Foreclosures are reaching new levels and about to go even higher in 2008. It is becoming imperative that Realtors and real estate investors become learn the art of the short sale and to use it to increase their sales production There is a right way and a wrong way to do approach a short sale.
Learning and implementing the following 5 secrets to short sale success will allow you to gain proficiency in doing and successfully completing short sales. If you are investor you can create equity where none existed. If you are a real estate agent you can sell homes that are upside down even in a bad market.
Secret 1 – Submit a complete package. Do not submit an incomplete package to the lender. If you do it will more than likely be put on the bottom of the pile. Make sure to include all the required information in the order specified my the lender and that every item is completely legible. This is an absolutely critical first step.
Secret 2 – Make a careful estimate of the current market value of the property and structure your offer accordingly The initial offer is critical to getting the short sale off to a good start. As you do more and more short sales you will become familiar with how various lenders work and how they react to offers. Most immediately tell you that you have to raise your offer. If they say this you need to find out why they have come to this conclusion.. Your goal is to have the lender order an internal BPO (Brokers Price Opinion) or a full appraisal of the property. Do not settle for just a drive by appraisal. No need to be nasty but be insistent and keep at it until you get the BPO ordered.
Secret 3 – Make sure that you personally meet the BPO agent This is the most important part of being successful with your short sale. You must personally meet with the agent or appraiser doing the BPO (Brokers Price Opinion or Appraisal). You job is to provide the person doing the BPO any information that can influence the BPO in your favor so that their price that will justify your offer. You should speak the BPO agent and let him know that the seller is in dire straights and is depending on the BPO. You should have a list of repairs done by a contractor and most importantly have a good list of comparable sales showing that the property is worth substantially less than what is the owner owes. All these items are important but meeting with the person doing the BPO is the most important of all. Do not let them get in the property without you being there and be sure to be early for the meeting.
Secret 4 – Don’t take No for an answer The job of the loss mitigator is to get the case settled for as much money as he possibly can. Of course you have to realize that there are certain circumstances that will limit the amount that the lender will take. Some of these are PMI (Private Mortgage Insurance), Fannie Mae, Freddie Mac, FHA and the VA guarantees. These loans are insured by private or governmental agencies and as a result are limited in the amount of discount that they will take. If it is a conventional loan the settlement amount is arbitrary and determined by the end lender or the investor holding the loan. If you are dealing with a servicer rather than a direct lender your negotiations have to be approved by the note owner before a price is agreed upon. Your continued persistence will determine your success in getting prices that allow you to create a profitable transaction..
Secret 5 – Be sure you are prepared to close promptly Once you have finalized your negotiations the bank will expect your to close quickly. Usually within 2 to 4 weeks. If you are unable to close within this period you can have a very difficult time negotiating an extension and may encounter difficulty negotiating with this lender or servicer in the future. This problem does not usually arise if you are the end buyer but if you are planning on “flipping’ the property out to another end buyer you need to be sure that they are ready to close when you finalize the negotiations for the property. One way you can stall this is to slow down your final negotiations until you secure your end buyer. Sometimes this can really work to your benefit when the loss mitigator calls you to see what is holding up your final acceptance of an offer. Many times you can get an additional reduction in the price.
Certainly there is much more involved in doing short sales but these 5 steps are critical in getting a successful resolution to a short sale case. Remember that you have to be persistent and polite but do not take no for an answer. Push on and you will succeed