Finance Tips

Short Sale Step By Step

To make things easier for realtors here is the information you will need to do a short sale. Investors can use this guide also there are just a few things that are done differently. Short Sale Step By Step

1. Get a list of people in foreclosure or work from your referral base to send letter to potential clients in foreclosure.

2. Talk with homeowners

3. Meet with homeowners in foreclosure

4. Tell them you are a realtor and that you will be contacting the bank to list your property at a discount + your fee.

5. Get paperwork from homeowner to show the bank that there is a hardship.

6. Paperwork includes:

a.

Authorization to Release Loan Information

b. Cover letter

c. Listing contract agreement

d. 2 year tax returns Short Sale Step By Step

e. W-2

f. 2 Months Bank Statements

g. Hardship letter

h. Personal financial statement

7. Call bank or lender to get loss mitigation number or use the list in this book.

8. Contact loss mitigation and fax over authorization

9. Call 2 days later and make sure the authorization is in their system.

10. Once authorization is in system, send over short sale package to the loss mitigation fax. (Note the fax may be the same for the authorization and short sale package)

11.

Wait 3 to 5 days call loss mitigation to make sure they got the paperwork.

12. Meet BPO appraiser at the property to get the price that you need to sell the house at.

13. Once assigned to negotiator, then work with them to get the price you need to sell the property and get the time you need to sell it.

14. Once you get the ok from the negotiator, sell the property.

15. Sometimes in the MLS you will see the agent put short sale contingent upon bank approval. This has to do with the offers, if it is too low the banks will not sell.

I have given you a step-by-step guide to doing a short sale. I have been doing deals for a long time, so everything I am telling you works. These are tested methods, not theory. You must consistently call the lender and keep marketing. Consistency will get you the great deals to be successful at this type of business. Good Luck! Short Sale Step By Step

Unless you’ve been living in a cave, you already know bank foreclosures are at an all-time high. All predictions are calling for the numbers to keep rising in 2009 and 2010. The President and Congress are pressuring banks to work out loan modifications and short sales if possible, and only as a final option go through the foreclosure process.

This presents a tremendous opportunity for the Real Estate Agent or Investor who is willing to work with the banks and to help people with their mortgage problems. In this chapter I am going to show you how I get this done. Understand that this is not theory; this is a practical and successful approach gleaned from many years of trial and error.

The first thing you must do to have a successful transaction is to understand that your bank mitigator has more files than he or she can handle. Your first step is to take control of your file.

Be prepared when you talk to the bank mitigator. They know if they are dealing with a professional or a wanna-be. So be ready with your information when they get on the phone.

Now let’s get down to business! Here are my steps to short sale success:

FIND OUT

1. How they want to be contacted: Some mitigators prefer to be contacted by e-mail first and to have the package sent that way as well.

2. Time Zone: This is important! If they are on the West Coast they will work till 8PM West Coast time. That makes it 11PM East Coast time. Will you be ready to answer the phone? Many times they call late presuming they will get an answering service. This way they can say they left a message and put your file back in the pile. If you actually answer when they call, they will be surprised and you’ve just moved your file to the top of the pile!

Steve’s Tip # 1

Get their phone number and jot down the area code.

All calls from them will show the area code so you’ll be able to immediately identify the call as important.

3. How many short sales they are working: I have had people from one of the largest lenders tell me they have so many they don’t even know the number. I have had others tell me they have a couple of hundred.

Steve’s Tip # 2

You may only get a couple of chances to sell your deal so be prepared and professional.

4. Ask about the “BPO”: Broker Price Opinion. You must control this part of the process. I always tell the bank Mitigator to have the BPO Agent contact me. I like to talk to the agent and get them all the information needed to produce a true picture of the market. If you get a “BPO” that is just not in line with the market conditions your deal is dead. The work to try to get a BPO adjusted is very time consuming and may not get your desired results.

5. Tell the Truth: If you are an investor working with the home owner and you are buying the property tell them. They will find out eventually, and you will lose credibility if you omit this minor detail. The mitigator might wonder what else you are trying to pull.

When banks reject your short sale offer, do you just easily walk away? What should you be doing? Find out how…

Bank Rejection is Possible

Even if you think everything is finally set, banks may still find reasons to reject your offers. They do this because they want to keep their loss at a minimum. People engaging in short sale would want to sell their houses less than their outstanding loan in exchange for the forgiveness of debt. If the bank accepts, this would normally result to a loss in the part of the bank. That is why they are being meticulous on whom to grant this opportunity.

If you are interested to know why they reject it, here are some of the reasons:

1. Your offer price is lower than the calculated BPO. 2. Your hardship letter is not convincing enough or it could be your reason for undergoing short sale is not acceptable. 3. Your short sale package is incomplete or some of the requirements got lost. 4. It could be your loan was already sold to a third-party investor and they may have rejected your offer. 5. On the other hand, it could be because the property sold has a mortgage insurance that lenders would find it advantageous in their part to foreclose the property and collect money for no loss.

You can make a Counteroffer

In certain situations, you can have more reasons to just not give up trying. Depending on the reason for rejections you can always make a counteroffer to sweeten your proposal. This way lenders would be able to see the benefits of short sale on their part. However, take note that this would mean more additional days or weeks for waiting. So, if you do this be sure you do your best because sweetening the offer does not stop foreclosure from happening. Determine Your Short Sale Offer

When you pursue this, the first step to making a counteroffer is knowing the exact reasons why your bank rejected the offer. This will allow you to evaluate if you have to fight or fly from the situation. At the same time, this also saves you time on deciding which area of your offer that needs to be changed.

Here are some other tips you can use:

1. Try to make sure your asking price will be at least equivalent to that of the brokers price opinion. You can try to use your Comps BPO as a basis. The brokers price opinion is the basis for banks to determine, whether the amount offered is appropriate or not. 2. You need to make follow-ups from time to time. Doing this allows you to find the remedies for the problems related to your application. 3. Double check your packages and make sure it is complete this time.

There is no easy way to getting short sale offers accepted. However, people still try and try until they succeed because it is one of the best ways to avoid foreclosure and its detrimental effects on one’s credit.

In the current real estate market, many homeowners and investors down roads and through different tools, they would not have imagined before. When things go well, and the real estate market is hot, most people think that good times are here to stay. Unfortunately, the good times were over the slide and the market has declined twice as fast as it went. In many areas, prices have fallen back to where they were eight years ago, before the frenzy of real estate began. When times are good, we all know how to act. “Yippee, hooray, wooded, wooded” When times are tough is when the investor shows his true Moxie true.

There comes a time when the market goes down when you have to ask, “Is this the house is worth keeping?” For an investor, it is usually a financial decision. Some people do not want to sell because they would lose too much money.

The sad part is that they have already lost their equity. Why ride a horse with a bad leg? Something that has become commonplace in this market is selling. A short sale, is when a property has decreased in value below the mortgage value and the bank is willing to accept less than the amount due. In the past, most banks did not accept that. Today, there are too many homes being seized, and for banks is the lesser of two evils.

Here is my experience with an investor I know of two different short sales. A house was bought at the top of the market for $ 230,000. The loan was with a bank that has a lot of business with. The investor had an eight-year relationship with this bank. The original loan officer was a fantastic guy who was pleasant to deal with.

Unfortunately he lost a battle with cancer then the investor moving around some different people. He finished with a gentleman we’ll call Dan. (This is actually his real name). He is aware of Dan’s history with the bank and what his intentions were. The region was hit hard by the real estate crash. The property in question was on the market for sale. He was advised by Dan bid when he got one.

The property was sold for $ 80,000 with a realtor. The loan amount was $ 130,000. After not having any visits they have progressively reduced the price. Since it was built for $ 60 000, they received an offer of $ 54 000. It was an all cash offer, 30 days of closing. He sent all the information to Dan, and got to know that the cons-offering $ 67,000. He did, and the buyer came to $ 58.500 all species, nearly 30 days. In this market, is fine. They had an inspection on the house and it was confirmed that these were the necessary repairs and has an original label, and original air conditioning. Dan refused the offer and said to sell for as much as $ 64,000. Buyers, of course, went away.

Finally, there was another offer, this time by $ 50 000. It is always a good deal in this market. This was also rejected. After the agent also talked to Dan a couple of times, I said it would accept an offer of $ 58 000. After a month or two, he received an offer of $ 56 000, all species, around 30 days. Dan said that to cope with $ 57 000, approved by the buyer. After submitting all the papers to Dan and the bank examination, took some time to come back with an answer. Meanwhile, the federal government came and closes the bank and the bank took over another. There was a great article on the cover of a newspaper of local unethical practices. After what happened, it took at least one week before Dan could return to our investors for an answer. When he recovered, he said the bank accept a short sale, which would have to sign an agreement to pay the loan balance.

It is clear that Dan and the Bank do not understand short sales. Of course, an investor said to Dan that he could not accept. The property is taken off the market and investors continue to collect the rent.

This investor was owned by another, who was also on the market at the same time. There was an offer on this property and has submitted all the information the bank consider a short sale. It took about six months before the bank returned a response. One week, he received notice that the closure was about a month away. The next week, he received a letter from the bank that would accept a short sale. They closed two weeks later. Each bank is different. In these markets is the interest of banks to accept short sales. When a bank returns a foreclosure property, they get much less of it. Our first scenario, Dan, it’s easy to see how the banks themselves have been so much hot water is bad business decisions. Our second option, all has a winner, especially in the buyer. Remember to always inform the investor.

Selling a property to another real estate investor at a discounted price is called flipping properties, or wholesaling properties. This is the easiest and fastest way to make money in real estate investing.

So can you flip a property negotiated in a short sale with banks to another real estate investor?
This article analyzes the possibilities of flipping short sale properties.

In order to successfully flip properties, your selling price must be higher than your buying price in order to make a profit.

Wholesale real estate investing involves finding greatly discounted properties, then finding a buyer, usually a real estate investor to buy it.

Typically the buyer does all repair work, so it is necessary to sell it at a discount.

The profits can be as little as 00 to as much as ,000.
If situations allow it, you can negotiate with the lender so they sell the property for less than is owed on it. This is called a short sale.

You must close a short sale property within 30 days.

Let us explore different scenarios:
1)Assigning a contract
In order to wholesale a property, you can simply assign a contract to the real estate investor buyer.
For this, your contract needs to have the buyer “and or assigns”. Bank do not allow this clause, so you cannot use this method to wholesale properties.

2) Double closing
The next method involves buying and selling the property on the same table in a simultaneous closing, also called a double closing.

As a real estate investor, you walk away with the difference.
You can use the money from your buyer to close the first transaction, then use it to close the second transaction. A lot of hard money lenders did not mind this. Most of them do not accept this any more.

Also, most banks no longer allow you to use your buyer’s cash to close the first transaction. This means you have to raise the cash to close the deal.
You can get such transactional funding from hard money lenders, making this deal possible.

3)Seasoning issues
Of late, lots of bank are requiring that you hold properties at least 30 days before selling.
This means that you can get a hard money loan, buy the property and flip it 30 days later. Of course you must consider your closing and holding costs in this transaction.

Of course, this filters out a lot of deals that would have made you lots of money without this clause. A deal that makes you 00 to 00 does not fit into this category. Properties that make you more money are better for this type of transaction.