How to Do a Short Sale
Dealing With The Seller
Two of every five homes are behind on their mortgage payments in the U.S.. SOme of them are even facing foreclosure. Homes are upside down on their equity, and they have no exit strategy The only viable solution for these sellers is a short sale.
As a real estate investor or agent, it's your job to educate the homeowner on their options. With all of the exposure short slaes have gotten in the media lately, sellers may already be familiar with the terminology, but still need some clarification on what a short sale is and how it can work for them.
The guidelines are pretty easy - if the seller isn't able to afford the monthly payments, and the house is worth less than what they owe on the mortgage, then they're a candidate for a short sale. You need to develop a presentation that will help the seller see why a short sale will be the best route for them to take.
The paperwork involved in a short sale can be daunting and even intimidating to most people, especially newbies to the business. It's always best to learn the paperwork that's involved, including any state required disclosures, and feel comortable explaining them to your seller and/or buyer.
There are several different methods that are totally acceptable to the banks when they're reviewing the loan for a short sale. And they will want to see all of the paperwork that was signed by the seller. If you're an investor, for example, your intent may be to negotiate the purchase price (contingent on the short sale acceptance) and then immediately resell the property to an end user. The paperwork for this type of transaction will be different than if you were a Realtor who was listing the property for sale, and then working through the short sale once you have an offer on the house.
What ever your business model, find a coach or a mentor to help you through the paperwork to make sure that you are doing it right. Everything that you do needs to be disclosed to everyone involved so there is never any misunderstandings. Always play it safe and keep everyone informed.
Negotiating With the Bank
Once you've got all of the paperwork completed, it's time to start dealing with the banks. the first step is to get them the authorization to release information. This document that is signed by the seller will allow you to speal with the bank about the seller's loan, thus being able to move forward with negotiating a short sale purchase. Once you send the authorization, it usually takes about 24 to 48 hours for that inormation to be updated in the bank's system before you can call back and actually start talking to a loss mitigation officer.
Remember, the bank does not want this house back. They'd much prefer to settle on a short sale with an interested buyer than have to wait out the foreclosure, spend the money on the foreclosure, and then list it with an REO agent This costs the bank time and money. So they are willing to talk to you and work with you.
One of the downsides of short sales is the time involved. The banks have no sense of urgency (it seems). It could be the fact that they have short sale files piled to the ceiling these days. Whatever the reason, be a good follow up person and maintain good contact skills and relationships with the banks. They'll guide you along the way and tell you everything that they need from you, or need for you to do. Respond to them in a timely manner, and your short sale should go smoothly.
Finding a Buyer for Your Short Sale
It seems like every property that is on the market is a short sale. Buyers are out there right now looking for deals and bargain hunting. They're aware of the real estate market crisis, and are taking full advantage of it (the smart ones are, anyway). So the more exposure you can get for your short sale property, the better chance you have of securing a buyer. It's almost insane not to call on the help of a Realtor to list the house, mainly to get the multitudes of website exposure that will come automaticlly as a result of the local MLS feeding to all of the national real estae sites.
Fina a Realtor that you enjoy doing business with, and one that has good communication skills. If you are a Realtor yourself, then that should be easy. :-) Price the house to SELL quickly, and it will. If you try to get top dollar for the house, it could easily sit on the market for a year or more. This is not a good plan. Create a price tag that is below market value and will appeal to the qualifed buyers that are out there right now. There are plenty of them that are saying "It was such a good deal, I HAD to buy it".
Closing On The Short Sale
Once your short sale has been accepted by the bank, they'll allow bout 30 days for you to close on the transaction. This time will allow for the title company or closing agent to prepare the closing docs, and get everything ready for the big day.
Depending on your business model, you may have to line up your funds to close on the front end purchase and have everyone ready to show up at the closing table.
You'll definitely feel accomplishment when your short sale deal finally closes and everyone walks away happy.
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