Pacific Heights
Financial District
Patrero Hill
Marina
Case Studies
Assisting a Distressed Seller through a Short Sale
John was facing financial hardships and the imminent threat of foreclosure. Desperate to find a solution, he reached out to us through a referral. We are real estate investors with expertise in buying pre-foreclosure properties on creative terms. Recognizing an opportunity to help John while acquiring a valuable investment, I initiated the process of a short sale.
- Establishing Communication: John contacted us after hearing about our success in assisting distressed sellers. I promptly scheduled a meeting to understand John’s situation better, discuss his financial struggles, and explore potential solutions. This initial meeting helped establish trust and rapport.
- Evaluating the Property: To determine the feasibility of a short sale, I conducted a comprehensive evaluation of John’s property. I assessed its condition, market value, and researched the outstanding mortgage balance. My evaluation allowed us to determine a fair market value for the property, taking into account the seller’s financial hardship.
- Educating the Seller: I explained the concept of a short sale to John, outlining how it can help him avoid foreclosure and minimize the negative impact on his credit score. I emphasized that a short sale would involve selling the property for less than the outstanding mortgage balance with the lender’s approval.
- Negotiating with the Lender: With John’s consent, I began negotiating with the lender on his behalf. I presented a comprehensive short sale package, including financial statements, a hardship letter from John, and evidence supporting the property’s current market value and property condition with the pictures. I was able to convince the lender to consider the short sale as a viable option.
- Agreeing on the Terms: After extensive negotiations, I successfully obtained the lender’s approval for the short sale. The terms of the agreement were established, including the accepted purchase price, conditions for closing, and the necessary documentation.
- Assisting with the Documentation: Our attorney prepared the necessary legal documentation to ensure a smooth transaction, ensuring compliance with all legal requirements and protecting both parties interests.
- Closing the Deal: Once all the documentation was in order, John and I proceeded with the closing process. The short sale transaction was completed, and I acquired the property at a mutually agreed-upon price. The proceeds from the sale were used to satisfy a portion of John’s outstanding mortgage balance, relieving him of his financial burden.
- Long-Term Impact: Through the short sale, John avoided the devastating consequences of foreclosure and began his journey toward financial recovery. The successful completion of the short sale not only relieved him of his financial burden but also provided him with the opportunity for a fresh start.
Why would a distressed seller in pre-foreclosure opt to agree to sub-to terms for selling their property, and is it a wise decision on their part?
A pre-foreclosure distressed seller might consider agreeing to “subject-to” (sub-to) terms to sell their property for several reasons:
Avoiding Foreclosure: By agreeing to a subject-to-deal, the seller can prevent the foreclosure process and the associated negative consequences, such as damage to their credit score and potential eviction from the property. It provides an opportunity to resolve their financial difficulties and move on without going through a foreclosure sale.
Quick Resolution: Sub-to-deals can offer a faster resolution compared to traditional selling methods. It allows the distressed seller to transfer the property to a buyer who takes over the existing mortgage payments, relieving the seller of the financial burden.
No Cost to the Seller: In a subject-to-arrangement, the buyer typically assumes responsibility for the existing mortgage, including making the payments. This means the seller doesn’t have to come up with any upfront cash for closing costs, pay off the loan, or handle any outstanding liens or judgments on the property.
Preserving Equity: In some cases, the distressed seller may have built up equity in their property. By selling through a subject-to-deal, they can preserve that equity and potentially negotiate a deal where they receive some cash upfront or a share of future profits when the property is sold or refinanced.
However, whether a subject-to-deal is, a good decision for a distressed seller depends on their specific circumstances and goals. It’s important for the seller to carefully evaluate the terms of the agreement, consider their long-term financial objectives, and seek professional advice.
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