Below is my response to Dorothy regarding her FHA deal.

Lesson learned – Sometimes you need to let a deal go.

I’ll comment more after you read my response to Dorothy.

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Dorothy,

Wow. I wouldn’t touch this one.

Of all the deals I’ve ever done, I have NEVER seen a title as messed up with liens and judgements as that one!

My suggestion would be to find another deal.

To answer your questions…

FHA is going to require their NET proceeds to be no less than 88/86/84% of the appraised value. With all the tax and judgements, this property is WAY over levereged, and trying to negotiate all those liens will be a nightmare, and your odds of getting them done are so slim, that it just isn’t worth your time.

Let this one go to sale and find another deal. There are plenty!

BTW, great to hear from another North Carolina investor!

- Marty

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Early in my short sale career, I was really struggling. I had about 6 deals I was working, all of which seemed to be “stuck in the muck” (that’s a quote from my 3 year old’s book). All the deals would provide minimal profit and were requiring maximum effort (if they closed… and a big IF). I finally got frustrated and dropped EVERY deal… yep, I let them all foreclose. I did it to clear the air and start fresh. Guess what happened. 4 months later I started closing 3-5 deals per month averaging $10,000 to $15,000 per deal.

How did that happen?!!?!??!?

I’m a big believer in Karma, Energy, or whatever you want to call it. I believe that by clearing the air, it opens the door for more and better things to come. That’s exactly what happened in this case.

How do you apply this? If you are working deals that you are not sure about, ask us about them. We’ll be happy to help you. Of course, you probably already know the answer. What does your gut say about it? If it look, smells, and tastes like a bad deal, then it probably it. It’s ok to let it foreclose. Think of all the other homeowners you’ll be helping by letting this bad deal go (by the way, the ones you “let” foreclose are probably going to foreclose anyway… so don’t think that you’re “giving up” on that homeowner. You only can do what the foreclosing bank will let you do. Ultimatley it’s the banks decision to foreclose, not yours.

I hope this help! Have a great weekend!

Marty Schulting
Top Foreclosure Training
Accelerated Loan Mods
Co-Founder and Coach

Dorothy just sent over more information on this property. Check it out below.

I’ll post my response to this soon.

- Marty

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Hi Guys,
Here is the info you requested.

City & State – Charlotte, NC
The values in this neighborhood range from 120k to 150k
Subject property value is 137k
Appraisal came in at 115k
All comps are for the last 6 months – solds

The liens are as follows:
4,632.68 Hud
7,138.41 Hud
The letter that accompanied the denial stated that the Hud liens need to be paid in full from the proceeds of the sale and that another company handles the negotiations (not Citimortgage). It stated that all these fees and payoffs need to be on the sellers closing costs.

10,305.01 State Tax
5,400.34 State Tax
842.35 Federal Tax
4,431.97 Judgement (includes interest & fees – told they do not settle
2,367.95 Judgement (includes interest & fees – told they do not settle
2,184.29 This is a judgement that was not on the credit report, but showed up
when I went to the courthouse to inquire about the others.

When my offer was denied, this note came back with it.

“Please keep in mind that Citimortgage will not pay any buyer’s closing cost and/or any buyer’s discount points and/or help with down payment assistance! Not even if the offer price is increased to offset the closing costs.

Is all this normal? or did I choose poorly?
How do you choose a short sale deal?

Thank you for your help.
Dorothy

The following question was recently asked regarding the new FHA guildelines. This question was posted in our Question and Answer Forum, and is where I answered the question. It is a great question, so I wanted to share it with everybody, not just those who are in one of our coaching programs.

The question was:

Your email could not have come at a better time. I’m new to the game and in need of some direction right now. I am doing my first short sale. It is an FHA and I’m stuck. I think I might have done everything wrong.

Thank you for your help

My answer to the question was:

On page 12 of the mortgagee letter, it states:

“HUD has established guildelines for vauying minimum net sales proceeds based on the length of time a property has been competitively marketed for sale.”

Some loss mitigators (most, actually), will interpret this as meaning that the timing starts when the propety is listed. This is ok, becuase your typical short sale is going to take 3 months from beginning to end anyway, so with that, you’ll end up with the full 84% discount.

With your example below, if the appraisal came in at $115,000, then the max discount of 84% you’ll end up paying (NET TO THE LENDER) of $96,600. Realize that all the other liens will need to be taken care of somehow, but the lender is going to require $96,600 in order to make this deal happen… MINIMUM NET to them.

The discount comes off the “as-is” appraised value. Is that where the $115,000 comes from? Or is the $115,000 the full retail value? Have the listing agent or the homeowner ask for a copy of the appraisal. That will answer the above question. If the as-is value is lower, then you can take the 84% cisount off of that number, and that’s the new MINIMUM NET that the lender will need to see.

*** MANY lenders will try to give you the discount off the FULL RETAIL value of the property. THIS IS NOT CORRECT!!! They need to use the “as-is” value as dictated by FEDERAL GUIDELINES on the mortgagee letter. It sometimes takes a little arm twisting to get them to see it ***

How much are the other liens for?
How much can you sell this house for?
What city and state is this house in?

Let’s evaluate this deal a little further with those quesitons above.

I’ll look for your answer later today.

Marty

I’ll add any follow up questions and answers to this blog.

If you are a coaching student (Emerald or Diamond) and you are not registered for the forum, please do so. There are so many good questions and answers in the forum, that you’re really missing out if you’re not there.

To register, go to www.TopForeclosureTraining.com/forum. The register link is in the upper right hand part of the page.

Take care,

Marty Schulting

This is awesome! On December 24, 2008, The U.S. Department of Housing and Urban Development released the “Mortgagee Letter 2008-43″. What does this mean to you, the real estate investor? Well, to summarize:

1. Change in NET to lender. First, let’s cover the “bad” part. Well, it’s sort of bad, but if you play this right, it’s going to be irrelevent to you. The original NET of 82% has changed. The new NET is 88% if sold within 30 days, 86% percent if sold within 60 days, and 84% if sold after 60 days. Why does this not REALLY matter? See #2.

2. Removal of 63% or greater property appraisal versus debt. This will help everybody! The old FHA guidelines called for the appraisal to come in at or above 63% of the loan balance plus past due interest and late fees not including attorney fees. This guideline has been removed, which opens up FHA short sales for those areas that have seen huge depreciation as well as those properties that require massive repairs!

3. Property (by exception) no longer needs to be owner occupied. What this means is that FHA will still allow a short sale, even if the property in not owner occupied. The details are in section B (Mortgagor Qualifications) in the mortgagee letter. It will be interesting to see how the lenders interpret this section over time.

4. Increased amount to Junior Liens. FHA now allows up to $2500 to Junior liens ($1000 of this comes from the Seller Incentive).

5. Up to $1000 in seller incentives. FHA will allow the homeowner to receive up to $1000 at closing as an incentive for participating in the short sale program. However, the NET to the lender must still be at or above the 88%, 86%, or 84% as discussed above.

6. Lender MUST e-mail or fax the appraisal if requested. Ever wonder if the loss mitigator is lying to you about what the appraisal came in at? Guess what, if the homeowner or the real estate agent request a copy of the appraisal, the lender MUST disclose it! Wow, this takes ALL the guesswork out of the numbers required to pay for the property. Cool, huh!

7. The discount comes off the as-is value, not the full retail. Ever wonder what number drives your discount? This isn’t necessarily a change in the guidelines, but the mortgagee letter clearly states that the lender is to take their discount off the as-is value, not the full retail value!

Holy smoke, do you see why this is so cool!?!?!? All the guesswork for your FHA deal is now gone! From now forward, you know:

- What the appraisal came in at (lender required to send you a copy of the appraisal)
- What your number is that you must pay for the property
- That the appraisal can come in at ANY number (old 63% guesswork is gone)
- You can even get vacant FHA deals done

If you haven’t done an FHA deal ever, it’s time you got one!

To your success!

Marty Schulting
Top Foreclosure Training