There is a house in my neighborhood which the owner vacated because his mortgage was more than the value of his house and I would like to buy it from the bank but they refuse to do talk to me at this stage because they have not yet completed the foreclosure and I would like to make a offer for a short sale prior to the auction. What am I missing?

There are a couple of legal rights and responsibilities that you must take into account. First of all, when a borrower makes a loan from a bank, the bank has an obligation to keep any information with respect to that loan confidential. So, generally speaking, a bank will not talk to anyone who is not the borrower or someone authorized by the borrower prior to completing a foreclosure sale. Also, the bank has an obligation to its borrower to try to get the highest and best price at the auction to try to reduce the amount of the deficiency which it will be entitled to look to the borrower for if the amount paid at the auction is less than full amount due to the bank. So, for those reasons a bank is generally very reluctant to discuss a sale of the property prior to the auction. In addition you have to realize that the bank is not in a position to transfer title until it has completed the foreclosure. The only way you can buy the property prior to a foreclosure auction is to enter into an agreement with the current owner to buy the property for something less than what is owed and have the owner of the property present that to the lender as a short sale alternative to the foreclosure. Whether or not a particular lender will be amenable to a short sale will depend upon a number of factors, which will include whether or not it thinks it can get more money for the property if it is sold either an auction or thereafter as so-called bank owned property or if they think that the owner of the property has sufficient income or assets to pay the deficiency arising after the completion of the foreclosure. The only other alternative you would have is to offer to buy the loan from the bank for less than what it is owed. If you did that, you would then complete the foreclosure in order to become the owner of the property. However you would have to have the ability to have the cash to purchase the loan. Getting financing to purchase the loan would be difficult even for most sophisticated lenders and virtually impossible for a typical homeowner.

 

If you have questions about this or any other legal matter, please contact Tom Bennett at (617) 531-6574 or tvb@barronstad.com.

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