Short Sales

I am new member and I would like to thank everyone's contribution to the different situations described on short sales and it's process with sellers, buyer's and lenders. Now I have a better understanding.

Thank you

Rick

As long as the seller/person on the loan signs a 3rd Party Letter of Authorization (LOA) allowing the lien holder(s) to speak with you about their loan details, then you should be ok. Otherwise, just like Elena says they will not entertain you.

The trick is to get the listing ageent/seller to submit your offer to the lienholder for a short sale request. And with your LOA, you are in for negotiations with the lien holder! This is key.

I am sure you are already aware, short sale transactions involve the bank/lien holder in making final decisions - it is a patience test. It can take anywhere from 2-3wks to 3 months. But for the price you can bargain for, IT IS SO WORTH IT!

Also, even though lienholders will do their own Broker's Price Opinion (BPO), send 5-7 sales comparable of homes with your offer that recently sold within the area (the lowest possible). This gives you a better negotiation fight with the negotiator.

Good luck!

Welcome to the DG family, we're happy to have you here with us. Glad we were able to help you. That's what this site's all about... People of all walks of life, with various levels of rei experience, helping each other reach their investment goals, so they can live the life of their dreams.
God bless,

Ihave just started reading on short sales, with me having not so good credit is a short sale a better route to go or lease-option? i have been told short sales is not a good way to go,because the owners has pulled all the equity out of the house and its hard to get the bankers to take lower offers.I found a home for 294K and i gave them an offer of 210K its been 3 months and havent heard anything yet.

Short Sale is a Patience Test. When I submit offers on short sale properties, I usually pull up 5-7 comparable homes in the area that sold recently. I try to get the lowest comparables possible. This helps justify your cause for the price you offer. I have closed 42 short sale transactions within the last 7 months (and counting), and this seems to work. It would have been 43, but I lost one due to foreclosure.

Good Luck!

Thank you so much for your input. It's great to have people with experience willing to share. Please continue to give us pointers, and welcome to the site.

very grateful,

Rina

Rina wrote:

Thank you so much for your input. It's great to have people with experience willing to share. Please continue to give us pointers, and welcome to the site.

very grateful,

Rina

Thanks Rina! I've been reading posts and you seem to be an expert! Thanks for the welcoming words. You are awesome!

But working on it! I learn something new EVERY day, and today I learned from you. Thanks again, Shiela, and keep posting.

Best wishes,
Rina

Shiela,

Thank you so much for your information on short sales, I have been playing the waiting game so far, the last time I talk to the lender we had fax over the short sales package to them. At this point now I am waiting on my realtor to fax over paper work the purchase agreement. I am wondering should I have done this my self since I am doing all the calling, I do not think she has experience in working with alot of bank owned property.

Hi Rsisterfaye,
From experience, the reason that it may be taking quite a while is because the short sale package should have been submitted with your purchase agreement from the very beginning. Lien holders will not entertain package that is incomplete. I can only imagine that the short sale package that was submitted initially is just sitting on someone's desk and not yet assigned to a negotiator. Everytime, new documents is sent over to them, they would have to find the file and see if any other paperworks are missing. If so, it stays incomplete, until someone calls and inquires about any other documents that they are looking for in order for them to submit it for review.

Some signs that the short sale is progressing:
* a BPO has been ordered, and you know it has been completed and submitted to the lienholder for review. This is usually where they base their approval/counter from.

* a negotiator has been assigned

* you are actually getting responses from the lienholder, and not so much on you having to call them with no different news.

I am assuming that you are in the buyer side. If the seller gave you authorization to speak directly with the bank, try to follow up 2-3 times a week. As I've mentioned before, short sales is a patience test and it takes lots of following up. Due to lienholders high volume of short sale requests coming in on a daily basis, they are swamped and do not have the time to call. So, it is our duty as REI to follow up on this. This is where your realtor comes in handy. It is his/her duty to follow up for you - this is why you hired an agent. He/she is getting paid to assist you in your REI ventures. So, to answer your questions in regards to using a realtor....it depends. You might want to talk with your realtor in regards to staying on top of this file because as an REI, you are extremely busy. Then again, on the other hand...if your realtor is extremey busy - I have always believed in the saying "if you want something done, ask a busy person". However, if after speaking with your realtor and you are still doing the work, you might want to think about hiring a different agent that suits your needs.

As you already know, its always good to stay involved. You're doing great! Hang in there...don't lose patience. It is well worth it!

Where can I find a sample short sale package for the lender? I found a property that I'd like to move on but don't know where to get started.

Walter

Short sale package submission is the responsibility of sellers/listing agent. In the short sale package contains pertinent and confidential financial information/documents about the seller requesting the short sale. As the REI buying the property, you only have to submit your offer. What I have experienced recently is that lienholders are now asking for buyers' asset information and pre-approval letters before lienholders can give an acceptance/short-sale approval. This could be a snag in the way if you are an REI with poor credit and very low assets. However, if you are assigning the property to a qualified buyer, there are many creative ways in making this work for you.

But to answer your question, Short Sale Package is obtained from the lienholder of the property, usually through their loss mitigation/short sale department. It is usually 2-3 pages of seller's financial analysis form to be completed by the seller. There are also financial documents that will also need to be turned in as supporting documents (i.e. Hardship Letter, Sellers last 2 yr tax returns, Last 2 months paystubs, bank statements, etc). Its a timely process - which as REIs we do not have to worry about.

When dealing with short sale properties, make sure the listing agent is well experienced with short sale transactions - As little mistakes, can delay the whole process which lienholders can easily reject the file - which starts the short sale review to day 1 again of the 2-3 months wait. And that would really suck! What I have been doing is that if its not a listing of mine that I am trying to re-assign, I try to be good friends and offer any assistance that I can to the listing agent in completing the short sale package. I follow up with the listing agent once a week, for instance, if a BPO has been ordered and I know the date is around the corner, I call the listing agent and remind her of the appointment and/or to just simply follow thru to seek any new news from the lender. And since the sellers' financials are involved, I am only limited to what I can assist in. But what I do know is this.........................................................................................Once the short sale package is complete (which the buyer's purchase contract completes the package along with an estimated HUD), and submitted - a Brokers' Price Opinion (BPO) will be ordered by the lienholders. Once this is submitted back to the lienholders, it will then get assigned to the negotiator (or vice versa). It will then take another 10-15 days to review the file by the negotiator. The negotiator will then package this up and submit this to package to the "investors" for final approval (which can take another 7-10 days). Once investors gives the final approval, the short sale approval letter will then need to be typed by the lienholders (which can take another 1 week) and then faxed to listing agent. The listing agent then gives you or your agent the verbal of the terms and conditions. Then the ball is in your court.

Sorry, I tend to blab on and on - wether you are working with an agent or not, try to be involved as much as possible because in this market, its hard to keep a buyer interested and by being pro-active shows the listing agent that you are still interested.

I decided to take action yesturday and posted a pre-foreclosure letter on a local web site. To my surprise I received my first response within 18 hours. Now that I have something to work with I need some help. This lady is 65 and owes $208,000 on the property. I immediately called my appraiser and he gave me a wide range of value between $165,000 and $230,000 (Might be time to get a new appraiser with that price range :/). She is 2 months behind on her mortgage and her monthly windfall is about $1,000. It appears to me that the only choice is to do a short sale. She would love to stay in the property. My 2 questions are #1 Is a short sale my only option? and #2 Is it legal to let someone who has a short sale on their property remain in the property as a future renter? Any advice would be appreciated. I am scheduled to call her back in 48 hours!

Congratulations on taking action! Definitely looks like the scenario for a short sale. She sure appears to be (or nearly) upside-down on her mortgage.
Can you get better comps from your realtor (or maybe a different appraiser. ) ? Unless you can get this at a greatly reduced price from what she owes, it doesn't appear to be a great deal, unfortunately. But definitely check into it. Start with those comps and then re-read through Shiela's(Bailey-Meadows) posts on short sales for your next step. If you have the coaching program listen through the audio course on Short sales. It will give you ALL the info you need.

Good luck and keep us posted!

Rina

P.S. From what I've read, it sounds like she could stay on as a tenant.

I am excited to be taking action and seeing immediate opportunities come my way. I have been spending loads of time educating myself but not moving forward. Now I have and it feels great. I will talk with an appraiser in the area to get better comps. and will pursue a short sale if the comps aren't very good. Thanks for your quick response and I look forward to further communication in the future. Much success to you!!!!!!!!

You're doing great!

Rina

Very good! I am doing the same thing, but I was told that the bank want the house to be listed with a realtor for 90 days, I am not sure if that is true but someone can verify that information for us. The problem I have been having is in CA is the banks will not answer if the offer is two low, and the wait is a waiting game, some properties have had 12-15 offers and the house is still sitting waiting on the higest bidder, the bank is trying to get the best offer. Also do not forget the lady has emotional ties to the house, if everything do work out and you let her rent the property from you make sure you have an understanding on paper, because I have a friend that done that with close friends and she lost her property. We all are rooting gor you.
Take care,
GINA:)

Hi Sheila, I found some of your advise at Dean's forum about short sale and i have one that I' gonna make an offer but my realtor don't know how to fill up the form. Kindly spare me a copy of what you did in the past and i have both side realtor involved.

Greatly appreciate your help.
Linda

Let your realtor know that it is the same procedure, just next to your name he/she would put "and/or assigns" (example: Shiela Meadows-Bailey and/or assigns). This gives you the right to assign. Once the lienholder has already approved the short sale, then you can use an addendum to do an assignment.

Bid at the lowest comparable/if not lower in the area. When your realtor submits the purchase offer, on the cover page, let the seller/lienholder know that you are willing to participate in a counter. This way, they do not just reject your offer and gives you the opportunity to negotiate with pricing.

What is the single biggest pitfall investors face when conducting short-sale transactions?

(1)When short sale request is denied after so 2-4 months of waiting and then we're back again to square A

(2) When the contract is not worded correctly.

I guess it now explains why my offer has been taking so long. I've been working with an agent and if i don't call him to follow up on the progress of my offers, i would have never knows what's going on. I guess i should have dealt with the seller's agent myself, but if i don't make any progress, i guess i would have to fire my real estate agent.

Another thing i've learned from you Shiela is providing four or five copies of the latest sales in the area. We're dealing with an agent (seller's agent) now that she lives about an hour from here, and she has no clue about the house and the condition it's in. I guess if i should have submitted the lowest sales of homes in the area, they probably would have accepted my offer already. I will deninitely do this on my next deal.

The house is REO and have been on the market for seven months now. Yes, I say seven months. The house was sold at the sheriff sale eight months ago, and seven months later, it's back on the market. I've done my research and with the condition the house is in, i think i've made a reasonable offer of $42k cash. Most homes in the area have sold or have appraised at 80k. The asking price is 55k, but it would need $15-20k for repairs. We have gone back and forth about this house, and so far hasn't gotten anywhere.

Now they want to accept my offer and take the house as it, but when i walked through the house, the power wasn't on and so was the water, so i couldn't tell if house needs plumbing and electricity repairs. I've talked to the neighbours next to the house and i was told that the house has had some plumbling problems in the past. I've passed on the info to my agent and so far haven't heard anything. I've called him and told him about the plumbing since now that i have been told about it and, i've also lowered my offer to $39k cash and they can either take it or leave it. The mean time, i'm moving to find the next deal.

LL

A great way to make excellent profits as well as helping the homeowners credit.

Hi lloydsap,
Sorry to hear you are going thru delays with your short sale transaction. I do short sales all day long and it is a patience test.

Short sale package submission is not so much wether the seller's agent know the area much or not. It is all about short sale package submission to the lienholder - its all about presentation. With overwhelming numbers of short sale requests they receive on a daily basis, it is important that we submit a full/complete short sale package. They want to be able to navigate thru the package at ease and be able to make their decisions without having to search for missing documents. The delay is usually because of incomplete submission. It is also important to follow thru weekly, as lienholders are too busy to call - they usually leave a note on their intranet for their call center to relay to you when you call. This is just from my experience and of course every bank will provide their own experience

In DG's book, it said something about coming up with an invoice/estimate of the work that needs to be done for the property and attach this with your offer. This helps justifies your new asking price.

Sounds like you do your homework well. That is awesome! One thing I learned about these short sales is that we cannot just play the waiting game with 1 property to move on the the next. As an REI, instead of waiting, I look for other properties I can invest in/or assign. In due time, you'll be closing deals left and right.

Keep us posted!

There are probably several investor clubs in your area. You can do an internet search for investor clubs. You may be able to find investors who would assist you with analyzing properties and providing other support services to you.

Sheila,

To start: I know there are a lot of variables and this could be a broad question.

With that said, how long (from a dead start) would you say is reasonable to expect to be doing short sale "flips"/assignments on a consistent basis? By consisent I guess my definition would be an average of $10k profit/month.

Jeff

Hi Jeff,
On an average, I would say 3 months +/- 15 to 21 days.

Hi Jeff,
On an average, I would say 3 months +/- 15 to 21 days.

Hi Jeff,
On an average, I would say 3 months +/- 15 to 21 days.

FHA actually has pretty specific requirements on who can be approved for a short sale. They’re looking at people who can no longer financially make payments on the property. They just don’t have the wherewithal to make payments because of medical or divorce or those kinds of issues where they can no longer pay for the property. Then you’ll have people who move out of state for a job or school transfer. There are a lot of reasons people can qualify. If they are able to, HUD needs the property to be owner-occupied, which is one of the requirements that HUD has because even if payments are not being made, HUD wants to make sure the property is being maintained. It makes it a lot easier when the property is occupied.