Short Sale Step-by-Step Guide

2 years ago

Understanding how to negotiate your short sale can get you a steep discount on your new home. It is important to handle the sale professionally from beginning to end. Directly contacting your loss mitigations department, providing all the necessary documents, and negotiating around your appraisal will assure that your short sale goes smoothly and you walk away with the home you want.

Finding the right home- Many websites are dedicated to short sale and foreclosed homes. Search within your specified criteria and locate a home that is the right match for you. Never settle for the first home you come across.

Connecting with a homeowner who is more than three months behind on payment will put you at a distinct advantage. By this time, the homeowner has already received a Notice of Default. It is unlikely that they will make good on payments, and the lender wants to salvage any losses.

Also, look for homes that are in need of great repair. Lenders are more apt to give deep discounts for distressed homes.

Contacting the Lender- Your initial contact with the lender is crucial when working with a short sale. Call the bank and locate the Loss Mitigations Department. This may take several calls because many banks have different names for this department. It’s a good idea to have more than one listing in mind in case the first listing proves unsuccessful.Once you have established contact, inform the lender that you are representing the homeowner. Never disclose that you are an investor.

Be prepared with all the basic property, homeowner, and sales information. Your goal is to get a short sales packet, or workout packet. Once this is sent to you, fill it out completely.

Handling the Paperwork- Upon completing the short sale packet, the lender will request that you mail with it several documents:

A hardship letter explaining why the homeowner can no longer afford payments on the mortgage.

The preliminary HUD-1 settlement statement shows all of the funds coming into and out of the sale.

Income documents including two years’ income tax returns, four months’ bank statements, and two months’ paystubs.

Negotiating the Price - Your lender will order a BPO, or broker price opinion. This is when a license’s real estate agent assesses the value of the property. You want the BPO to work in your favor because the low the appraised value, the less you pay for the short sale home.

It is a good idea to hire a private appraiser to evaluate the cost of repairs on the home. If your home shows excessive disrepair, the lender is more apt to give you a discount on your home.

By following these steps, you will handle your short sale like a professional. Remember to connect well with a homeowner in distress, be patient with your lender, and get a BPO that works in your favor. Once you understand the process of a short sale, it can become a very profitable niche market in which you invest.

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