Copyright (c) 2008 Cory Boatright
A “short sale” has certainly been a buzz word with all the foreclosures taking place in today’s real estate market. Distressed homeowners are looking for creative ways to sell their homes quickly. However many Realtors and investors are still unclear on how to get a lender to accept a short sale offer. Here is how you do it.
The following steps are to be used as guidelines on determining what to offer the lender to get a short sale acceptance. It is recommended that you consult a legal adviser before involving yourself in any real estate transactions.
All the steps you need to know:
1. Determine Fair Market Value (FMV)
2. Evaluate Sold Comps Systematically
3. Reveal the ARV (After Repair Value)
4. Figuring out the Lenders BPO
5. What is The House Type?
6. Learning the Loan Types
7. Memorizing the Percentages
8. How to Deal with Junior Lien Holders
9. In Closing
The FMV can be determined by evaluating sold, comparable properties in a similar or close proximity to the subject property. A Realtor will have access to the MLS (Multiple Listing Service) and can create a CMA (Comparative Market Analysis) for the subject property. This analysis will identify sold comparable properties with same square footage, bedrooms, baths, garage and other similar characteristics. Request the Realtors use a sold time frame within 6-12 months when pulling properties in the immediate or surrounding areas. Usually the short sale lender will not consider any sold comparables that are older than 12 months and that are further away than 2 miles from the location of the subject property.
2. Evaluate Sold Comparables Systematically
Contrary to popular and often misguided belief; you can use a formulaic system to work in your favor when determining what to offer on the short sale property. The way this works is like this
Let’s say you have eight sold comparables. You would take out the two highest comps and the two lowest ones and average the rest.
EXAMPLE:
You have a property you think is worth $145,000.
A Realtor pulls a CMA and you find eight sold comparable properties.
The MLS (Multi Listing Service) shows the following sold property values:
$159,000 $154,000 $153,000 $161,000 $148,000 $143,000 $146,000 $151,500
When you use the formulaic approach you would take the two highest sold comparables ($159,000 and $161,000). Take out the two lowest sold comparables which is ($143K and $146K). This would leave four others comps.
$154,000 $153,000 $148,000 $151,500 ———–
You would then take an average by simply adding up the sum of all the sold comparables and dividing them by the total number of properties left. In this case, that number would be four.
Total: $606,500 divided by 4 = $151,625
You can reasonably justify the house may sell for $151,625 instead of the $145,00 you originally estimated.
3. Reveal the ARV (After Repair Value)
This terminology is jargon or slang often used with real estate investors. FMV (Fair Market Value) is similar. The ARV is made up by the amount of repairs the investor thinks the property needs in order to sell quickly on the open market using FSBO (for sale by owner) techniques and not using the MLS.
It can be argued the ARV is more of a guess or suggested value derived by using sold comparables from houses that were NOT sold by a Realtor. One way to explain the difference is a Realtor will typically use a FMV (Fair Market Value) evaluation method. A real estate investor may elect to use an ARV. An appraiser can use both value methods, but generally sticks to the ones that come from off the MLS. The ARV is a less accurate and dependable value than what come off the MLS. It doesn’t hurt to know both.
(continue reading.. How to Short Sale Real Estate and Get Your Offer Approved – Part 2 of 3)

Many homeowners are now finding themselves in a situation where they cannot afford to pay off their mortgage any longer. This maybe because they had taken advantage of the short-term interest-only loans or had their properties valued lower than the loan they have obtained. In such an event, there are some options available to them rather than to go through the whole process of mortgage foreclosure and run the risk of being evicted.
Short sale is a good solution. It involves the sale of your mortgage property at a low price. Keep in mind that banks would rather take the money that your property. As the borrower, you can propose a short sale to the lender so that everybody is benefited. This strategy is getting very common in the U.S.
There are mortgage foreclosure specialists and buyers works as facilitators of short sales. If you’re lucky, you might even be approached by them and have you sign a release or an authorization form of your property. The specialists would write up all the paperwork involved, including the contract of sale. The contract would contain the offered amount and all the conditions involved in the agreement. You’re free to review the document before signing it. Also included in the contract is a hardship letter indicating the reason why you can’t pay for the property and how the short sale can be beneficial to the lender.
A short sale of the real estate can be advantageous to the homeowner or borrower because:
1. It can help them save their credit history
2. It can help them find a solution to an otherwise embarrassing situation
3. It could reduce the stress of finding funds to answer a certain financial obligation
4. It is the faster solution to mortgage foreclosure process
In today’s housing market, there are tons of property inventories. And that causes the banks to lose a lot of money each day. The whole foreclosure process can be a long and tedious one for the lender. For the borrower, it is a stressful, embarrassing, and dreadful experience. Short sale could actually stop the mortgage foreclosure process involved and benefit all parties involved. Through it, the lender gets his money from the sale and the homeowner can walk just away from the property that he can’t pay for any longer. The buyer gains advantage too as he ends up buying a good property at a discounted price.

Getting a bank loan is easier said than done – all kinds of paper work, formalities, guarantors, and high interest rates….its enough to make a small business owner lose sleep.

Business cash advance or small business funding- a new concept in the economic block is proving to be a savior for small business owners and entrepreneurs, even those with bad credit history. Cash advance is a small business loan that is sanctioned against your future credit card and debit card sales.

The reputed and reliable small business funding companies pre-approves loan after understanding the nature of your business. They do not ask you to bring along a guarantor or pay hefty hidden costs.

All you need to do is to have a merchant account with a minimum monthly amount of transaction through credit card sales. Every day an agreed upon percentage of your credit card sales will go towards the repayment of your business loan till the time the complete loan amount is paid back.

Use this capital sourced from small business funding company to run, strengthen or expand your business or for any other purpose of your choice. Till recently, business owners plagued by bad credit history found it extremely difficult to get small business loans when banks were the only source to secure business loans.

But now with many private players entering in the lending market, securing loan for your business has become much easier. No matter what FICO score you have managed to secure in your credit report, bad credit small business loans are easily available in market. Caution: If you are looking for a small business funding company then be careful of certain facts: Check out if the company is charging anything as closing cost. There is no closing cost involved in cash advance or small business funding. Plus, your bad credit history should not affect the approval or interest rate. So do not pay any extra amount to get approval.

Many of the homes on the market today, and homes going into foreclosure are not worth what they have outstanding loans for. Now we have an expected 1 in 500 homes (national average)expected to go into foreclosure due to adjustable rate mortgages in the next year. How do you sell a home for less than you owe?

Short Sales! While we have purchased homes via a short sale, I would not recommend it. It was a very long drawn out process each time and consumed weeks of time and a flurry of faxes, conversations and numerous voice mails.

I found National Short Sale Center, Inc. a national company which assists homeowners and mortgage services on a nationwide basis in negotiating down the amount owed on a home loan. It creates a win-win situation for both parties by providing the homeowner an option before their property is foreclosed upon, and by achieving maximum yield for the servicer.

National Short Sale Center has been the national leader in conducting short sales since 2004. This is a result of our commitment to the homeowner and conducting each negotiation with excellence. We are effective because many of our employees have worked in the lender?s loss mitigation departments and have been trained in short sales as their specialty.

They list the following success stories on their website:

1. Negotiated a 2nd lien owed $63,000 to $2,000

2. Negotiated a 2nd lien owed $212,000 to $5,000

3. Negotiated a 1st lien owed $107,000 to $71,000

4. Successfully negotiated the complete removal of an IRS lien for approximately $25,000

If you are a homeowner, lender or realtor, it might be in your interest to contact them if you or a client owes more on their home than it is worth. I was not able to find any negative information on them and they are a member of the BBB (Better Business Bureau).

If you are heading down the road to foreclosure, you may wish to consider a short sale. This can and will at least protect you from having a foreclosure listed on your credit report, but it still may not completely clear you from all of the money owed to the lending company. The most important part of the entire process of selling your home in a short sale is the negotiation that is done with the lending company.

All lending companies have a department that works with sellers for negotiating all short sales. In the majority of cases, the department is known as loss mitigation. If you begin to talk with your lending company before you receive a notice of default, they may just ignore you totally. All lending companies are in the business to make money and if at all possible, they normally want you to repay the total amount of your loan so the do not lose money.

On the other hand, after a notice of default has been issued and records with the courthouse you can then begin the negotiation process. In most cases, you will not have much to do as most companies have pre-determined criteria for these types of transactions. All banks, lending companies, and mortgage companies have the right to deny or accept a short sale. Due to this fact, they are still going to want as much as they can get for the home so they do not lose more money from the loan that is in arrears. Some lending companies will take any reasonable offer.

A short sale may save you from having a foreclosure on your credit report; however, this does not mean your credit rating will stay excellent. Short sales are considered a type of settlement whereas you worked with bank in order to repay a loan that you were unable to pay. This does not look favorable on your credit report; however, it does look much better than a foreclosure. A short sale will stay in your credit history for seven years. In the majority of cases, you will be able to reapply for another mortgage loan within 1 to 3 years after a short sale.

The mortgage company in most cases, will work with the homeowner during a short sale and forgive the remainder of the loan, however, companies that have a lien on the property most generally will not forgive the money owed to them.

Before contacting the lending company, it would be in your best interest to talk with experts on short sales. Selling your home and saving your credit is the number one reason for short sales of homes, if you are still going to be stuck with a huge debt, and then you will not be any better off than before. Instead of trying to do it alone, talk with experts to ensure you are doing everything possible to save your credit and learn the process of short sales.

Short Sale FlippingShort sale flip has become one of the most popular scenarios in the real estate market today. Short sale flip, back-to-back closings, transactional funding, and a million other terms are associated with short sales. In short sale flipping, a homeowner with a bad debt agrees to sell off his property on a lower price. The lender or the bank purchases the property at a price that is less than what the owner actually owes, in turn preventing the homeowner against foreclosure. This a win-win situation for both the buyer and the seller because the seller is able to dissolve his bad debts and the lender purchases the property on a lesser amount and can sell it off for more at a later stage. This kind of buying and selling is legal. However, there are many controversies associated with short sale flips. Many title companies and real estate brokers find it illegal and unethical to indulge in short sales. Bill Bronchick, a proficient attorney reveals the truth about this dissension. Short Sale Flips are Legal says Bill BronchickBill Bronchick opines that a short sale flip is not much different from a regular wholesale flip; the only exception being that in short sale flipping, investor pays off seller’s lender at a discount instead of paying in full in case of regular flips. Bill Bronchick puts forth certain points that are important to avoid falling in a legal battle in case you are indulging in short sale flips. According to Bill, it is a fair game to make profit in a short sale flip, as the seller is not entitled to get any money out of the deal in any case and furthermore, the lender will not agree to flip while the seller walks away with the money. He further affirms that if the investor keeps the property as a rental, it is absolutely legal and triggers no issues at all. In addition, if the property is sold off few months later instead of selling immediately, there is no contention involved with it. It is also imperative for a lender or an investor to disclose to the seller about the intention of reselling the property for a profit, asserts Bill Bronchick.To know more about short sale flipping and to get some more useful tips from Bill Bronchick, please visit http://www.legalwiz.com

When you work with the homeowner to put together short sale negotiations with the bank, you?ll also be assembling vital evidence in a short sale package. This package is very important in preforeclosure deals. It provides enough information to (hopefully) convince the bank to accept your short sale offer on the homeowner?s property.

Include everything you can in the short sale package that backs up your request for a short sale. Obviously, you?ll want to leave out extra evidence, (unless the bank specifically requests it), that may hurt your claim.

Common Items in a Short Sale Package:

Standard Purchase and Sales Agreement & Escrow Instruction

This is the standard sales contract between you and the homeowner, since you will actually be purchasing the property from the homeowner with the bank?s approval.

Authorization To Release Information

In order to get the bank to work with you, the homeowner need?s to sign this document stating that they authorize their lender, the bank, to share all vital information concerning their mortgage with you. If you don?t have this the bank won?t talk to you!

Letter Of Agreement and Addendum

This is the cover your butt document stating that you will work with the homeowner and the bank to stop the foreclosure, but you can?t guarantee that the bank will agree to stop the foreclosure during short sale negotiations with you.

Warranty Deed To Trustee

You?ll need to get a notary to authenticate this document. It basically shows who owns the property you are attempting to purchase.

Agreement and Declaration Of Trust

In order to keep your own name off of public records you?ll use this document to declare a land trust on the property, which you?ll have rights too.

Letter That Trustee is Making Payments:

This letter is used when you have an agreement with the homeowner that indicates you?ll be taking the property ?subject to? and notifies the lender that payments will be coming from a trustee.

Escrow Letter

You?ll use this letter to tell the bank to apply funds in an escrow account to the loan balance when the loan is paid in full and the short sale deal is complete. Be aware there is no guarantee the bank will comply with the instructions for your real estate investment. They may send the escrow proceeds to the original borrower, which is the homeowner. So, you?ll need to make arrangements with the homeowner just in case this happens.

Special Power of Attorney

You?ll get this signed by the homeowner in front of a notary. It applies only to the property and lets you make decisions concerning the property if something happens to it before the short sale deal closes.

Residential Real Estate Disclosure

This is basically to protect everyone involved. You?ll sign it as the purchaser. It discloses any defects in the property and prevents anyone from claiming after the deal is completed that they weren?t aware of certain defects in the property.

Hardship Letter

This is a very important letter in pre-foreclosure investing. The hardship letter allows the homeowners to explain in detail all of the reasons they were unable to make payments on their mortgage and why they?ll be unable to completely pay off the mortgage. A good hardship letter can really help you seal the deal.

Financial Statement

This is basically the homeowner?s pay stubs, copies of their past income tax returns and other items that show the homeowners really are in financial hardship. The bank will absolutely want to see this proof of hardship before discounting a loan and taking a known loss.

Suggested Extras to Seal the Deal!

There are a few extra pieces of foreclosure information you can include in your short sale package to get the bank?s attention in this preforeclosure deal.

Cover Letter

The cover letter helps your short sale package stand out. It basically states who you are as an investor and that you are requesting a short sale. It also states why the bank should take the short sale. You can also summarize the major points of your package in this cover letter for the bank officer reading it.

Proposed Closing Statement (HUD1)

Eventually you?ll find that a bank requests the HUD1form. It shows all the fees and payments that will be made to the parties involved in the short sale. It helps them know their bottom line on the deal at a glance. Plus, it ensures the seller is not receiving any compensation.

Opinion Of Value

This can be a professional estimate or your own statement. You?ll back it up with a quick list of all the negative points of the property, its needed repairs and the lowest comparable sales in the area.

Estimate Of Repairs

If this property in pre-foreclosure needs repairs make sure you get estimates for all of them and include those estimates in your short sale package to back up your discounted price. Use the highest priced estimates you get.

Notice Of Trustee?s Sale

This is the notice that the homeowner receives telling them that their property is going to the foreclosure sale. By including this document in your short sale package you are letting the bank know that you are aware of the foreclosure process. It also helps put a timeframe on the deal and can light a fire under them, so to speak.

Color Photos

You?ll get extra points with the bank by sending them pictures of the damaged and neglected areas of the house. They provide photographic evidence of the low market value of the property and encourages the bank to accept your discounted offer.

The short sale package usually contains quite a lot of foreclosure information. In fact, it?s an involved process and essential part of debt negotiation with the bank. The bank will want ample evidence to back up your short sale request for their loss mitigation department as can be seen by the bulleted list. This package contains information that the bank requests from you and your own research on the property including; damage estimates and the homeowner?s hardship letter, all of which work to back up your request for a discounted sale price on the property.

Every day more and more people are deciding to become weekend real estate investors. Armed with the proper information and right training this can be a lucrative business. Jumping in and playing blind archery can be a very costly mistake.
All of the stories you hear about being able to buy real estate with no money and no credit are true, but doing it without the proper documentation and training can literally wipe you out overnight.
I don’t say this to scare anyone away from the business quite the contrary, just due your homework before you start making offers on property. Concentrate on a small area and learn it well find out what homes in that particular area are selling for now and what they have been selling for the past six month to a year.
The best way for a new investor to start is by wholesaling properties to other investors. This is done by finding a property below market value and selling to another investor. If you add a few thousand dollars to the price and leave enough for the other investor to make money you will have more buyers than you could ever supply.
Most investors would give their right arm to have someone finding properties for them to fix up and resell for a tidy profit. You see, investors are basically a lazy group and don’t mind paying you for doing their legwork for them.
Another profitable way is lease option or get the deed as I call it. Your key here as with any other niche of real estate investing is to be working with people who need to sell not people who just want to sell. You can find hundreds of sellers that want to sell just by picking up the classifieds.
This may come as a shock to some of you but you really aren’t looking for houses you’re looking for problems. Homeowners who are getting a divorce, a job transfer, military transfer, burnt out landlords that just want to get out of the business simply because they don’t know how to manage the property or the tenants. Get the idea?
Preforeclosures are another great way to make money as a real estate investor. In fact your highest paydays and most motivated sellers will be those who are in the preforeclosure state. Sellers in preforeclosure are behind on their payments, but the bank has not yet taken back the property. Come on now, can you think of anyone more motivated to sell.
Remember that you are doing a great service to these seller by somewhat saving their credit by not having a foreclosure on their credit report. Most people don’t realize the severity of a foreclosure or how long it stays on your credit report.
Their problems are just beginning at this point. Picture yourself as a landlord and an individual that has just been foreclosed come to rent or lease option a home. The foreclosure shows up and the first thing that pops into the landlords head is, if they won’t pay for their own home the sure as heck aren’t going to pay me.
Unfair, possibly but put yourself in the landlords shoes and then lets see how unfair it really is. So yes you really are helping the seller solve some of their problems and making a profit by doing so. After all most of us don’t start a business and intentionally not make money.
Heck even non profit organizations make money and a ton of it; if they didn’t how in the world would they possibly stay in business for very long.
So get off your high horse and wake up and smell the coffee, this is the real world we are talking about here.
Buying Junkers and fixing them up and then retailing them is great also if you are experienced at estimating cost or can do most of the work yourself so you don’t get raked over the coals by some contractor that wants to make a killing on your first rehab.
Just slow down and look before you leap by doing some wholesale deals and lease options before you decide you want to play with the big dogs in the tall grass.
Make certain to get you team in place such as your title company, attorney, plumbers, painters electricians. In other words all your tradesmen before you take the plunge and start doing property rehabs.
Take it one step at a time and you’ll be a professional real estate investor before you know it, without getting kicked in the teeth a half dozen times while you are learning.

Despite the way it is portrayed in the media, not all businesses are swimming in profits. The truth is, many businesses face an ongoing struggle to remain profitable. Some months are good, others are not so good. Even those that are consistently profitable may have very lean cash reserves. Then, when the economy cools and sales slow down, those cash reserves can quickly disappear. In order to remain in business these small businesses must be able to find and obtain additional business funding.
There are two types of funding that many small businesses consider when looking for business funding; conventional secured loans and unsecured loans. The type your business will qualify for largely depend on tow factors. How long your business has been operating, and the credit record of the business. In order to qualify for the best rates when getting business financing, you should have an existing business that can show a history of profitable performance, and have a clean credit history. Businesses that fall into this category can go to any bank that they have a relationship with, and the chances are good that you can get financing.
Unfortunately, some new businesses are not able to qualify for conventional loans through a bank. Depending on the business, it can be very expensive to get a new business to profitability. It is not unusual for a start up business to require additional financing in the early life of the business. Because the new business has not established a history, and many times they already carry a significant debt load, banks will refuse to give them the financing they require.
The good news is, there are lenders who work with businesses that do not qualify for financing through a bank. Working with these lenders, sometimes as little as three months of credit card transaction records is enough to qualify your business for financing with an unsecured loan.
With an unsecured loan, the lender will give you business financing in exchange for a certain percentage of your credit card sales. This percentage of your credit card sales will go to the lender until the total amount of the financing is repaid.
For secured and unsecured loans, the financing can be structured as a lump sum payment that is transferred to your account, or it can be set up as a line of credit where your business only withdraws the amount needed. If more financing is needed in the future, the remainder of the money is in the line of credit account. The business only pays interest on the amount that has been withdrawn from the account. As long as the line of credit is kept open the money is available to be withdrawn until the credit limit is reached. Once the funds that were borrowed are repaid, that money becomes available to be withdrawn again if needed at a future date.
Having access to business financing can be a saving factor in new businesses, businesses that may be struggling financially or businesses that are hoping to expand. It can mean the difference between reaching profitability and struggling financially.