Shorts and Investments

In the past few days I have received call after call from homeowners who have decided that they just dont like that investment property any more......It may not have increased in value or it may have had terrible tenants that have left it in a mess....there are many reasons to hate an investment property nowadays! The most important distintion here is that IT IS NOT a PRIMARY residence - Most agent s will agree that banks will not accept a deficiency on an invest,ment property ~ WHAT! ~ thats right! Banks typically WILL NOT accept a short on investment properties ~ HOLD ON THOUGH ~ that may be a myth ~ we have a client who is set to close on the 30th of Jan whose lender is accepting a short on the payoff WITHOUT a deficiency judgement or promisary!

Questions

Some questions that I always ask of someone who asks about selling their investment property short -

• Have you spoken to an attorney and your tax advisor? There may be some serious effects from a short sale on your credit and tax positions!!
• Do you have a second lien holder?
• Are you current in your payments?
• What is your credit score?
• Is the second lien holder the same as the first?
• Why dont you like this property any more? This one gets some pretty interesting answers!
• How long do you think it will take to regain your value if you keep this property?
• How much? Yes, How much do you think you are going to be short AND how much do you have in hand to pay the deficiency?
• Are your prepared to sign a promisary if required?
• Why do you think your lender will even consider taking a short?

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Comments (2)

Zach L says...
on 03/04/09

Reply

Hello Marshall,
I was wondering what the outcome was in regards to the client that was trying to do a short sale on an investment property that was scheduled to close on Janurary 30th.

GH says...
on 02/22/09

Reply

I have a unique question about a potential short sale situation I am considering on an investment property:
1. This is on a SFR "investment property"
2. I purchased this proiperty in 2007 for $355k with 10% down payment, and purchased it "subject to" the pre-existing mortgage. Which means I simply took over the last owner's mortgage, the loan did not change to me name, it is still under the previous owner's name.
3. This property was a serious fixer, I later spent $70k on the property
4. It is now only worth maybe $200k. The mortgage balance is about $310k. It is now vacant. I could not find good tenant even at $1200 per month.
5. I got laid off last year, could not afford to make payments on this property & other investment property & my own home mortgage. I have decided to stop making payments & property taxes on the two investment properties.

The question is, is a short sale on this property possible, given the fact I own it but the mortgage is still under the previous owners name.

Please kindly advise ASAP. Thanks

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