What is the next step???

A short sale is where you are basically negotiating with the bank directley because the seller is in a pre-foreclosure status. They are given time by the lender to sell the property on their own. How you can benefit from this is, as the investor you are in a great position to aquire this property at a price below market value. The banks want to negotiate because it is not beneficial for them to have a foreclosed property on their hands. The seller just wants to get out of the financial burden. So whether they are upside down, you get your trusted realtor friend to give you comps on the property, what other homes are selling for like that particular property in the area or go to one of the sites like willow.com. This is how you can determine what offer to submit to the bank. Submit a offer that will make it profitable to you. Below market value. Negotiate with the bank. Make sure when negotiating, you take in account of what you want to profit from this sale and if the home needs repairs. What it all will cost to fix it. You can go many ways from this point if the offer is accepted. You can turn around and lease the property and end up with a positive cash flow or have the option to sell to another investor for a great return. The amount depends on what low price you get the bank to accept. Remember this is a buyers market now! From what I am reading from the comments, Dean's coaching Acadamey would be beneficial to sign up for. They can walk you through this buying process. Also go to the search section of the home page and type in short sale and there will be forum discussed in length on short sales. Until next time, keep positive. We are in the right place at the right time! Much Success.......
Lubertha

Congratulations on getting started in real estate. You may want to prepare a summary about the questions to ask people that can short sale they home. It would be helpful for you to reference Dean's book on the subject. Then once you run the numbers you can determine if the deal is worth pursuing and doesthe seller have the approval from thebank for a short sale. Good luck on all your deals. Believe and Achieve! Indiana-Joe

To reinforce what Mydestiny and Joe have said, you will want to create a purchase offer (with assignment clause) and submit an offer to the bank. Calculate the FMV, using either common formulas discussed here, or ask the buyer for his formula to make sure you are on the same page. Ask the buyer at what point below FMV a deal becomes interesting to him.

To give you baseline, many will submit initial offers at 60-20% of FMV depending on their familiarity with market and experience. You can always work up, but not down, so we suggest unless you are familiar with your market, the demand, offer volumes - the kind of insight that is gained with working the market, you will probably want to test the waters with 60-40% off FMV. Work up from there if nothing presents itself. You might need to submit 20 or 30 offers to know that perhaps 60% off is unattainable in any properties in your area. In which case you might start offering 50% or 40%. You will also learn a lot on the desperation factor, especially of different banks based on the counter offers.

Once you have a property locked up you can offer it your buyers to purchase the right to your deal for $X, or you can buy the property yourself for any number of strategies: rental, flip (with rehab/remod), lease option, buy and hold (long term investment), etc.