OfflineReal Estate Investor Training—Short Sales
Because of current economic conditions in the housing market there is a great deal of investor interest in the technique of purchasing investment property with Short Sales. So--what is a Short Sale? A Real Estate Short Sale happens when a seller’s bank allows a property to be sold for, and accepts a payment of, less than the amount owed to that bank.
A rough example would be if a home owner currently owed $170,000.00 on a mortgage and the bank holding that mortgage agreed to allow the home owner to sell the home and payoff that mortgage for $150,000.00.
An overview of a short sale technique might work like this… You the investor would start by doing a marketing campaign or sign up for program to find prospects. Having found a few names you would contact the prospects and get one of them to agree to proceed with the short sale. When you have reached an agreement with that prospect, ask for a copy of their last bank communication to verify that what they have told you is accurate.
Before going any further you must search the public records in order to uncover any additional liens that may exist. This is important so that you can decide weather to stop the process or try to work with these creditors to get the liens removed. If you choose to continue, have the seller contact their bank or mortgage companies’ short sale department and ask for a third party contact authorization and a Short Sell forms package.
After the bank’s short sale kit arrives--have the seller fill out all the forms and paper work and return it to the bank. They should also give you the third party authorization information. Now you should contact the bank using third party authorization and talk with the person assigned to the case.
The bank should give you instructions for submitting your offer. When you submit your offer be sure to reserve the right to do a full inspection of the property should your offer be accepted. When the bank replies to your offer you should be prepared and negotiate if necessary. If your offer is approved you will need to monitor and promote the project periodically.
If that sounds like a lot of work to you—you understand the program! But there a few advantages to the short sale technique. They include:
• Instant equity
• Lots of prospects
• It’s so complicated and time consuming that only a few competitors persevere
• It is a good fit for systemized process
• The seller could avoid foreclosure
• There is a lot written on subject
There are also some disadvantages and some of those are:
• You will be dealing mostly with unmotivated and unhappy sellers
• You will also have to deal with banks
• The seller may owe taxes on the unpaid balance
• This technique take longer than many other ways of finding deals
• Seller may still owe the bank the difference
• You cannot pay the seller any money if you want to stay out of jail
• There may be other liens on the property
Considering the disadvantages to the seller--why on Earth would a seller ever agree to sell you their home this way? There are three main reasons. The sellers that agree to work with you do not want to have a foreclosure on their credit record, they do not want their credit to suffer more that necessary and they have become tired of dealing with, and want to be rid of, the debt.
Why would a bank agree to take less than the full amount owed? The bank or mortgage company may be more motivated than you think for a number of reasons. The value of property may have dropped since the loan was made. The buyer is behind on their payments and they want to avoid having another bad debt on books. There are federal penalties and restrictions for banks with bad debts on their books. And the bank may just want to avoid the hassle of having to foreclose, take over the property, get it fixed up and market it just to try to break even. And break even is all a bank is allowed to do.
There are several ways to find short sale opportunities but the quickest and easiest is to sign up for one of the many short sale programs on the market. Just use any internet search engine and to locate one that meets your needs and budget. Many of these programs offer lead generation and scripts for what to say to prospects. They also provide advice on filling out the numerous forms required. If you are determined to reinvent the wheel, you can buy a list and send out letters to attract potential short sellers. Or--you could just run a campaign of ads that could include advertising:
• In newspapers & tabloids
• With flyers
• Passing out cards
• Using Birddogs
As you can see the short sale technique is not a quick and easy way to start on the road to real estate investing wealth but by devoting a good deal of study, hard work and time, it can become a profitable technique to use in your quest for investing success.
I hope this article has helped you in your quest to build wealth through real estate investor training.
Dennis Henson
"THE ARCHITECT OF YOUR DESTINY IS YOURSELF"
"SUCCESS WALKS HAND IN HAND WITH FAILURE"
I am looking to work directly with homeowners where they can qualify for a shortsale. I have two areas of concern that I'm looking for feedback and input:
I am going to be submitting some short sale packages directly to lenders on behalf of the homeowners once I have them agree to my terms. How do I go about convincing them to add me to title of the house, so that I can ultimately flip the home and satisfy lender seasoning requirements?
What tactics can I use to influence the bpo when it is carried out for the bank?
Thans for the input all.
Mati
Live life today, because you never know what tomorrow can bring!
I am looking to work directly with homeowners where they can qualify for a shortsale. I have two areas of concern that I'm looking for feedback and input:
I am going to be submitting some short sale packages directly to lenders on behalf of the homeowners once I have them agree to my terms. How do I go about convincing them to add me to title of the house, so that I can ultimately flip the home and satisfy lender seasoning requirements?
What tactics can I use to influence the bpo when it is carried out for the bank?
Thans for the input all.
Mati
Live life today, because you never know what tomorrow can bring!
I am looking to work directly with homeowners where they can qualify for a shortsale. I have two areas of concern that I'm looking for feedback and input:
I am going to be submitting some short sale packages directly to lenders on behalf of the homeowners once I have them agree to my terms. How do I go about convincing them to add me to title of the house, so that I can ultimately flip the home and satisfy lender seasoning requirements?
What tactics can I use to influence the bpo when it is carried out for the bank?
Thans for the input all.
Mati
Live life today, because you never know what tomorrow can bring!
Mati,
The short sales process can be two mouths or longer. Most Banks do not allow you to assign to the property.They only allow one buy. Allotmently your going to need to ask this questions to the buying agent.
Zellner Inc
SIBKIS
See it big Keep it simple
In order for a seller to obtain permission to conduct a short sales it must be on the approval of the bank/lender. Also as the example above stated, for instance you owe the bank $170k and the bank agree to $150k, if a prospective buyer wishes to bid at $145K, the sellers agrees to accept the offer, the seller will be responsible for paying the $5K difference, unless the bank allow a pardon of the $5K. Sellers have to be particularly careful. Also in a case where, you relinquish authority for a prospective buyer to interact with the bank, you do not know what offer they will finally submit. Hence the reason it is advisable the seller seek legal assistance. There have been instances where seller sell for next to nothing and is responsible to the bank for the difference. However, despite the fact that buying short sale property takes about 60 to 90 days, it is a good investment because in all cases you acquire a huge equity that could be withdrawn instantly on doing a swift closing. Good Luck and God Bless.
Sandra
"You can never get to the top, if you are not willing to climb. Do not look at the difficulty of the climb, only anticipate the view from the top."
"Can't even walk without you holding my hand." (Song)
"Is anything too hard for the Lord ..." Genesis 19:14
"In all things, wait on the Lord."
"Think not of your own deliverance, but trust in God who will give in abundance."
"When you are down to nothing, God is up to something." Unknown
"Our lives begin to end, the day we become silent about those things that really matters." Dr. Martin Luther King Jr.
Here is some tips from Realtor.org that may be helpful to pass on to distressed home owners as well as buyers. The
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If you're thinking of selling your home, and you expect that the total amount you owe on your mortgage will be greater than the selling price of your home, you may be facing a short sale. A short sale is one where the net proceeds from the sale won't cover your total mortgage obligation and closing costs, and you don't have other sources of money to cover the deficiency. A short sale is different from a foreclosure, which is when your lender takes title of your home through a lengthy legal process and then sells it.
1. Consider loan modification first. If you are thinking of selling your home because of financial difficulties and you anticipate a short sale, first contact your lender to see if it has any programs to help you stay in your home. Your lender may agree to a modification such as: Refinancing your loan at a lower interest rate; providing a different payment plan to help you get caught up; or providing a forbearance period if your situation is temporary. When a loan modification still isn’t enough to relieve your financial problems, a short sale could be your best option if:
-Your property is worth less than the total mortgage you owe on it.
-You have a financial hardship, such as a job loss or major medical bills.
-You have contacted your lender and it is willing to entertain a short sale.
2. Hire a qualified team. The first step to a short sale is to hire a qualified real estate professional and a real estate attorney who specialize in short sales. Interview at least three candidates for each and look for prior short-sale experience. Short sales have proliferated only in the last few years, so it may be hard to find practitioners who have closed a lot of short sales. You want to work with those who demonstrate a thorough working knowledge of the short-sale process and who won't try to take advantage of your situation or pressure you to do something that isn't in your best interest. A qualified real estate professional can:
-Provide you with a comparative market analysis (CMA) or broker price opinion (BPO).
-Help you set an appropriate listing price for your home, market the home, and get it sold.
-Put special language in the MLS that indicates your home is a short sale and that lender approval is needed (all MLSs permit, and some now require, that the short-sale status be disclosed to potential buyers).
-Ease the process of working with your lender or lenders.
-Negotiate the contract with the buyers.
-Help you put together the short-sale package to send to your lender (or lenders, if you have more than one mortgage) for approval. You can’t sell your home without your lender and any other lien holders agreeing to the sale and releasing the lien so that the buyers can get clear title.
3. Begin gathering documentation before any offers come in. Your lender will give you a list of documents it requires to consider a short sale. The short-sale “package” that accompanies any offer typically must include:
-A hardship letter detailing your financial situation and why you need the short sale
-A copy of the purchase contract and listing agreement
-Proof of your income and assets
-Copies of your federal income tax returns for the past two years
4. Prepare buyers for a lengthy waiting period. Even if you're well organized and have all the documents in place, be prepared for a long process. Waiting for your lender’s review of the short-sale package can take several weeks to months. Some experts say:
-If you have only one mortgage, the review can take about two months.
-With a first and second mortgage with the same lender, the review can take about three months.
-With two or more mortgages with different lenders, it can take four months or longer.
When the bank does respond, it can approve the short sale, make a counteroffer, or deny the short sale. The last two actions can lengthen the process or put you back at square one. (Your real estate attorney and real estate professional, with your authorization, can work your lender’s loss mitigation department on your behalf to prepare the proper documentation and speed the process along.)
5. Don't expect a short sale to solve your financial problems. Even if your lender does approve the short sale, it may not be the end of all your financial woes. Here are some things to keep in mind:
-You may be asked by your lender to sign a promissory note agreeing to pay back the amount of your loan not paid off by the short sale. If your financial hardship is permanent and you can’t pay back the balance, talk with your real estate attorney about your options.
-Any amount of your mortgage that is forgiven by your lender is typically considered income, and you may have to pay taxes on that amount. Under a temporary measure passed in 2007, the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act, homeowners can exclude debt forgiveness on their federal tax returns from income for loans discharged in calendar years 2007 through 2012. Be sure to consult your real estate attorney and your accountant to see whether you qualify.
-Having a portion of your debt forgiven may have an adverse effect on your credit score. However, a short sale will impact your credit score less than foreclosure and bankruptcy.
Someone told me recently that banks have the right to go back to the owner in the future to get money from them and most people don't realize this. One way to stop this from happening is to have an attorney involved. Haven't verified this with a real estate attorney yet so take it for what its worth. Just wanted to put this out there.
Lea
SPR Property Solutions, LLC
The purpose of a short sale would be to offer low not more than the asking price, what the re agents told you is wrong. You are in this bussines to make money not lose. So tell them to recheck their resources who inform them about that incorrect statement
great
Hi All,
The best way to do a Short Sale is to take a course on how it is done. When you do a Short Sale you have to be very careful. You have to disclose how much you are going to make on the sale. The FTC is coming down on a lot of deals because of all the fraud out there. The best way to do a Short Sale is to go through a Title Co. That way everyone knows what is going on.
Happy Hunting
charlie-d