Now you can buy Foreclosures for as low as $10,000. Listings Updated Daily.
Negotiating a Short Sale
A "short sale" is a great way to get a property at below market value. That is the target of the real estate investor. Negotiations with the Loss Mitigation Department of the lender in question is a key factor in a successful short sale. Whenever possible a lender will sell a distressed property without sustaining a major loss.
With the consent of the homeowner it may be possible to offer an amount in payment of the outstanding mortgage which is as much as 25% less than the amount of the outstanding mortgage. If the lending institution accepts the offer you immediately profit by the amount of the difference between the two sums. This is what makes a short sale so appealing to investors.
Click on the Map to Start your search
Beginning a Short Sale
Transacting a short sale can be a complex procedure. But, with research and patience, it is possible to earn big profits on short sale deals. The first short sale will be the most challenging for an investor.
The first step is to find a potential short sale opportunity on our website where we list nearly 2 million listings nationwide. This number includes constantly updated foreclosure listings and notices of foreclosed properties for sale.
A pre foreclosure home is ideal for a short sale as the profit will be greater with them than with a home athat is already owned by the bank or lender.
To succeed you need to contact homeowners who are more than three payments behind on their mortgage. They will have received a Notice of Default or NOD and are very near the end of the process of losing their home and their investment in it. They don´t have much time left and their chances of catching up with the back payments are not good. The homeowners are aware of their situation and might be glad for your help. The lender is also aware and wants to recover their loss as quickly as they can.
Contacting the Lender
It is very important to gather all of the information that you can about the property and the homeowner before contacting the lender. When you get a representative on the phone they will ask questions about the homeowner, the mortgage and related information and you will have to provide the answers. You will want to use the contact information you found in the listings you selected from our website now that it´s time to contact the lender and propose a short sale agreement. Normally such requests are handled by the Loss Mitigation Department.
If you aren´t able to contact the right person it´s best to move on to the next listing. The short sale process can´t work unless you reach the right person and it´s a waste of time to try to complete a transaction that you can´t move to the next step.
Once you contact a representative for the lender tell them that you represent the homeowner. That´s all you need to tell them at this point. Avoid revealing that your are an investor. The representative will want basic information about the proposed deal, the homeowner and the property. They´ll also need to know the value of the proerty and the financial condition of the homeowner.
In addition to the initial introduction this conversation should include a request for a short sales or workout packet. The packet will give you all the forms and information that you need to complete the short sale.
Broker´s Price Opinion (BPO)
Normally a lender will hire a local broker or appraiser to evaluate a property in foreclosure prior to selling them at auction. The result is called a BPO or Broker´s Price Opinion.
Basically, a realtor or broker gives the lender an estimate of the current value of the property. This is the key piece of information that a lender uses to make a decision about a short sale deal. The lower the estimate the better it is for you.
Lenders want to get rid of distressed properties off the books quickly but will not give them away. Many short sales fail because the BPO was too high. When a home is in good condition it is difficult to convince the lender that it´s worth much less than the BPO.
Hardship Letter Request
Most lenders will ask the homeowner for a letter that explains the reasons that they have not made the required mortgage payments. The homeowner in default must, in effect, prove that they are broke and can´t make the payments.
This can be an extensive request. The homeowner may need to show tax records, pay stubs and whatever other personal information is requested. It is critical to submit everything that is requested or your offer may be rejected.
You might find it necessary to be creative to produce an effective hardship letter. While being truthful the letter must paint a very destitute image of the homeowners finances. If you don´t have decent writing skills you might find it profitable to hire a professional.
HUD-1 settlement statement
In most cases a lender will demand a written contract between you and the borrower. A HUD-1 settlement statement form will normally convince the lender that the homeowner won´t get any cash from the short sale.
The HUD-1 form requires you to itemize all charges from the real estate transaction that you and the homeowner had to pay. Basically it is a complete list of incoming and outgoing funds.
You should be careful to ensure that the contract is written to show that you pay all costs associated with the short sale and that the "net cash" to the homeowner is the exact amount of the short pay that the lender will receive.
If you have trouble completing this form you may want to hire a title or escrow company to help you with it before the closing.
Supporting Materials You May Find Helpful
The bank may agree to a larger discount if a home needs a lot of repairs. The more work that is needed means it will be that much harder to sell.
It´s best to get bids from professionals for the repair estimate or estimates. The higher the estimate is the better it is for you. This is often not necessary as the bank will get it´s own BPO but having independent appraisals and comparable sales information to support your offer is crucial.
There are other actions you can take if the home is not in ready-to-move-in conditions. It is always in your best interest to submit as much negative information as you can about the property. As an example, newspaper clippings about crime or other bad news near the home or the neighborhood can help reduce the price of the property.
After the Offer, Waiting For An Answer
Normally the short sale decision process takes three to six weeks after submission of the HUD-1 and other supporting material. It´s a good idea to call the lender to make sure they got all the information you submitted and to be sure they are aware that you are available for further information if needed.
Of the date of the auction is close you might ask the lender to extend the time to be sure they have a chance to consider your offer. If it is legitimate the lender will, more often than not, grant your request. Hopefully your offer will be accepted and you, the lender and the borrower will all benefit from your short sale.
In the tool kit of the investor in foreclosure real estate the short sale is a powerful ally in the quest for a profitable foreclosure real estate investment.
Knowledge Center
- Bank Foreclosure
- Bankruptcy Homes
- Cheap Land
- Commercial Foreclosures
- Condo Foreclosures
- Fannie Mae Foreclosures
- FHA
- Fixer Uppers
- Flipping
- Foreclosed Homes
- Foreclosure Auction
- Foreclosure Investing
- Foreclosure List
- Freddie Mac Foreclosures
- FSBO
- Government Foreclosures
- House Auctions
- HUD Foreclosure
- Lis Pendens
- Pre Foreclosure
- Real Estate Brokers
- Real Estate
- Repo Homes
- Sheriff Auctions
- Sheriff Sales
- Short Sale
- Stop Foreclosure
- Tax Credit
- Tax Deed Sales
- Tax Lien Sales
