My Short Sale Club

Get Ready for More Short Sales

admin — Tue, 21 Dec 2010 05:39:38 +0000

Even though a government program intended to simplify and incentivize the process, short sales have not even been close to staying up with foreclosure sales.

However, if banks start to see larger losses from foreclosures than from allowing a short sale, they could put more resources into approving these deals, where the homeowner is allowed to sell the house for less than the outstanding value of the loan.

According to a report from Fitch Ratings, “Loss severities on distressed U.S. residential mortgage loans are likely to increase an additional 5-10 percent from current levels due to higher loss mitigation and foreclosure expenses and weakening home values.”

We are already starting to see home prices double dip in numerous markets, and this is anticipated to continue through the first half of 2011. One way for banks to mitigate these losses is through short sales. “Short sales generally experience recovery rates about 10 percent higher than foreclosure sales,” according to Fitch.

Will this be enough to push the banks to increased short sale deals? Unclear.

It’s all about where the math comes out. If home prices fall far enough, the equation may tip from foreclosure to massive short sale approvals. Get ready!

Deed in Lieu of Foreclosure?

admin — Sat, 11 Dec 2010 05:03:33 +0000

QUESTION: My son is underwater with his mortgage. He owes $125,000 on a condo worth about $85,000. He recently lost his job, but is current on the mortgage payment. Can he give the property to the bank that holds the mortgage and avoid foreclosure?

ANSWER: Your son can avoid foreclosure on his home in a couple different ways.

The first is to sell the house and have his lender accept to a short sale.
The second surrender the property to the lender as a deed in lieu of foreclosure.
The last way to avoid foreclosure is to to keep payments current on the mortgage.

It seems very unlikely your son can maintain his payments without a job. However, if he finds a job quickly and continues to make his mortgage payments on time, foreclosure won’t be an issue. But if his job prospects seem bleak, he should find a good real estate broker to list his home as a short sale.

If he prices the home aggressively, he may find a buyer. Once he does, he will need to see whether his lender is willing to accept the amount offered by this buyer to allow the sale to continue.

If the lender agrees to the short sale, your son can see whether the lender will agree to waive any claim on the deficiency.

In some states, a lender can’t go after the borrower if the property is sold through foreclosure, even if the sale doesn’t cover the borrower’s debt. However, if the borrower volunteers the property back to the lender, in some states the lender may be able to go after the borrower for the deficiency.

Finally, if your son can’t sell the property, and the lender is unwilling to take a deed in lieu of foreclosure, your son may lose the property through foreclosure.

More borrowers are falling into foreclosure these days, and their credit histories and credit scores are falling. But though a good credit history is important, it shouldn’t be the driving factor behind what your son decides to do.

Usually, a borrower fails to make three or more payments on a mortgage before the lender begins foreclosure proceedings. The longer the payments remain unpaid, the greater the effect on the credit history and credit score. Though it’s better for your credit history to avoid foreclosure, a deed in lieu of foreclosure or short sale is only marginally better.

Why Do Banks Short Sale?

admin — Sun, 18 Jul 2010 18:48:33 +0000

To the new real estate investor it can be a little confusing when trying to figure out all the reasons a bank would have to approve a short sale.

As you assemble short sale packages on behalf of your distressed homeowner, keep the following reasons in mind:

The mortgage is behind in payments or already in foreclosure.

The property is distress and in very poor condition.

The homeowner is experiencing hardships and can no longer afford to make payments.

There are newer homes in the area that are being chosen over older used homes.

The neighborhood is in a downward trend and losing value every month.

The bank’s shareholders keep pressure on management to not have too many defaulting loans on the books.

Statistically speaking, some banks are required to prove a loss each month.

Some banks are required to have cash on hand equal to or up to six times the retail value of each REO (Real Estate Owned)

REO properties are liabilities, not assets. Banks are in the business of loaning money, not managing property.

So remember the next time you’re assembling that killer short sale package, talk to the bank’s sore spots. Remind them of all the reasons they should sell to you now!

What Should My Short Sale Offer Be?

admin — Fri, 09 Jul 2010 05:16:27 +0000

*** New 6-Part Video Series – Real Estate Offer Calculator ***

The most important question you need to answer about every investment property you evaluate is: How much should I offer? Every real estate investor knows that profit is made when you purchase, not when you sell. If you want to be a serious player in the real estate game then you need the ability to evaluate properties very quickly and know where the profit is. This calculator has made a huge difference in my short sale business. There are a ton of opportunities out there, make sure you can quickly and accurately evaluate your deals to be successful. Make sure to get the free short sale forms.

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Short Sale Marketing

admin — Thu, 24 Jun 2010 20:14:44 +0000

When you’re first getting started in the Short Sale business you’ll need to start telling EVERYBODY about what you do. Let everyone know that you’re the short sale expert, the local go-to guy or gal. You’d be amazed at the number of people who know someone who needs your help and expertise. Listed below are some of the methods you’ll want to use in your Short Sale marketing campaigns to get the word out. 1. Business Cards – This is an absolute must-have item. Be creative and think of your business card as a mini billboard. I have two different business cards, one for homeowners and one for investors. Here are some tag lines you could use on your cards… For Homeowners – “Avoid Foreclosure”, “We Buy Houses – No Equity, No Problem”, “I Buy Houses CASH – Guaranteed offer in 24 Hours”… these are just some tag line examples. Make sure to use the back side of your business card to explain your services even more. For Investors – “Short Sale Specialist”, “Wholesale Properties”, “Short Sale Partnerships” and even “Short Sale Training” when you’re ready. Other investors will understand the term “Short Sale” so it’s good to have it on this card, whereas it may not make as much sense on a homeowner business card. Obviously, you’ll want to include you business name, personal name, phone numbers, and e-mail on all your cards. A great place to get you first set of business cards is through VistaPrint.com.

2. Postcards – These are great for marketing to all houses in specific neighborhoods. This type of marketing is referred to as “Farming” and is a great way to get homeowners to call you before other investor knows about this lead. It’s a good idea to mail to theses same neighborhoods at least once every 4-5 weeks. VistaPrint.com is also a good place to have your postcards made; currently you can get 50% Off All Postcards, and if you choose, they’ll even address the cards and mail them for you. You just need to provide them with a list of names, addresses and the date to be mailed. If you need to get a residential mailing list, go to W3 Data where you can create your own specific list right online.

3. Signs – Bandit signs are the Marketing Secret to use if you want the phone to start ringing fast. When I go out and put up 50 signs, I’ll start getting calls before I can get back to the office. However you should consider this warning: many cities have strict rules against road signs and they may try to enforce fines for such activity. However, since a lead could be worth $20,000 and the fine only $50, you’ll need to make a business decision and the risk you’re willing to take.

4. Referrals – These are the absolute best leads you’ll ever get. After being in the business for about 8 months I started getting more referral leads than I could handle. Once people know what you do, the deals will come your way. Most of my referral leads are from other investors who don’t do short sales and only want a small referral fee if the deal successfully closes.

5. Foreclosure Listings & Letters – Since foreclosure information is available to the public at the county court house, you can obtain homeowner information and property address for your target marketing. A series of marketing letter can be sent to the homeowner informing them that your services may be the answer they’re looking for. In many cities you can find companies or individuals that compile these foreclosure lists and sell them on a monthly subscription. This saves you the time and trouble of going to the court house and doing all that tedious work. Keep in mind that there is a lot of competition with other investors who use the same list, however you’ll probably get a small share and that can be more than enough.

Marketing is vital to keep your pipeline of short sale deals full. Commit to a monthly marketing budget and stick to it. Go to local Real Estate Investment Association (REIA) meetings and network with other investors. But, the absolute best thing you can do after you get a little short sale experience is to give a Short Sale presentation at a real estate investors meeting. This more than anything else will establish you as the Short Sale Expert.

Sample Hardship Letter #1

admin — Sat, 12 Jun 2010 21:21:29 +0000

Hardship Letter – This is a letter composed by the homeowner that explains to the mortgage company the circumstances that have led to the missed mortgage payments. The homeowner needs to make it clear that there is no hope of curing the default and a short sale is the only option. It is best if this letter is hand written, but a typed letter is fine. The letter should be at least one page long and be emotionally moving

In addition to a hardship letter make sure to include Hardship Proof – These are supporting documents that support the hardship letter explanation. For instance; a repossession slip, a layoff pink slip, doctor bills, death certificate, divorce papers, bankruptcy papers, police report, etc.

There are multiple ways to structure a hardship letter. Make sure to download the free short sale forms to see 10 different examples.

Short Sale Package Basics

admin — Sat, 03 Apr 2010 18:41:47 +0000

The Basics – Short Sale Forms

What is a short sale? It is a transaction where a mortgage company agrees to accept a payoff on a property that is less than the actual amount owed.

What are the typical short sale forms included in a short sale package?

Authorization to Release Information – This document is signed by the homeowner and authorizes the investor/Realtor to speak with the mortgage company on behalf of the homeowner. It is the first document you need in order to get the process moving.

Hardship Proof – These are documents that support the hardship letter explanation. For instance; a repossession slip, a layoff pink slip, doctor bills, death certificate, divorce papers, bankruptcy papers, police report, etc…

Financial Statement – This is a one-page document that states the monthly income and expenses of the homeowner. This includes food, utilities, clothing, car, phone, etc…

Bank Statements – Most mortgage companies will require the last two months bank statements for both checking and savings. They are interested in verifying the deposits and withdrawals against the financial statement.

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.

Net Sheet – The Net Sheet itemizes all closing cost and provides a bottom line number the mortgage company would receive at closing. Mortgage companies will request a Net Sheet or HUD-1. Over 99% of the time a Net Sheet is easier to create will be accepted even if they demand a HUD-1. A HUD-1 will be provided just prior to closing and will be prepared by the Title Company or Real Estate Attorney.

These are the most typical short sale forms in a short sale package, however there are others such as Economic Information, CMAs, Police Reports, Code Violations, etc… that can really help support your low offer.

Download free short sale forms.

Three Important Stages when Buying Foreclosure

admin — Sun, 30 Aug 2009 02:25:29 +0000

Have you heard about the strategy called ‘everybody wins’? This strategy is used by many businesspersons who are into buying foreclosures. It involves the investor, the lender, and the homeowner.

Homeowners who can’t pay their mortgage on time or probably missed to pay several mortgages will later on have their homes foreclosed. If this occurs, it’s the investors turn to get the interest of the homeowner. In purchasing pre-foreclosures, several investors usually take interest on a certain property. Be prepared for a slight competition just in case you want to buy a foreclosed property.

There are some basic guidelines that you need to follow. It is ideal to make a loan application if you think you are not able to pay for it on a full amount. With so many properties to choose from, you should evaluate them one by one in terms of location, property condition, and the price. Try to know the homeowner and be determined to know his or her requirements, motivation as well as flexibility. Through that, the negotiation will smoothly run. If you’re able to, close the purchase, fix it, and turn it over quickly.

Buying from Auctions

Through auctions, you can obtain foreclosed properties under the true market value. In an auction, the person with the highest bid will be able to obtain the property. Still, before making the bid, try to conduct a simple research about the property in order to set a limit when it comes to your bids. Prepare for your funds that you can use to make a deposit prior to making a bid.

Buying Real Estate Owned Properties

In this case, you will deal primarily with the lender since he or she has reclaimed the foreclosed property in order to minimize loss. For the lender, the properties could be a huge expense and thus they wish to sell them immediately. If you can find a reputable lender with lots of REOs, you can easily negotiate the purchase. Take note that REOs are sold close the actual market value; still, you can get a clean and clear title. Still, you don’t need to worry about the title because it is already clear.

Download the free short sale forms.

Mortgage Foreclosure: How it Works?

admin — Sun, 30 Aug 2009 02:13:38 +0000

If you are not able to pay for your property payments on time, your lender can proclaim a foreclosure and default on your property.

The deed that could merely be foreclosed by means of a court action is called the mortgage foreclosure. Normally, a mortgage foreclosure is called as the judicial foreclosure.

The mortgage is a legitimate document which lets the borrower to take charge of the title of the property while using the property as agreement or assurance for the loan. Also, the lender puts a lien on the property if in case the owner of the property is not able to pay the agreed payment. When the borrower pays the loan, the lender provides the borrower an agreement of mortgage that eliminates the lien from the estate. Around half the number of US states utilizes mortgage foreclosure as a mode of completing the outstanding balance on the loan.

Just like most mortgage foreclosure proceedings, it begins with the court order and the complaint is provided to the mortgagee as well as to other involved persons with small rights to the property. Basically, the person who issues the notice is the attorney of the lender. The complaint is submitted to the court to where proceedings will take place. Here’s the fascinating part; once the borrower has been given notification, he will be given 20 days to respond to the court. Once this happens, the court has now 40 days to answer to the borrower. Remember that every communication should be legitimate and handle with several detailed portion of the complaint. This procedure might go to and fro so long as the borrower finds a mistake on the complaint. This deeply delays the mortgage foreclosure as it must undertake the court trials.

It might as well go for a year or two, if it requires. The important thing is that you as an investor must contact your mortgagee during the duration and talk about the acquisition of the involved property. This is actually the time for the homeowner to be seriously motivated and should create a fast decision regarding the matter.

Download the free short sale forms.

Short Sales and Its Function

admin — Sun, 30 Aug 2009 01:32:00 +0000

Stop Foreclosure Sale

Short sales are known to be a helpful technique for acquiring discount properties in real estate. This makes large investment potentials and is a requisite if you wish to become competitive in this field. One significant step in the process of short sales is being able to obtain the deed. A lot of times, novice investors would leave out this important step. What’s the reason for obtaining the deed from the homeowner? It’s because very often, homeowners tend to alter their minds or simply wish to withdraw from the possible short sale even after the long hours you have exerted on the property. After the homeowner finally signs the deed, the control on the property is now yours, you can continue to the next process which is contacting the lender.

Dealing with Loss Mitigation

In creating the short sales request, you must take a certain procedure for calling the lender. Normally banks know if you’ve been into this before. When you contact the bank, you don’t have to tell them that you’re an investor. This is one big problem a lot of beginners make and will lead the lender not to approve the short sales request. Hence, as you contact the lender to ask for short sales packet; either you inform them that you’re the buyer or merely a representative of the homeowner. At times, the bank may ask if you’re a real estate lawyer. Simply reiterate what you have already told them before. Then say that you wish to ask for a workout packet or short sales packet. When the packet appear it would give details about what you the deal for short sales successful.

Hardship Letters and BPO

Usually, the lender would ask for a hardship letter. This will notify the lenders of the causes why homeowners are not able to settle the payments for their loan. They will as well request for a copy of your income statements, bank statements, pay stubs and many more. In order for your request to be acknowledged, you need to give them what they require you to give. It normally takes about 3 weeks or so to get the answer from the lender.

The last process would be the Brokers Price Opinion. This is actually the key to shot sales. You must try anything that will surely influence the BPO. It actually takes time to perfect this but if you already know how, there is a huge possibility to be successful in each short sale that you request for each foreclosure that you come across.

Download the free short sale forms.