How To Complete And Close A Successful Short Sale In Real Estate Investing
Knowing how to do a short sale is a must for 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.
Here is a step by step guideline of how to do a short sale. Knowing how to do a short sale is a must for successful real estate investing. The market is full of defaulted properties or even facing foreclosure, therefore you must learn how to negotiate with lenders.
Follow these simple steps for a successful short sale.
1) Identify a short sale candidate
Not all properties qualify as short sale deals. 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.
A second mortgage can be discounted by as must as 70-80% or more. This creates enough equity for making profits.
A seller must be behind on their mortgage to qualify for a short sale.
2) Sign a Sale / Purchase Agreement
Once you have identified the right property, you need to sign a contract to buy the house. This is required by all lenders.
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 of hardship is also required by all lenders. A hand-written one increases credibility with the lender.
3) Fax Authorization to Release Form
Call the lender and ask for the fax number to fax Authorization to Release Form.
It usually takes 48 hours to register in their system.
4) Fax required paperwork
After Authorization to Release Form has been accepted, ask them what documents they need for a short sale.
Get the short sale package exactly as they need it. In most cases, you can find this information on the mortgage lender's website.
Fax all the paperwork as requested. It is important to be accurate as missing or inaccurate information can delay the short sale for months.
You will need to wait at least 48 hours as it registers in their system.
he short sale is then allocated to an underwriter who will see it through the end.
5) Follow up
This step can get tiresome. Most underwriters have hundreds of short sales to deal with. It is therefore important to follow up to make sure you can get an answer soon.
6) Attend BPO appraisal
If your offer looks good, the lender will then do an appraisal (BPO). They will ask you to open the property for them.
Be sure you are present for 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!
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