WHAT IS A REAL ESTATE SHORT SALE:
A real estate short sale is when the bank accepts less money to pay off the mortgage than what is owed. This can only happen when the property is being sold…this is NOT used when or if you try to negotiate down the mortgage balance on your own mortgage.
HOW DOES IT WORK:
As the homeowner, you can find anyone to buy your property. However, you can not do a short-sale unless the property is in the foreclosure process (90+ days delinquent). The buyer would offer your bank $100k on your property for a loan = $150k. The bank would accept the bid or offer (not always) and then would convey the property to the buyer.
In some states, the mortgage company can obtain a summary judgment (which is either the full or forgiven amount of the mortgage) and could technically 1099 the homeowner for the amount they did not collect from the sale of the property. So, in my example, the $50k could be 1099 to the homeowner for the amount not collected to convey the property. This is also the case in a sherriff’s sale.
However, as the buyer, if you are knowledgable, you can negotiate a deficiency waiver for the homeowner which would protect them from the bank 1099ing them.
HOW DO YOU GET STARTED:
You first should educate yourself as much as possible. I always suggest people to seek out someone like myself or a realtor educated on short-sales. Find someone that has been doing shortsales for a number of years and see if they’d be willing to help you understand how the process works. You can also buy a number of books, e-books and things of that nature. However…BEWARE…that most of those courses and books are general knowledge and do NOT give you the whole story.
If you are going to invest in real estate, you need to build what I call a “power team”. Your power team will consist of a Title Company, a Realtor, a Mortgage Broker, a Lawyer (who understands real estate law), a Tax Advisor (who understands real estate tax implications) and several Conractors.
Investing in Real Estate is not for the slight of heart. It can be dangerous for someone who doesn’t have the right people around them and/or who doesn’t fully understand what they are entering into. I see far to many people get into Real Estate Investing who have no more knowledge than watching TLC’s Flip That House. All of those people…I see ending up in financial trouble because they haven’t taken the time to educate themselves on what they are doing. Investing in Real Estate is just like investing into the Stock Market. If you don’t know what your are doing or you don’t have the right advisors around you…you WILL lose your shirt.
THE SHORT-SALE PROCESS:
The first thing you would do is obtain a BA (borrower’s authorization). This allows you to negoiate with the bank directly without having to go through the homeowner. Once you’ve contacted the bank and given them the BA, you tell them you are wanting to short-sale the property in question. Then ask them for their “short-sale package”. The short-sale package is a list of questions and documentation that you will need to gather for the homeowner, if they haven’t already provided the same information to the bank already. This information includes, but is not limited to…2 month’s bank statements, hardship letter, last two years of their tax filings, at least two recent payroll stubs, an income statement on the homeowner and any recent listing information (if the property has been listed with a real estate agent). After all that is pulled together, you will submit that information along with a purchase and sale agreement signed by you and the homeowner as well as a HUD/closing statement of the fees and closing costs for the sale (this is where your title company comes into play). After all that is submitted, its a waiting game to see if the bank will accept it.
There are dozens of things you can do to “motivate” the bank to sell you the property at your offering price. However, I have years of experience and thousands of dollars rapped up in what I know…as well as do other people that know how to do this. Most people, myself included, don’t give away all that we know for free. I own a company that actually does this for people. My process is to show my clients how to do what I do…step-by-step for a fee.
This is the just of what I do and how to do a short-sale. There is much more to this process than I listed here. There is information that I have obmitted…due to time and space here.
A short sale is where a house is sold for less than what is owed on the mortgage. It is becoming a more acceptable practice because of the mass of foreclosures happening around the country.
How do you get started. If you are the buyer – you would submit an offer for the purchase of the house contingent on approval by the lien holder. There is usually a whole package that needs to be completed by the seller in order for the short sale to work, so he/she needs to be onboard.
If you are the seller – then you need to contact your lender’s Loss Mitigation Department. Tell them that you want to sell the house, but you are no longer able to sell for what is owed. State that you cannot pay the mortgage down. They will ask you to fill out a Short Sale package – including the financial (loan approval, or proof of funds) info of any buyer plus their offer.
A short sale occurs when a bank is foreclosing on a home owner and you come in and offer the bank an amount less than what is currently owed on the note. For example, homeowner Joe is in foreclosure and owes $100,000 on the first mortgage. You negotiate with the bank and offer to purchase the home for $85,000 ($15,000 less than owed). They may accept your offer to eliminate the future expense of holding the property, taxes, insurance, etc.
To get started, you need to educate yourself on the where and how to’s. There are lots of real estate gurus out there who “teach” you how, but most only give you the format and part of the story. Dealing with the banks can be difficult at times, although they are more willing to deal now than ever due to the current market conditions. Six months ago, I backed out of a short sale because the bank I was working with took over six months to finalize the deal and then asked for more that the originally agreed upon price. This is an isolated incident, but it is an example of how difficult they can make it. Contact me via my website if you would like to speak privateley about this subject. I am a professioanl real estate investor and coould send you in the right direction. http://www.nationwideproperty investments.com
Comment by Christopher B — November 14, 2009 @ 2:43 pm
WHAT IS A REAL ESTATE SHORT SALE:
A real estate short sale is when the bank accepts less money to pay off the mortgage than what is owed. This can only happen when the property is being sold…this is NOT used when or if you try to negotiate down the mortgage balance on your own mortgage.
HOW DOES IT WORK:
As the homeowner, you can find anyone to buy your property. However, you can not do a short-sale unless the property is in the foreclosure process (90+ days delinquent). The buyer would offer your bank $100k on your property for a loan = $150k. The bank would accept the bid or offer (not always) and then would convey the property to the buyer.
In some states, the mortgage company can obtain a summary judgment (which is either the full or forgiven amount of the mortgage) and could technically 1099 the homeowner for the amount they did not collect from the sale of the property. So, in my example, the $50k could be 1099 to the homeowner for the amount not collected to convey the property. This is also the case in a sherriff’s sale.
However, as the buyer, if you are knowledgable, you can negotiate a deficiency waiver for the homeowner which would protect them from the bank 1099ing them.
HOW DO YOU GET STARTED:
You first should educate yourself as much as possible. I always suggest people to seek out someone like myself or a realtor educated on short-sales. Find someone that has been doing shortsales for a number of years and see if they’d be willing to help you understand how the process works. You can also buy a number of books, e-books and things of that nature. However…BEWARE…that most of those courses and books are general knowledge and do NOT give you the whole story.
If you are going to invest in real estate, you need to build what I call a “power team”. Your power team will consist of a Title Company, a Realtor, a Mortgage Broker, a Lawyer (who understands real estate law), a Tax Advisor (who understands real estate tax implications) and several Conractors.
Investing in Real Estate is not for the slight of heart. It can be dangerous for someone who doesn’t have the right people around them and/or who doesn’t fully understand what they are entering into. I see far to many people get into Real Estate Investing who have no more knowledge than watching TLC’s Flip That House. All of those people…I see ending up in financial trouble because they haven’t taken the time to educate themselves on what they are doing. Investing in Real Estate is just like investing into the Stock Market. If you don’t know what your are doing or you don’t have the right advisors around you…you WILL lose your shirt.
THE SHORT-SALE PROCESS:
The first thing you would do is obtain a BA (borrower’s authorization). This allows you to negoiate with the bank directly without having to go through the homeowner. Once you’ve contacted the bank and given them the BA, you tell them you are wanting to short-sale the property in question. Then ask them for their “short-sale package”. The short-sale package is a list of questions and documentation that you will need to gather for the homeowner, if they haven’t already provided the same information to the bank already. This information includes, but is not limited to…2 month’s bank statements, hardship letter, last two years of their tax filings, at least two recent payroll stubs, an income statement on the homeowner and any recent listing information (if the property has been listed with a real estate agent). After all that is pulled together, you will submit that information along with a purchase and sale agreement signed by you and the homeowner as well as a HUD/closing statement of the fees and closing costs for the sale (this is where your title company comes into play). After all that is submitted, its a waiting game to see if the bank will accept it.
There are dozens of things you can do to “motivate” the bank to sell you the property at your offering price. However, I have years of experience and thousands of dollars rapped up in what I know…as well as do other people that know how to do this. Most people, myself included, don’t give away all that we know for free. I own a company that actually does this for people. My process is to show my clients how to do what I do…step-by-step for a fee.
This is the just of what I do and how to do a short-sale. There is much more to this process than I listed here. There is information that I have obmitted…due to time and space here.
Comment by bob W — November 14, 2009 @ 1:35 pm
A short sale is where a house is sold for less than what is owed on the mortgage. It is becoming a more acceptable practice because of the mass of foreclosures happening around the country.
How do you get started. If you are the buyer – you would submit an offer for the purchase of the house contingent on approval by the lien holder. There is usually a whole package that needs to be completed by the seller in order for the short sale to work, so he/she needs to be onboard.
If you are the seller – then you need to contact your lender’s Loss Mitigation Department. Tell them that you want to sell the house, but you are no longer able to sell for what is owed. State that you cannot pay the mortgage down. They will ask you to fill out a Short Sale package – including the financial (loan approval, or proof of funds) info of any buyer plus their offer.
Comment by Brian G — November 14, 2009 @ 2:09 pm
A short sale occurs when a bank is foreclosing on a home owner and you come in and offer the bank an amount less than what is currently owed on the note. For example, homeowner Joe is in foreclosure and owes $100,000 on the first mortgage. You negotiate with the bank and offer to purchase the home for $85,000 ($15,000 less than owed). They may accept your offer to eliminate the future expense of holding the property, taxes, insurance, etc.
To get started, you need to educate yourself on the where and how to’s. There are lots of real estate gurus out there who “teach” you how, but most only give you the format and part of the story. Dealing with the banks can be difficult at times, although they are more willing to deal now than ever due to the current market conditions. Six months ago, I backed out of a short sale because the bank I was working with took over six months to finalize the deal and then asked for more that the originally agreed upon price. This is an isolated incident, but it is an example of how difficult they can make it. Contact me via my website if you would like to speak privateley about this subject. I am a professioanl real estate investor and coould send you in the right direction.
http://www.nationwideproperty investments.com
Comment by Christopher B — November 14, 2009 @ 2:43 pm