Short Sales

Please explain what a short sale is?

Is a listing of a property pre-forclosure, the owner has listed it and is trying to sell it. The lender is the third party and the sale is subject for approval by the lender. The realtor does the negotiation with the lender when a contract is made. The banker will have to get approval from his management on your bid proposal before a sale is closed. Under the property description you will find the term short sale in the first paragraph of most listings.

what is the chances that the lender will agree to the restructuring of the loan since there is a real estate agent involved? Would it be beneficial if the home owner themselves would do the restructuring or renogotiating with the lender? and what kind of short sale package needed to be submitted to the lender? do we have the short sale forms or package available? Thanks.

There is no real involvemnet of the owner in the negotiations for the contract, They are in the back seat, that is why it takes so long for a contract offer to get answers. They short sale offer is mostly negotiated with the lender because the owner owes a lot more on the loan than what the present appraisel of the property. There are no short sales forms available because they would like us to pay for a coach to get them. The form os offer is a regular contract for the property. The conditions you put in the offer is depending on how smart you are and what kind of condition the property is at the time of offer. You have to check ot the property and come up with your calculated bid.

A short sale is nothing more than going to the lenders that hold the mortgage(s) and negotiating a discount on the outstanding debt. Although it sounds easy, to do it right, takes experience and submission of a package that will be looked at and accepted by the lender. Most lenders have a Lost Mitigation Department that you would call to ask for their package. Once you have the package you then begin doing your homework giving the lender the information they need to be able to accept whatever discounted amount you intend to offer. One of the keys is to do everything in writing and stay away from giving a number to the bank during initial conversation. He who speaks first loses.

Hope this helps.

Another item to keep in mind in a short sale is to specify in the contract that you are allowed to sell the property immediately after you take ownership. Some lenders do not care about this, but others do, especially if they are holding the paper on the new sale. Short simply means -- the property is not selling for the total amount of the current outstanding mortgage or first trust (or combined 1st & 2nd or 3rd) -- the total amount owed on the property. The owner, in selling, would normally have to come to the settlement (escrow) table with cash money to make up the difference to their current lender between what the house sold for and what is owed to the their lender. In other words -- the seller is "short" on proceeds. Many banks are willing to work with owners on this just to get the house out of their inventory. Schedule a brief time with a real estate attorney (settlement officer/escrow officer) who understands short sales and can advise you on the nuances so that you don't get caught in a bad place. The laws do vary from state to state. It can be done, and it's being done more and more in this market. Talk to the DG advisors about how to handle -- they won't steer you wrong, and it's important for you to have it down step by step. Then -- GO FOR IT !

Texas Irish Lady

Yes, the bank will have to approve the final offer. And yes, banks are notoriously slow about dealing with short sale offers. 2-3 months might be optimistic. Have a few of them going at once.

Where is the HUD 1 form mentioned in your book.

what is the best way to finance them?

Try this location for the Hud 1 form and instructions

http://www.all-forms.com/products.php?n=100&gclid=CI3b49Can5MCFRb8iAodAm...

I'm currently doing a short sale for a client. I listed the house for sale in October of 2007, the process began by doing the following;
1. I suggested my client to call his lender to request a short sale approval on his home.
2. The lender then sent my client a short sale package.
3. My client filled every piece of information that was in the package; a)hardship letter, b)current bank statements, c)2 years of Tax returns, etc.
4. The lender looks at the information and then makes a decision to approve the short sale process based on his responses.
5. Keep in mind, my client was already two months late on his mortgage payments.
6. I then got an interesting buyer, which we then submitted an offer to begin the negotiation proces. We received a counter offer after two months of just touching basis with them every week.
7. The lender sent out an appraisser to the property.
8. Then, we received a counter offer and now we are at the last part of the short sale package, the lender is now requesting an Estimate Settlement Statement.

We are now on month 7th of the short sale process.
I will write more once we close on the shor sale, but as of now, this is how and where we are in the short sale of this property.

I hope this information is helpful.

Marvin

can someone explain short sale to me with alittle more detail

Ok, so I have not done one myself, but I have a guy I'm partnering with who's more knowledgeable than myself. Here's what I know from him...

It's probably best for you as the investor to be the one to deal with the lender if at all possible. This is obviously easier if you're working with the homeowner directly (no agent). Get the necessary info from them (how far behind they are, mortgage acct info, and a signed release from them allowing you to work with the lender on their behalf) and submit it to the lender with the request for a short sale package. Work with someone who has already done one to know how to put a standout package together (so the lender will want to work with you before the other 50 files on their desk) and I think you'll find that the process will speed up. I have brought 9 deals (directly w/ homeowners) to my partner. He is going to teach me the process as we're working on them together. We will then split the profits from the resale of the home , and I'll be in a position to take them on myself moving forward. This has all transpired in the last two weeks.

I have worked with investors off and on for over 15 years as well as flipping homes myself. I have had my real esate license sinse 1995. Short sales do take longer to from the time you find the property to the time you close, but the great thing is that you are dealing with the lender/bank not the seller/owner of the property. Most sellers are emotionally attached to the property, the lender/bank is not. People think because it is a short sale that there is no money to be made, this is not true. There can be alot of money to be made, sometimes you can even get the seller/lender to help with closing costs. It's all about how you present the offer. I've even offered more than the asking price, got all my closings costs paid by the seller/lender and I have even got the roof replaced and the seller's insurance paid for it and the deductable was paid by the seller/lender at closing. You cant get all sellers/lenders to pay for closing costs or repairs but you wont know unless you ask for it.

I found a townhouse May 14, 08. I put a contract less than the asking price. It was a short sale. That owner owes more than the loan on the property. I have put a deadline in my offer June 6, 08 for the Bank to respond. The bank assigned a trustee working in the bank to get an appraisal for the property. This person will then complete a Total assessment for the bank and answer back with a decision withinn seven working days. There are two realtors involved, Listing agent and my agent dealing with the bank. The owner has minimum say in all of this. I was informed that the bank has not forclosed on he property which my agent says is a good thing. I think he means we could close faster if the bank approves my offer.

Just make sure you or your agents are talking directly to the person who makes the decisions on any offers, or you could be wasting valuable time and it'll probably be drawn out for months like in Marvin's case! Jvfinlay is right, most lost mitigation reps are so bogged down they don't even return your call, so talk to their boss directly to get quicker results and do your homework by having all the necessary documents, fax the authorization form while you're speaking to them on the phone so they know you mean business and are ready to go now!

Hi,

I'm looking to invest in a short sale soon. I've read Dean's book and have determined that, based on national and (more importantly) local factors for my area, now would be a good time to buy. We saw a property that's listed for 259K and we don't want to offer nearly that much. Ideally, we'd like to get the home for no more than 225K. However, I'm in the process of making a well-reasoned offer detailing why I'm only offering 225K. I'm definitely thinking outside of the box on this one and planning to talk to the owners first and then to the lender, if possible. I'd like some guidance on strategy so that I can be one of the success stories Dean writes about.

Here's what I've done so far...

After I saw the home, I began the process of getting pre-approved and expect to have what I need from my bank in a day or so. I contacted the listing agent who informed me that his clients (who have moved out of the city and now own a very nice home elsewhere as well) owe much more than the 259K and they have already missed two payments. Additionally, the seller received an offer of 250K that they accepted and the 2ndry lein holder accepted, but the primary lender said no. Rather than wait for the primary lender's counter offer, the first bidder withdrew their offer and went elsewhere. And here we are...

I'd really like to contact the seller/lender and see if we can work something out to prevent them from foreclosing. However, the seller's agent told me that the client signed a seller's agreement, so I'll have to go through agent. Or will I?

So, any advice on next steps for me would be helpful. I want to craft the best low offer possible but, as Dean mentions in his book, make it worth the seller's/lender's while and get the property for a steal.

Please advise.

a friend of mine came to me and said that she sign for a loan for a friend of hers and now this person is behind in their mortgage, they file for BK and is was dismiss now they want to do a short sale, my question is? should I buy this property the seller is willing to work with me. Should I contact the lender to find out how much is owed on the property and go from their. Any advice would help me on this project. Thanks

It's not that easy, the bank won't talk to you about someone else's loan without authorization. If the seller's willing to work with you then she can sign the authorization form for you, but without it the lenders won't deal with you. Once you do contact the lender fax the form while you have them on the line so they know you're serious. They have hundreds of people who contact them about delinquent loans daily and if they don't think you're serious, they'll dismiss you quickly. Find out what's owed, what the lender will do to work with you, will they take a partial payment and remaining payments added to the monthly payments? Some will, some won't. This should get you started, keep us posted.

I thought if the property is in pre-foreclosure the owner has the right to sell not the lender. Only if the owner is in default and is past the cure date will the lender be in a position to negotiate.

Elena M
Thank you for your prompt response on this one, I took your advice and will fax the paper work today, the lender told me to call tomorrow to discuss options. Keep your fingers cross for me. Everyone on this web site is awesome I am so glad I invest in Dean's book, being able to communicate with you all is great, and people are very kind. I will keep everyone posted on this progress. And if the owner do have the right to sell to me at this time, that is even better, I will go for it. talk to you all soon.

Thank you everyone.

Glad to help, I hope it all works out for you. Let us know if you need any more help or have other questions. We're all rooting for you!

giaajet1
The seller has the option to sell it or have someone step in to discuss other options with the lender at this point, because lenders are willing to do whatever it takes to get their money rather than foreclose and have it sit on the market. A short sale might be the best solution at this point. There are many variables to consider in these situations.

Good Morning all,

I talk to the lender today, and the lender said she would do an reinstatement on the loan and go over the figures to get me a balance on the loan. she also told me to fax over my offer after I get the figures tomorrow and gave me the name of the person who would make the decision on this loan, lets see what will happen on Wed seem to making some progress. Again thank you all for your support.

Alright!! Looks like you're getting somewhere now. That's pretty quick for them to give you a response too. Usually this can take up to weeks. Good for you! Keep us posted.

I just started down this road of investing. While looking for properties to flip I ran across the home of my dreams. I just talked with the owner and she said "short sale" and it was just turned over to a realtor. I have recently moved to the Minneapolis area from PA and am recently divorced, and home after 2 yr of active duty deployment. I have no job yet and little money to live off of at the moment. I am literally starting over from a 22 yr marriage. All this reading hurts my brain and could use someone to "Barney" style this down for me, or better yet take me by the hand and lead me thru the process. Being a former Marine and now Army Reserves, I work well when shown how, as opposed to reading and understanding(something about, too many blows to the head, I'm told). Any help here is greatly appreciated. I'd really like that house.
Thanks
Dwight

Welcome to the DG family we're glad to have you here with us! First, let me just say thank you for your tour of duty in protecting our freedom. Second, let me say I'm so sorry to hear about your marriage ending.
Now, have you read Dean's book? If not, start with that . Foreclosure's are one of the more complicated ways to obtain your first deal. Don't get me wrong it's doable, but takes a little more time since you're dealing with banks or lenders. A short sale is simply making a discount offer to the lender for that loan so they don't take a complete loss. Then they write off the difference. Again, it's more detailed and timely but can be done. You also need to have proof of the funds for that or be pre-qualified for a loan to even do a short sale. But don't get discouraged, this is the best possible time to buy a house!
Continued blessings,

I have started to read Deans book, and not wanting to get off thread here, I guess my biggest question is, seeing as I just moved here is there a list thru this site that could link me with someone in the area to assist me until I get to know the area and help me with contacts.

I don't know if there are others from your area here. But you might try calling investors in your area and see if they'd be willing to mentor you.
Best of luck to you!

Once the short sale is approved, financing is no different from financing a regular sale/re-sale.

I am a real estate broker and I am in the short sale market. Over the past 7 months I have successfully closed 42 short sale transactions and counting. And looking back at the numbers, I could have made much more profits on these distressed homes - only, if I would have read and known about DG's BE A REAL ESTATE MILLIONAIRE.

Yes, short sale is a patience test. The lender/lienholder has the final say to everything. However, it is worth the wait! Its a bit tricky and I highly recommend hiring a seasoned/experienced real estate agent to help you through this. Its free to both sellers and buyers in short sale transactions, so take advantage of it.

Paperwork in the buyer side does not change, with the exception of Short Sale Addendum - disclosure about the short sale trnsaction. The work is mostly done by the listing agent. As a buyer, pretend waiting for an answer from the seller (which is the bank) who is out of town.

Like I've mentioned, only if I knew about this book...I would have made a lot of money already in re-assignments.

Has anyone accomplished a short sale transaction w/ re-assignment?