Buying a Short Sale


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If you are interested in buying a short sale the best way, or stop a foreclosure by Selling with a Short Sale, please visit my website at: We offer solutions that help the Buyer, Seller, and Real Estate Agent.

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Buying a Short Sale

  1. 1. ==== ====To learn how to guarantee a "Short Sale", check this out! ====Many real estate investors find that buying foreclosures or REO properties can be challenging.With foreclosures, the public sale is published and readily known to all interested real estateinvestors, but there is limited information and rarely an adequate opportunity to conduct properdue diligence. Foreclosure properties can be full of surprises!You often find that the best properties at the foreclosure auction attract the attention of other (oftensophisticated) buyers who are prepared to pay more for the property than you are if they knowthey can make a good deal down the road. You also need to have 10 percent of the purchaseprice in cash and immediately have to find a loan for the balance within 30 days, whereas with theshort sale you can usually negotiate for a sale closing date that gives you more time to findfinancing. A short sale also helps you avoid the complications of a borrower redemption possiblewith a judicial foreclosure.Tracking down the property information for REO properties can be challenging, and the lenders ortheir agents may not be cooperative with requests for inspections or details about the condition ofthe property. Though the reputation for REOs is that lenders are anxious to sell these properties atany price, the reality is that they often go for pretty close to the full market value when discountedfor the condition and quick sale terms that they require.Find properties that are in preforeclosure - that is, properties where the owner is delinquent on herdebt service payments - and make a deal to buy the property from the owner before she loses itanyway and ruins her credit. These situations became more common with the excessive use ofhighly lever- aged financing where borrowers had loans that were equal to (or even greater than)the full value of the property when it was acquired. Some borrowers took out second loans, andthe combined debt exceeded the value of the property.If they have a large number of nonperforming loans on their books, they may be motivated toquickly make a few short-sale deals. However, our experience has been that some lenders withfew delinquent loans are actually more willing to agree to a buyer proposing a short sale becausethey want to cut their losses quickly and not risk government intervention or negative public- ity.Lenders that participate in short sales are always secretive about it too.One recent legislative change that has really helped owners of properties who want to work out ashort sale is the Mortgage Forgiveness Act of 2007. Previously, mortgage debt that was forgivenor cancelled by a lender had to be included on the borrowers tax return as taxable income. Underthis new law, any loan that was used to buy, build, or substantially improve the borrowers principalresidence (not second homes or investment properties) qualifies for the exemption from taxationas ordinary income. A refinance loan for the same purposes also qualifies. The lender is requiredto report the debt cancellation to the IRS on Form 1099-C, and the borrower must file Form 982.
  2. 2. This law is scheduled to expire as of January 1, 2010, but may be extended. Be sure to seek theadvice of your tax professional before agreeing to any short sale.You need to send the lender a short sale package with the following information:A hardship letter or proof from the borrower that he is unable to continue to make mortgagepayments.Copies of the borrowers income tax returns.Information on the current condition of the property with contractor estimates or proposals to makeany needed repairs property.The estimated value of the property and your offer for the property.The lender will want to verify current market conditions where the loan balance is greater than thecurrent value of the property. Theyll obtain a Brokers Price Opinion (BPO) or quick appraisal ofthe property. This figure acts as the basis for their negotiations with you, with the goal of achievingas close as possible to the BPO.The one common denominator to short sales with all lenders is that short sales require a lot ofphone calls and investigative legwork to even find out whether the lender is open to receiving anoffer for less than the current loan balance. Each lender has a different organizational structure forvarious individuals or departments that handle non-performing loans. Some lenders haveautomated phone systems that can be helpful and allow you to get right through to people youneed; others are best described as "voice mail jail." Live operators are probably already familiarwith what youre looking for, and you just need to describe that the purpose of your call is to findsome- one in charge of loss mitigation or foreclosures. If all else fails, you should contact thecustomer service department and ask to speak to someone who is authorized to make sales onpreforeclosure properties. Have the property address and the borrower name and loan number (ifavailable).These transactions arent likely, and are a sure bet to take at least 30 to 90 days (or even more)because most lenders are now much more inclined to work with the current borrower if at allpossible. Our advice is that short sales can be effective in limited circumstances and only if youhave the ability to reach a decision-maker at a lender that is inclined to participate. The real estateinves- tor looking for just one property may find that the effort exceeds the return and that thereare better ways to locate and purchase rental properties.Dont forget that with short sales, you need to have some cash as well as be preapproved forloans so that you can make deals quickly. Lenders that are willing to agree to short sales aregoing to require all cash and wont be willing to offer any sort of financing. Lenders that are likelyto be sources of funds for your loan on a short sale are going to be selective about making loanson non-owner-occupied rental properties. Your credit worthiness and having an establishedbanking relationship is helpful if youre going to be successful with buying short sales.See How I Find Short Sale Properties...
  3. 3. Do you want to see my strategy for buying a short sale?Visit Source: ====To learn how to guarantee a "Short Sale", check this out! ====