How Does a Real Estate Short Sale Work?
A real estate short sale involves getting a mortgage note holder on a piece of real estate agreeing to take less than the loan value as payment for releasing any claim on a property. Theoretically, a short sale could take place anytime, but in reality, it only occurs when a bank is losing money on a loan.
I once tried to do a short sale on a house that had 3 loans. The homeowner was in default on the first and second notes, but for some reason was paying the third lien holder on time every month. Even though the first lien holder was foreclosing, the bank holding the third position would not agree to a short sale. Somehow the banks internal rules procedures prevented them from acting on a short sale offer, even though they eventually lost 100% of their loan balance.
Once you have found an owner in default, you will have to get authorization from the owner to negotiate with the bank. In order to negotiate a real estate short sale you will need to find a phone number of the loss mitigation department of the bank. This often involves several phone calls, so don’t get discouraged. A specific person is usually assigned to each property and this is the person who can tell you what information is required for the short sale foreclosure process.
Once the loss mitigation contact has given you a list of information needed, you will have to return to the homeowner and start collecting the paperwork needed,. This can be a delicate process as much personal information is needed, such as:
W-2’s
bank statements
financial statements
In addition, you will need the homeowner to write a hardship letter to explain why they are behind in their mortgage payments.
Once you have collected all the information needed, fax the documents to the attention of the loss mitigation officer. Sometimes, you will have to do this more than once.
Then the waiting game starts. Banks are notoriously slow at acting on your purchase sale offer. They will likely request a BPO (brokers price opinion) and you will need the homeowners cooperation to gain access to the house.
After weeks of deliberation the bank may make a counter offer. Sometimes they are stubborn and think the property is worth more than you offered. If you have pictures of the house (inside and outside) detailing problems, you can sometimes negotiate a lower price.
Like any other offer you make, if the bank won’t accept it and you can’t negotiate a reasonable price, walk away.
To understand all the details of how to create a real estate short sale offer visit
Short Sale Foreclosure
The author, Paul, is an active investor that has purchased over 30 rental properties. His investment ideas are at: http://www.investing-in-rental-property.com
Article Directory: EzineArticles http://ezinearticles.com
For more videos on short sales check out Kevin and Fred on the Short Sale Power Hour. Video for Short Sale Specialists.
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Fred Weaver is a founding co-owner of Group 46:10. He has been working in the financing/real estate business for over 7 years. Fred began his real estate career by working for a large wholesale bank as a processor and rate/lock specialist for home mortgages. After 2 years in the business, Fred transferred from the banking side of home loans to the mortgage side. While on the mortgage side of financing, Fred gained experience originating mortgages and processing files for Morgan Capital of Arizona, Inc.
Kevin is a founding co-owner of Group 46:10. He began working in the real estate business in 2007 after spending 8 years working in the finance industry for companies such as Bank One, Green Tree Financial, & GE Capital.
