sale agreement.

RE agents aren't lawyers, and they'll tell you how "experienced" they are and how much they "know", while handing you a contract that's laced with disclaimers regarding legal advice.

The truth is, there isn't any mention of "short sales" in the Arizona Revised Statutes, specifically - ARS § 33-729 (the "anti-deficiency" statute). Even if there was language there, there was a court case in AZ with a VA loan where a deficiency judgement was allowed , contrary to AZ law.

This is untested territory, many lawyers have disagreements on the value of a short-sale for a underwater borrower, even one without a "promissory note". Remember, the lender already has a promissory note for the original loan amount.

Personally, I wouldn't do a short-sale if I was underwater. A trustee's sale gives you at least a little protection under Arizona law - a short-sale only gives you the protections in the short-sale agreement, and lawyers make lots of money arguing what the definition of "is" is. The people you're dealing with (the banks) have no problems forging documents, and lying to judges to get what they want. Signing one deal with the devil was an honest mistake. Signing another deal with one of them is begging for trouble.
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Old 10-19-2010, 11:11 AM
 
419 posts, read 1,526,464 times
Reputation: 172
Quote:
Originally Posted by HX_Guy View Post
Can you guys expand a little more on the process of a short sale (as the seller)? What is this promissory note you guys are talking about?

We currently turned in a short sale package with our lender and are not really sure what to expect. The original loan amount is for $280,000. The lender had a BPO done that came back at $165,000 and that is what the offer from the buyer is for. The lender (well, one of their customer service people) said that the offer is good and that a negotiator has been assigned and it should take about 60 days for a decision.

Again though my main concern is this promissory note and such. I mean if you short sale and the lender accepts, doesn't that mean you are not responsible for the loan any longer?
We just completed our short sale. After about 60 days, since the offer was in line with the BPO, the "investor" accepted the price, but asked us to share in the loss, called "seller participation". They wanted a cash amount or $5K AND a promissory note for $15K over 10 years. The 10 year note makes no sense whatsoever if you won't be living there. What we did, and I recommend anyone does, is negotiate with a little cash and work upward to a point you're comfortable with. If your loan balance is still near $280K, you should expect the 'investor" to want at least a couple thousand from you to cover their $100K+ loss. We got out with $2500 cash on a ~$100K loss.

Good luck.
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Old 10-19-2010, 11:26 AM
 
3,819 posts, read 11,957,761 times
Reputation: 2748
Artvandelay: Thanks for the specific info...can I ask who your bank was? We are with Aurora Loan Services. They have told us the same "60 days" time period and the completed paperwork package was accepted by them last week.

When did you find out about the "seller participation"? Was it in the short sale approval letter or was it tucked away somewhere in the closing papers?
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Old 10-19-2010, 11:33 AM
 
419 posts, read 1,526,464 times
Reputation: 172
Quote:
Originally Posted by HX_Guy View Post
Artvandelay: Thanks for the specific info...can I ask who your bank was? We are with Aurora Loan Services. They have told us the same "60 days" time period and the completed paperwork package was accepted by them last week.

When did you find out about the "seller participation"? Was it in the short sale approval letter or was it tucked away somewhere in the closing papers?
Our bank was Wells Fargo, but I don't know who the "investor" was, but I believe a separate entity. The seller participation was not hidden in closing, but rather a condition of acceptance for the sale. After a couple negotiations, our last offer was $2500 cash and no note. This was accepted 2 days later, and additional paperwork ensued. After that, it was normal sales activity, with buyer inspection and appraisal. The documents I saw and signed prior to closing clearly outlined my obligation. If you have a 2nd mtg on the house, that can complicate the approval.

FYI, with the Mortgage Deft Relief Act of 2007, you will not be liable for the loss on the sale (or taxed on it), as long as it's your primary residence. For 2nd mtg, I don't know if and for how much you can be held responsible.
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Old 10-19-2010, 11:53 AM
 
3,819 posts, read 11,957,761 times
Reputation: 2748
There was a second mortgage at one time, but we actually negotiated it for 10% a while back when we were trying to work on a loan modification which subsequently got denied. So currently there is only the first mortgage with Aurora.

I've searched online and found multiple Aurora Loan "approval letters" and they all basically look identical, I haven't really found one that asked for any sort of seller contribution out of pocket. They all end with...

"If the short payoff amount is remitted to us, Aurora Loan Services will:
* File a 1099-C with the IRS
* Release your mortgage on the public records.
* Report the transaction to the credit bureaus as "PAID INFULL FOR LESS THAN THE FULL BALANCE."

Here are some examples...

http://www.360groupaz.com/pdf/aurora.pdf (broken link)
http://www.fresnoforeclosurehelp.org/upload/Bank%20Approval.pdf (broken link)
http://regencylm.com/approvals/aurora.pdf

This is the only one I have found that does mention a "seller contribution" but it says that it's included in the closing costs.

http://www.google.com/url?sa=t&sourc...GQwZADMJPydONQ
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