When negotating a short sale and submiting a preliminary HUD-1 of closing cost estimate, should the payoff on the HUD-1 be the total amount due or the loan balance?
It should be the amount you are offering to the lender as their NET. The lender is well aware of the full loan payoff. They want to see the amount you are going to pay them as their NET. The lender will determine if your offer is in line with their documented value on the property. If you offer something too low they may decide to decline your short sale offer and close the file. One example of this could be:
The documented value on file is $300,000 and you offer the bank $100,000.
If the value of the property is determined to be anywhere near $300,000 your offer will be declined and they will close the file. They generally like to see an offer around 80% of the property value. Now here is the real trick. If you can find out the value of the property the lender is using to determine if your offer is good, you will have a better shot at getting your short sale offer accepted. This can be done by either calling into Customer Service and requesting if the lender has a BPO value on file. The lender assumes it is in their best interest to NOT DISCLOSE their value to you. However sometimes they will offer the information to you to help facilitate what they feel is a "reasonable" offer on the property.