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Cash offer on a short sale: advice/experience?

Posted by kaismom (My Page) on
Fri, Apr 22, 11 at 12:49

We are making a cash offer on a short sale house.
The seller owes about 500K, 2 lenders. 1 loan 450K, the other 50K.
Our offer: 400K cash, nonfinancing contingency hoping that it will expedite the process. The listing price is 480K now.
We will buy and convert to 30 year mortgage. This will be a rental investment house, not a primary residence for us.
The house has been on the market on and off for 3 years until the short sale listing. They have asked for too much money, above 500k. The house is probably worth about 425K to 450K. So not a huge discount but some...
Anyone with short sale experience, advice?
Does non-financing contingency expedite the process?
We have the contract written so that we can pull out anytime if we find better/other house.

Follow-Up Postings:

RE: Cash offer on a short sale: advice/experience?

"Does non-financing contingency expedite the process? "

Not enough to matter.

The big delay will be getting the note holder to sign off.

Banks and lenders do NOT like to lose money.

RE: Cash offer on a short sale: advice/experience?

Make the offer and sit back and wait to hear from them. Cash will not speed up the process, but it is more appealing than an offer with financing contingencies.

RE: Cash offer on a short sale: advice/experience?

Best of luck - I think you are going to need it. The chances of getting a short sale through with 2 lenders is pretty small.

Just by the numbers, if a house is worth $450k, why would the first mortgage holder take less than $450k? You might have a little wiggle room for the convenience of getting it off their books, but not much. Your $400k offer is going to net about $375k, so they will be losing $75k. That isn't even counting the second mortgage. Obviously, the second lender isn't going to approve unless they get something, so that loss to the first actually has to be larger.

It is possible that they will accept your offer, but I don't think it is likely. The first lender is better off just foreclosing and trying to sell at market value.

RE: Cash offer on a short sale: advice/experience?

"1 loan 450K, the other 50K."

The second mortgage holder is likely to foreclose since they will be wiped out if the first forecloses before they can.

Unless they want to lose the entire second they may step up and take the house.

If it is worth less than the first they may view the loss as better than taking on the first mortgage liability.

This is why seconds get a higher rate than firsts.

You are looking at a long path with two lenders, either of whom can kill the deal.

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