OfflineWhat are the benefits of doing a short sale?
The seller wins by avoiding foreclosure by selling their home before the foreclosure auction even if they owe more than its worth. If they were to sell the house the traditional way with a realtor without a short sale, typically they would have to bring tens of thousands of dollars to the closing to sell their own home. This is not an option for them because they are in foreclosure and don’t have any money. Sometimes they are able to get some moving money out of the deal where they would get nothing if they lost the home back to the bank.
Benefits to the Lender
The lender wins because they are getting some of their bad debt paid off. You see, when a lender has delinquent loans on their books, it affects how much money they can lend out in new loans because they are regulated by the FDIC. So the more bad loans they can get rid of, the more good loans they can then go ahead and acquire.
Also by taking a home to auction, the lender will lose 35-50 thousand dollars.
So it’s a huge cost savings to them to do a short sale before the auction occurs.
Benefits to you the Investor
The investor wins because we get to make a great profit on home, most of the time in the area of 25-200 thousand dollars, that we have invested little money in, have not had to own our credit at risk and we haven’t had to rehab the property.
Most of the time we are able to get these properties at 60 cents on the dollar and they are in great condition. I have acquired homes through short sales in bad condition for as low as 28 cents on the dollar. That means I was able to acquire a home for 28 cents on the dollar by doing a short sale with the lender.
The information of how to short sale a home benefits everyone:
It benefits Realtors because in today’s market Realtors are getting tons of listings with no equity and they can turn these dead leads into strong commission checks that they wouldn’t get without knowing how to help their sellers out with a short sale.
It benefits real estate investors because they are getting a lot of leads now from sellers that owe more than their house is worth. The only option for them is to do a short sale.
And the short sale business for investors is awesome in this market because you don’t have to make payments on the house, make repairs to the home, put your credit on the line to do the deal and you make a huge profit just for structuring the whole deal. The best part is you can control large luxury style homes which generating exponentially more profit than starter homes without any risk.
By: DC Fawcett
"THE ARCHITECT OF YOUR DESTINY IS YOURSELF"
"SUCCESS WALKS HAND IN HAND WITH FAILURE"
Thanks for sharing.
Rina
"Obstacles can slow you down, but they can only stop you with your permission." Dean Graziosi (BARM pg 101)
"For I know the plans I have for you," declares the Lord, "plans to prosper you and not to harm you, plans to give you hope and a future." Jeremiah 29:11
For a little about me, welcome to the site, and a few tips for new DG family members, click on this link: http://www.deangraziosi.com/user/3249
You are becoming the walking,talking book of REI 101. Keep the post coming...Jan
Thanks Rina and Jan..glad to share with you.
"THE ARCHITECT OF YOUR DESTINY IS YOURSELF"
"SUCCESS WALKS HAND IN HAND WITH FAILURE"
Thank-you for sharing...knowledge is power!
with the market we are in, and i just wanted to add a couple of "things" if you will, while we are on the subject of "short sales". Just wanted to make EVERYONE aware of what you are possibly getting the homeowner in when you propose a "short sale". I have found in a NUMBER of Articles on "short sales" that they dont properly disclose everything that can happen to the homeowner if his/her lender does indeed accept a "short sale" proposal. So here's just acouple of things to remember: 1) When you negotiate a successful "short sale", keep in mind that the agreed upon price is payment in FULL. However, the homeowners may still owe the DIFFERENCE between the mortgage balance and the DISCOUNTED amount via a "DIFICIENCY JUDGEMENT". If granted, this judgment WILL affect the homeowner and their CREDIT REPORT just as any other judgement. You must get the lender to agree to accept "PAYMENT IN FULL WITHOUT PURSUIT OF ANY DIFICIENCY JUDGEMENT", or get the lender to accept the "short sale" package with an "GASTOPLE AFFIDAVIT" which if the lender signs as part of the package will HALT all recourse against the homeowner.
2) Any amount of DEBT that the lender CANCELS will be TAXED as ordinary income, unless the borrower is found to be BANKRUPT or INSOLVENT, any loan that is "SOLD SHORT" or discounted by $600.00 or more is TAXED AS ORDINARY INCOME by federal income tax.
YOUR HERO, SULLY
I think that's an important addition. I've not done a short sale yet myself, so it's good to learn all this stuff. It bears repeating even if a person has heard it before. (Coaching program covers it all, but there's so much it's hard to remember it all when you're not in the middle of doing it.)
Thanks again, Sully and Sissy.
Rina
"Obstacles can slow you down, but they can only stop you with your permission." Dean Graziosi (BARM pg 101)
"For I know the plans I have for you," declares the Lord, "plans to prosper you and not to harm you, plans to give you hope and a future." Jeremiah 29:11
For a little about me, welcome to the site, and a few tips for new DG family members, click on this link: http://www.deangraziosi.com/user/3249
Even though the banks may sign a Estoppel Affidavit you will want to follow up with the sellers of the homes to make sure they are not taken advantage of by the banks. Banks have been known to have done damage even after signing of such affidavits.
Also, the banks are required to give a 1099. However, for the next three years the IRS will not count the 1099 of a primary home sale. If the three years lapses or the home is a second home for the seller a 1099 will act as ordinary income. If this happens a good accountant can help this. If the seller of property has more liabilities than assets there are ways to get this 1099 set as "non income" - your accountant should know how to do this. I write that last sentence because if I have a client that needs help with a 1099 I give them to the accountant and he works it out - I don't fully know what he does- I just do real estate.
2) Any amount of DEBT that the lender CANCELS will be TAXED as ordinary income, unless the borrower is found to be BANKRUPT or INSOLVENT, any loan that is "SOLD SHORT" or discounted by $600.00 or more is TAXED AS ORDINARY INCOME by federal income tax.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
When you do short sale, it's always a good policy to go to the owner first and ask for permission to work with the bank. Keep in mind that when you do short sales, you are paying for the lien of the property and not the property itself. A lot of investor stay away from this type of deal, (short sale) because the owner's debt is a lot more than what the property is worth, but if you know how to approach the bank, and have strategy in mind with a good plan of actions, it can be a very good deal.
In a short sale you do purchase the property itself. The lien or note is a separate transaction all together and is not called a short sale. We call a short sale a short sale because the seller is selling us their property and we need their permission to purchase the property. But because they do not have equity we have to get permission from the bank to purchase the property for less than what is owed on the property. If the bank agrees to allow the sale of the property for less than what they are owed the bank is selling short - a short sale.
If you purchase the lien from the bank you will need to finish foreclosure.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
This is incredibly important info to me right now, as I have a proposal into a bank for a mls listing which says "Short sale- all offers must be approved by xyz bank". But I am a little confused, because my realtor is delivering my package directly to the bank representative, not the seller or another realtor. Is there ever a phase where the owner gives the bank authority to do whatever they can to avoid foreclosure? My other big question is - who is responsible for making sure the owner moves out? They are currently still in the property - which by the way needs ALOT of rehab. I just cant seem to find a deal with just cosmetics!
Thanks for all the great info!
Laura
www.adeptpropertiesllc.com
my story:
http://www.deangraziosi.com/node/10404
The seller can give the property back to the bank at any time during the pre-foreclosure stage. The seller can do this with a deed in lieu of foreclosure. This is not the best idea because the bank can still come after the homeowner's credit and sometimes give a deficiency judgment or 1099.
If you bought the property from the seller they will usually leave themselves. If you purchase from the auction the sheriff will help the people out. In an REO property the bank has already had the sellers leave.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
I am going to dig into the situation further with my realtor to find out exactly what the situation is on this house and where everyone stands.
www.adeptpropertiesllc.com
my story:
http://www.deangraziosi.com/node/10404
Knowing is half the battle ~ G.I. Joe
When you know what everyone needs and wants it becomes easy to put the deal together. Keep in mind that if the sellers are not motivated, by choice or by force, they are hard to work with and can often be a waist of time. Once you understand the situation tailor your approach to them and you can make great money.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
Good points, Mr.Nstreet, obviously your right on the money with stating and making that correction, it most definitley is the property and NOT the mortgage that is getting SOLD, cause like you said "if it were the mortgage being shorted you would still need to go through with the Foreclosure", SULLY
YOUR HERO, SULLY
the seller can have up to $250k ea, h & w is $500K if it was there primary residence for 2 or more years. Iv'e completed more than 100 shortsales in nj.
go to my site shortsalenewjersey.com