San Diego Housing Bubble News and Analysis

I'm closing 10 this month.

Good 'short sale' article in USA Today:
http://www.usatoday.com/money/economy/ho...

If you are the 2nd lien holder, would you agree on a short sale that give you 10 cent (or even 1 cent) on a dollar or would you go after the seller for the full amount after the auction ?

There are a lot of 2nd liens in 100-200K for lower end and 300K - 500K for the higher mid end.
With that much of money at stake and knowing they are keeping current on that mortgage, the 2nd lien holder has good chance to get most of their money back, even after attorney fees and other charges. It is unlikely this guy will declare BK to wipe out the recourse 2nd.

Since the seller has 2nd home (mortgage), they probably put enough (20% or more) money to get the loan these days. And that is the money the 2nd can go after.

Why would you agree to a deal that you are absolutely going to lose a lot of money ?

Put yourself into their shoes, and you know why.

I think maybe you misunderstand a lienholders rights with regards to deficiencly judgements. California is a one-shot state. Either the lien holder goes after the property through traditional (non-judicial) foreclosure (NOD through trustee sale) or after the borrower through a judicial foreclosure process. Can't do both. Once there has been a foreclosure auction, it's over with. In California, a deficiency judgement may not be obtained when the property is sold through a non-judicial public sale or if the foreclosure is related to a purchase money mortgage.

Actually Pepsi, I would definitely agree to something rather than nothing. As SK mentioned there is no recourse after the auction, so here again is a viable reason why the bank should take their money before letting this go to auction.

Last I checked $1 is better than no dollars, but I suppose if there is more to the story for these banks as far as government incentives then I can understand. But at this point public knowledge would force me to believe that the 2nd lien holder is a complete knuckle head to walk away from a deal where they still get 10-20 cents on the dollar.

That is not true that there is no recourse after the auction. The 2nd lien holder get wiped out FOR THE BUYER. They can still pursue the seller for the deficiency in the court.

Google "2nd lien holder pursue recourse" and you will see many lenders are doing it. Especially for large amount.

Here is an article specifically talking about the 2nd lien holder with recourse loan:

http://www.trulia.com/blog/hannah_fliege...

Not a week goes by that I don't see multiple old short sale listings pop up as REOs, or relist at higher asking prices after getting kicked back by the bank.

It's a bit of a consolation to know that relatively few people actually closed on smoking hot deals earlier this year.

That's kind of right and wrong. If the foreclosure action is done by a senior lien holder and junior lien holders are wiped out, then the junior lien holder(s) have not exhaused their remedies, they can still turn the debt over to collection and/or litigate. But if it is the junior lien holder that forecloses, then they have no remedy after the auction, they're finished.

That's why 2nd lien holders often have some extra weight to throw around during short sale negotiations. Even if they have no equity, they can extort some amount in exchange for walking away. It's in the best interest of both the borrower and the senior lien holder for them to agree if it avoids a trustee sale. Even if it is paid by a senior lien holder.

Yes, that is correct, and that is why most of 2nd lien holders do not foreclose if the house is severely underwater.

I was just assuming that the 2nd was not the one that foreclosed. Was that the case ? There is less than 5% of NOT that are filed by 2nd.

When a lender forecloses, they kind of consume their legal right for their loan to accept whatever they can get from the auction.

So that means your closing 1, since we all know that your online "persona" magnifies everything to the power of 10. haha

Sorry murf you are correct I need to correct that. I'm closing 100 this month.

I don't know about "smoking hot deals". The bank behind the short sale my wife and I bought had an appraisal done before accepting our offer, so it's not like they were flying completely blind.

No, I think we paid "fair market value" based on a current snapshot of the market. I'm convinced we'll see a 10-20% paper loss over the next few years in our neighborhood. The only "smoking" is from the crater where our bank account used to be. I doubt we are unique.

We have no regrets, however. This deal makes financial sense for us for reasons other than capital gains or lack thereof.

Even with the sdr 90% hyperbole discount, that's a lot unless you are a broker rather than an agent.

Let's see: assuming a low end of $300k/sale @ 3% and an 80% agent cut, that's $72k in gross commissions for the month. How do you have time to post so prolifically here? I guess you could afford to pay your minions to keep your online persona going. :-)

10 is a great rounded number, but I tend to believe that unless you have a great team of negotiators and tc's in place for that many deals it is almost impossible. sdrealtor is your real name Gary Kent?:)

Admittedly it is my best month ever. The key to doing it as you surmise is having a great team behind me. My negotiator and TC are great. Both are experienced, smart, honest, hardworking and a pleasure to work with on a daily basis. I also have an attorney I work with. I am in constant contact via email, text and phone (gotta love that blackberry thingee!). I have my eyes, ears and hands on everything every step of the way.

I also frequently write checks when we are short at closing just to get it done and move on to the next one. I'm all about being fair to everyone in the transaction while getting results not ego or getting every last penny for myself which is why I beleive I am so successful at closing these short sales. At the end of each transaction, I generally get a thank you from the buyer's agent and comments that they wished other agents handled them the same way. At the end when everyone is paid I net between 40 and 50% of the gross commission dollars but the volume and consistency is what I am after.

I'm seriously considering shutting it down for month to give myself a break as I've been on overload for several months now.

sdr,

I hope you are not the powerhouse agent/broker who closed a short sale that we wanted.

In May, we saw a house we loved in SE Escondido. We liked it so much that we went $5K above list (hold your snickers). Alas, it had to be a backup offer, but we were apparently at the front of that line.

Yesterday it closed at $3K over list on a FHA loan — a brokerage repped both sides. I wonder if the lender knew there was at least one higher offer on the property — and a conventional, 20 percent down one at that? I realize $2K ain't much, but it still stinks for us. We've seen inferior properties go up to $70K over list, so to see this place go for what it did is comparatively baffling.

Sorry i'm just a small time guy who likes to keep a low profile in real life.

In a short sale the listing agent has alot of power and many abuse it. I rarely represent both sides and would only do so if the buyer I was repping was legitamitely the best buyer IMO.

Two agents but same agency, with the listing agent also a broker.

What's also weird is I haven't seen the closing update on SDLookUp.

Unfortunately if it looks like a duck and it quacks like a duck its probably..........

a duck!!!

Wow......in the span on one thread we've seen the "As seen on the internet" character known as sdrealtor go from a pompus braggart, to a meek recluse who wants to keep his anonymity.

Come on now.....we've all paid too much for this channel to have you changing your persona in the middle of an episode!

hehe

I noticed that most accepted offers on short sales are "cash" offers. Does anybody know if funds from a HELOC are considered cash and are banks willing to give a mortgage later on if the owner wants to "refinance"?

Hi kcal

I don't see a huge disparity in the way short sales are financed but if you are coming in with cash most lenders authorizing the short sale will want to see proof of funds. So if you have the cash in your account it doesn't matter how it got there. Lottery, heloc whatever. After the purchase if you want to refi to pull the money back you can but the rate "may" be a bit higher then a purchase loan. Hls can abswer that. How much you can pull out will depend on the lender

a brokerage repped both sides.

In fact we are using the same strategy (to make offers on REO). We have no buyers agent and agree to be represented by the sellers agent. We figure he/she will be *very good* to us.

Why not use the system to your advantage instead of complaining about it? We figured this may happen as soon as REO sales started.

Hadn't thought of that. We are using the agent who sold our house in '06 (and got full price for it), so I suppose it's a "why change what worked so well the first time" kind of thing; this is our third distinct (and most sincere) hunt since we sold, but that's mainly due to me not having the bucks to back up my snobbery, complicated further by the children factor.

If your contract with your agent is expiring soon, wait till then and try the new trick. If not, gently inquire if you can terminate it. If asked, you may explain what may be happening. However, your offers might not have been considered (even if it was better) if the lower offer was all or mostly cash. The sure fire bet to winning the REO game is a low ball cash offer combined with a "highly motivated" selling agent.

As mentioned, the "winner" supposedly got the house with a FHA loan.

I don't doubt your strategy is a good one. In my case, "trying a new trick" would be getting a better paying job. I'm pretty much incapable of embracing any house that's built after 1979 and in my price range.

That said, we submitted an offer on another short sale. So maybe that will change. It's pre-'79! But oh-so suburban. North Park or MH, it ain't.