Misc News

Life doesn’t give you all the practice races you need.
Jesse Owens

If everything goes well, the lender will approve your short-sale offering.

While the lender has no obligation to do so, you may want to ask it to not report the seller’s adverse credit information to the credit reporting agencies. A short sale will affect the seller and his credit like any other judgment. You should get the lender to
Agree to accept payment in full and not to pursue a deficiency judgment. You may be able to help the seller in that way.

Make sure to record the name and contact information of the person you’ve been dealing with. Address the package to that person and send it via overnight delivery service.

It’s common for the lender to come back with a counteroffer, reducing real estate commissions and other expenses. Remember, the ball is in the lender’s court to approve or disapprove of the sale, so expect further negotiations. The lender may negotiate the agent’s commission directly with him. You should anticipate that. Real estate agents experienced in short sales understand this as part of the game.

Be prepared for the lender to refuse to allow payment for termite inspections, appraisals, repair estimates, etc. The lender expects the buyer to take the property “as-is, not repaired.

You’re Contact Information

Make sure the lender knows how to get in touch with you. Provide your name, address, daytime and evening phone numbers, and an e-mail address.

According to a 2003 Federal Reserve study, lenders stand to lose 30 percent to 60 percent of an outstanding loan balance going through the foreclosure and REO process. It is estimated that foreclosure proceedings can cost a lender from $40,000 to $70,000 for each case.

Earnest Money Deposit

Include a deposit with the purchase agreement showing the lender serious intent to get the deal done.

You need to demonstrate the benefit of this deal to the lender. You want to convince the lender’s loss-mitigation department that it’s in their best interest to approve this deal. When doing so, don’t play games. Always approach the lender with good hard numbers that back up the offer precisely.

The settlement statement is usually in the form of a completed, preliminary HUD 1 form. This is a closing statement that estimated the sales price, costs of the sale unpaid loan balances, any outstanding payments due, late fees, taxes paid, termite damage, inspection and appraisal fees, and real estate commissions. A closing agent or attorney can prepare this document for you.

A preliminary HUD-1 settlement statement will reassure the lender that the homeowner isn’t receiving any cash from the deal. The HUD-1 form itemizes all fees and expenses imposed on the buyer and seller for the real estate transaction. It details all payments and expenses to both buyer and seller including the net amount paid to lender after taxes, fees, etc.

Be sure to detail all damage and report it to the lender. Take video or still photos of the damage you believe is costly. Use standard retail repair rates that any normal homeowner would pay for similar services.

A lender will often concede to bigger discounts it substantial repairs are required. The more work the property needs, the less it is worth and the harder it would be for the lender to sell.

You may also need to submit inspection and appraisal reports. Even if this isn’t required, it can be to your advantage. Use professionals to appraise the home. Get bids and repair estimates for all damage. The higher the estimates to repair damage, the better. Even though the lender will order its own BPO, your supporting documentation can be helpful. You want to show expensive repairs. That’s one way to build in higher profits. Similar to preforeclosure investing, this process helps create additional equity. You can increase your profits if you can convince the broker, inspector, or appraiser that they should suggest a lower asking price when making valuation judgments the lender will be considering.

Your proposal should also include a comparative market analysis also known as “comps.” This report or other similar market analysis will indicate current property sales, property values, and “days on market” statistics in the subject property area. This information is used to support the seller’s allegation that the property cannot sell for the loan amount owed and that conditions for a full price sale are unfavorable. A real estate agent can prepare a CMA for you showing pending sales and the number of properties sold in the past six months. This is all helpful when making your case to the lender.