FAQ's about Real Estate Short Sales
to have an amount equal to or up to six times the retail value of each REO “on hand” – ouch, that hurts.
*An REO is a liability, not asset. Too many liabilities will cause any business to go under if not dealt with quickly.
CAN I SHORT SALE A NICE PROPERTY?
Absolutely! As you can see, banks short sale for many reasons other than the poor condition of the property.
WHAT STEPS DO I TAKE TO COMPLETE A SUCCESSFUL SHORT SALE?
1. Find a property owner in distress.
2. Put a deal together with the homeowner.
3. Have the homeowner sign an authorization to release form.
4. Fill out a sales contract for the amount you want to offer the bank and have the homeowner sign it.
5. Call the Loss Mitigation department at the bank.
6. Fax them your offer along with the following:
a. Your cover letter explaining why you can’t offer full price.
b. The sales contract.
c. Justifying comps of the area.
d. Pictures, if you have them.
e. A net sheet or closing statement (a sheet that shows the bank exactly how much they will net after closing costs, taxes, etc. are paid).
f. A hardship letter from the homeowner that mentions the dreaded word…. bankruptcy.
g. Estimated list and cost of repairs, using retail repair prices that the normal homeowner would pay for these items.
WHAT HAPPENS TO THE HOMEOWNERS CREDIT?
When you negotiate a successful short sale, keep in mind that the agreed upon price is payment in full. However, the homeowners may still owe the difference between the mortgage balance and the discounted amount via a “deficiency judgment.” If granted, this judgment will affect the homeowners and their credit report just as any other judgment. You must get the bank to agree to accept “payment in full without pursuit of any deficiency judgment.”
In addition, you need to explain to the homeowners that the discounted amount (the difference between the mortgage balance and the short sale) may be declared as income on their income tax return by means of a “1099.” The homeowners can speak with their accountant for advice. Since the homeowners have been in such duress and probably haven’t made much income, a 1099 may not adversely affect them.
We hope this sheds some light on short sales. As you know, nine out of ten deals have no equity. To be successful in this business, trends call for you to be a short sale expert.
*An REO is a liability, not asset. Too many liabilities will cause any business to go under if not dealt with quickly.
CAN I SHORT SALE A NICE PROPERTY?
Absolutely! As you can see, banks short sale for many reasons other than the poor condition of the property.
WHAT STEPS DO I TAKE TO COMPLETE A SUCCESSFUL SHORT SALE?
1. Find a property owner in distress.
2. Put a deal together with the homeowner.
3. Have the homeowner sign an authorization to release form.
4. Fill out a sales contract for the amount you want to offer the bank and have the homeowner sign it.
5. Call the Loss Mitigation department at the bank.
6. Fax them your offer along with the following:
a. Your cover letter explaining why you can’t offer full price.
b. The sales contract.
c. Justifying comps of the area.
d. Pictures, if you have them.
e. A net sheet or closing statement (a sheet that shows the bank exactly how much they will net after closing costs, taxes, etc. are paid).
f. A hardship letter from the homeowner that mentions the dreaded word…. bankruptcy.
g. Estimated list and cost of repairs, using retail repair prices that the normal homeowner would pay for these items.
WHAT HAPPENS TO THE HOMEOWNERS CREDIT?
When you negotiate a successful short sale, keep in mind that the agreed upon price is payment in full. However, the homeowners may still owe the difference between the mortgage balance and the discounted amount via a “deficiency judgment.” If granted, this judgment will affect the homeowners and their credit report just as any other judgment. You must get the bank to agree to accept “payment in full without pursuit of any deficiency judgment.”
In addition, you need to explain to the homeowners that the discounted amount (the difference between the mortgage balance and the short sale) may be declared as income on their income tax return by means of a “1099.” The homeowners can speak with their accountant for advice. Since the homeowners have been in such duress and probably haven’t made much income, a 1099 may not adversely affect them.
We hope this sheds some light on short sales. As you know, nine out of ten deals have no equity. To be successful in this business, trends call for you to be a short sale expert.
Comments(0)
Where can I find buyers/investors to bird dog shortsales to?
- How do I market shortsales to investors if I need to be able to close quickly?
What types of banks need to show a loss each month?
- Are those banks likely to agree on a short sale for a greater loss than a normal bank might go for?