Stop Foreclosure in Seattle, Washington. There are many real estate agents and investors offering to help stop foreclosure in Washington State. Have you been approached by an investor claiming that they can help you stop foreclosure?
The general concept is that the investor will help you stop foreclosure by purchasing your house. This usually involves you owing more than your house is worth, which is the situation I’ll be addressing here. The investor will make an offer to purchase your house, then negotiate with your lender(s) to get them to approve a discounted payoff on your mortgage(s). This is known as a “short sale”. When the bank approves, you get to sell the house, get out from under the debt, stop foreclosure, and save your credit. Sounds pretty simple, right? Not necessarily.
First, I’ll clarify that investors are an important part of our real estate market. I’m an investor myself, as well as a real estate agent. Most investors I know are honest people trying to make a reasonable living. However, it’s important to realize when an investor is your best option and when it is not.
When selling to an investor to stop foreclosure may be worth considering:
- The foreclosure auction is just around the corner: If the foreclosure auction is less than two or three weeks away and you don’t already have a retail buyer in place, an investor may provide the best option (and possibly the only option) to stop foreclosure by getting the auction postponed while the bank evaluates their short sale offer.
- Your house is a fixer: If your house needs a significant amount of repairs, a retail buyer may not be able to secure conventional financing, and a cash buyer may be required. Investors need to make a profit, and purchasing a fixer at a discount and fixing it up can be a good way for an experienced investor to make a profit. When a house needs a lot of repairs, the bank will often times accept a larger discount in a short sale situation.
When selling to an investor to stop foreclosure may not be a good option:
- Your house is in good condition: If your house is in reasonably good condition or only needs some minor cosmetic upgrades, the bank may not be able to justify accepting a large discount that an investor would typically require. The bank will attempt to mitigate their losses, so they may feel that the house could be sold to a retail buyer, thus reducing their loss on the loan.
- You haven’t received a foreclosure notice or the foreclosure auction is more than 60 days away: If there is enough time to find a retail buyer, the bank may not be willing to accept a heavily discounted offer from an investor. The bank may believe that less of a discount would be required if the property is listed for sale and sold to a retail buyer.
- Your loan is an FHA or VA loan: HUD is now using a minimum threshold net receipt to lender percentage of the market value as a basis for short sale approval on FHA and VA loans. For example, they may accept a different minimum percentage of market value depending on whether your home has been listed for sale less than 30 days, 30-60 days, or over 60 days. If the short sale proposal does not achieve the minimum threshold, it will not be approved. If your home hasn’t not been listed for sale and an investor offers to purchase it, HUD may calculate the minimum amount that can be accepted based on a time-on-market of less than 30 days, causing the bank to require a higher net payoff.
Also, many investors offering to help stop foreclosure are wholesalers. They don’t actually purchase the property themselves. They “flip” the contract to another investor for a fee (usually several thousand dollars). This means that they need to negotiate a discounted payoff with your bank that’s low enough for them to make their profit as well as the investor they’re flipping the property to. The success rate of short sales in this situation is fairly low, except when the house is in very bad condition.
If an investor claims to be a cash buyer, ask them for proof of funds. If they’re negotiating a short sale on your home, they will typically need to provide proof of funds to the bank to get the short sale approved. If they really are cash buyers, they shouldn’t have a problem providing proof that they can actually purchase your home. If they don’t want to show you their bank account balance, sometimes seeing proof of other recent cash property purchases they’ve made can be sufficient.
While the information here may apply in most situations where an investor is offering to help stop foreclosure, it’s difficult to condense all possible scenarios into a single blog post and address every exception. I encourage you to seek legal counsel from an attorney if you have any legal questions. Also, I would be happy to share my experience if you contact me.
Authored by David Monroe, Realtor and Pre-Foreclosure and Short Sale Specialist.
Access Seattle area short sale help and foreclosure resources including selling in foreclosure, and 8 Ways to Avoid or Stop Foreclosure.
Copyright (c) 2009 by David Monroe (Home4Investment Team at Keller Williams Seattle Metro West).