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.

Many programs, seminars and boot camps on real estate teach a specific step-by-step strategy in an attempt to help newbie’s learn how to become a real estate investor. I have taken such strategy based classes, and have taught them too.

The focus is usually on specific strategies and the step-by-step process by which to execute that strategy. The idea is that this gives you a repeatable, easy to understand process that you can learn and implement quickly.

But after years of learning about real estate and then years of teaching and consulting I have realized that this approach can inhibit your ability to understand how real estate investing works at the most basic, fundamental level. A real estate investor faces the same challenge when trying to “hit a home run” and make big money with real estate.

Like star athletes, you must master the fundamental skills of your craft, and learn to apply those fundamentals to every prospective deal. The bottom line is if you want to be a star in the “game” and make the big money you have to be good at the right things. But strategy based training tends to divert our attention away from the fundamentals.

A short sale occurs when a lender is willing to accept less than the full mortgage pay off. They short the loan. It is when the lender absorbs the loss and allows the Borrower’s debt to be forgiven.

A property is a candidate for a short sale when all liens, plus costs of sale, exceed the market value. Liens include mortgage liens, mechanics liens, tax liens, unpaid judgments, unpaid HOA fees.

A short sale is form of pre-foreclosure sale in which the mortgagee agrees to accept less than the loan amount to avoid foreclosure. The good news is that the lender pays the closing costs, commissions, title fees, and repair costs. The seller gets the home sold, the loan satisfied, and avoids foreclosure.

Homeowners facing financial difficulties often make the mistake of avoiding their lender, which is exactly the wrong thing to do. If you are unable to make your mortgage payments, contact your lender as soon as possible and explain your situation. Find out your options from your lender.

A short sale will negatively affect your credit, but not nearly as much as a foreclosure or deed-in-lieu ~ read this entire article for details on each alternative.

A short sale simply means that the amount of the mortgage balance owed is greater than the current market value of your home. Homeowners who are in financial difficulties and facing foreclosure often opt for a short sale in order to escape the foreclosure process. This is precisely the situation now across the United States where the sub prime adjustable rate mortgage mess has caused mass foreclosures and significantly reduced the value of real estate.

A short sale takes place when the lender agrees to accept less than the amount you owe him on your mortgage because you don’t have enough equity to sell the home and pay all the costs of the sale. And make no mistake, the lender must agree or you’re out of luck.

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.

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.

Most lenders have a short sale package containing documents that the seller must submit in order to have the short sale approved. Such documents include: hardship letter from seller/borrower explaining why the short sale is necessary, seller’s financial statement, two most recent pay stubs, two most recent bank statements, two most recent tax returns, copy of an Agreement of Sale with buyer, copy of proposed settlement statement (HUD-1) demonstrating net monies to the lender. Once the package is submitted to the lender, a negotiator is assigned to the file who handles the short sale on behalf of the lender through closing.

Lenders do not want to own houses. Lenders are in the business of loaning money, not in the business of stockpiling real estate. There have been numerous reports that banks can face fees of up to $50,000.00-$60,000.00 in actually foreclosing on a property. From a business standpoint, the lender will make out better if the property is put on the market and given an opportunity to attract a buyer through private sale.

Lenders are not properly staffed to handle the number of short sale requests. In order to make sure that your file doesn’t linger on someone’s desk, you need to be persistent—your agent or attorney should make frequent calls to the negotiator in order to insure that your short sale moves forward.

It is wise to consult with an attorney and real estate agent who has been through this process before and has significant experience working with lenders. Also, attorney’s fees come out of the lender’s net proceeds. Therefore, you will not have to pay out of your own pocket for an attorney to assist you in the transaction.

Many times the short sale proceeds will be insufficient to pay your first mortgage off, let alone the second. The second mortgage lender may accept partial payment as a short sale but they may refuse to release you from the possibility that they will pursue your assets in the future. The statute of limitations for this sort of thing can be as long as four or five years, depending upon your state.

The best way to protect yourself is to do a short sale through a capable intermediary, or learn what you are doing before you start engaging your lender in a discussion. Then you can negotiate a release so the lender will not come after you later.

For information I urge you to visit this link about how they can come after you later for foreclosure losses, and get my free 25 page important report Keep Your Home Avoid Foreclosure which has details on short sales, avoiding bankruptcy, how to deal with credit card debts and more.

Avoiding foreclosure and negotiating a short sale for the more expensive home is more and more critical. It can affect your financial future for years to come.

With homeowners defaulting on their mortgages at a record pace, many people are practically begging their lenders for some form of relief or assistance in order to prevent themselves from ending up on the street. While it is certainly disconcerting to receive collection letters and threats of impending foreclosure from a lender, those who are falling deeper into debt and enduring difficulty making their monthly mortgage payments need not despair.

The “short sale” is one alternative worth considering as a viable means for resolving your debt with the lender and dealing with a home that is no longer affordable. Here are some basics you need to know before starting the short sale process.

Sometimes a short sale is brought about because the homeowner borrowed more than he/she could afford to pay back and miscalculated his/her financial status. Often, the short sale arises because of an unforeseen change in the homeowner’s life, such as a long-term illness, disability, divorce or loss of employment, which has dramatically affected the person’s income such that the mortgage payments are no longer affordable.

A foreclosure can have a devastating impact on someone’s credit report that has a lasting effect for years to come. A short sale is typically reported on a credit report as a debt that is “settled for an amount less than what is due”. While this will cause a dip in credit score, it will be nowhere near as harsh as the reporting of a foreclosure.

A short sale occurs when there are not enough funds available from the sale of the property to pay commissions, selling costs, property taxes and the amount due on the loan. It requires that the lender (or lenders) accept less than full payment on their notes that are secured by the property.

Obviously, the lenders do not want to do this, so you can’t just call them up the week before escrow is going to close, and ask them to accept less money for their note. There is a process that one must go through in order to obtain an authorization for a short sale.

Generally speaking, the lender will not even consider a Short Sale when the loan is current. So, if the seller has been making their payments all along, but now needs to sell the property, a phone call to the lender will be fruitless. He can tell them his problem until he is blue in the face, and they will just ignore his request. Basically, the lender is saying “Call me when you have missed two payments!” The reason for this is that if they made it easy, everyone would do it, and no one would take the responsibility of paying the difference between market value and the obligation amount.

Time is always a factor in negotiating a short sale. The lender will require that the seller supply detailed information regarding their finances, including wage statements, bank statements, verification of their other obligations, opinions of value of the property, etc.

Pay Stubs – Most mortgage companies will require the last 2-3 pay stubs to verify income. If the homeowner is unemployed, include a single signed document stating such and that pay stubs do not exist.

Tax Returns – The last two years federal tax returns are always required. They do not need the entire tax return, just the first two pages. If tax returns were not filed, include a single signed document stating such.
List of Repairs – Let the mortgage company know what costs would be incurred to bring the property up to market value. An automated rehab costing tool can help provide professional estimates and you don’t have to rely on a contractor to do all your estimates.

Listing Agreement – Mortgage companies always request a listing agreement; if you’re a real estate agent doing the short sale for the commission, this is no problem. However if you’re an investor, it would be better if the property wasn’t listed in order to maintain profit margins. You’ll need to convince the bank that a listing agreement is not needed since a purchase agreement is already in place you’ll be further ahead.

Purchase Agreement – Have the homeowner sign blank purchase agreements so you can negotiate quickly and resubmit new purchase agreements immediately. A signed blank agreement means you’ll only need to change the offer amount and date before resubmission.