subject: 8 Steps To A Successful Short Sale In Real Estate Investing [print this page] 8 Steps To A Successful Short Sale In Real Estate Investing
A short sale is a necessary component of successful real estate investing. In a market full of properties that are in default or facing foreclosure, negotiating with lenders is necessary to increase profits.
Follow these simple steps for a successful short sale.
1) Identify a good candidate for short sale
Some properties are good short sale candidates, others are not. To be a good deal, I consider a property that becomes profitable after only 10-20% of the mortgage has been discounted as a good short sale candidate if it has only 1 mortgage.
If it has more than one mortgage, the second mortgage can be discounted as much as 70-80% or more. This creates enough equity for making profits.
Of course, the motivated seller must be behind on their mortgage to qualify for a short sale.
2) Sign a Sale / Purchase Agreement
Next you need to sign a contract to buy the house. All lenders require to see this.
You must also sign an Authorization to Release Information form so the lender can discuss the mortgage with you. No lender will discuss a third party mortgage unless they have an Authorization to release.
A statement describing the seller's hardship must be presented to the lender. Preferably, have the motivated seller prepare a hand-written statement to increase credibility.
3) Fax Authorization to Release Form
Call the lender and ask for the fax number to fax Authorization to Release Form.
Usually it takes 48 hours to register in their system.
4) Fax required paperwork
Once the Authorization to Release Form has registered in their system, call them and ask what they need to do a short sale.
Get the short sale package exactly as they need it. The lender's website usually carries this information.
Fax all requested paperwork. Missing or incorrect paperwork can delay the short sale process for months, so it is important to get it right the first time.
Again, it takes about 48 hours to register in their system.
he short sale is then allocated to an underwriter who will see it through the end.
5) Follow up
This is the most tiresome step of a short sale. most underwriters are over-worked with hundreds of short sales. It is therefore important to follow up to make sure you can get an answer soon.
6) Attend BPO appraisal
If your offer is acceptable, the lender orders an appraisal (BPO). They will ask you to open the property for them.
Make sure you attend the BPO appraisal.
While you may not influence the outcome of the appraisal, pointing out important issues like roof or foundation repairs can significantly affect the appraisal value in your favor.
7) Acceptance or denial
The lender will then accept or deny your short sale offer. You may need to submit a counter offer if your offer is denied.
8) Close the deal
Next is to close the deal and follow your exit strategy to make money!
