Here are the basic steps to walk you through a real estate short sale. In case you’re new, a real estate short sale occurs when you attempt to negotiate a discount on the mortgage amount of a house you are trying to buy. Usually the property will be in foreclosure and will have no equity. Many times the mortgage amount will be higher than the property is worth, so you negotiate with the bank to accept less than the full mortgage amount.
When working with the seller’s bank, you’ll find that if any step or component of the real estate short sale is missing, your deal can die in no time. Loss mitigation reps that work for the bank often have 300+ real estate short sale files on their desks, so if you are missing anything your file goes right to the bottom of the stack. This is a list of the minimum you must do. Certain banks and certain situations will likely require other steps.
1) Get a signed ‘authorization to release information’ from the seller and their spouse (even if the spouse supposedly isn’t on the deed or mortgage). Submit the authorization to the bank ASAP since it might take them 48 hours before they log it in their system (no exaggeration).
2) Get a signed sales contract and take unflattering pictures of the house. Get copies of all proof of hardship (late bills, hardship letter, etc).
3) Put together your real estate short sale package to submit to the bank. I will go into detail in a future posting about what I include in my package.
4) Find out from the bank’s loss mitigation/foreclosure department what fax number or email address or physical address to send the package to. Sometimes when you talk to different people at the bank they will give you different fax numbers that you’re supposed to fax your package to. Fax every number you have, because someone will lose your package, guaranteed. Better to have too many of your packages floating around than too few.
5) The bank will likely order an appraisal or BPO (broker’s price opinion) to estimate the value of the property. Meet the appraiser/realtor and help them see why the house is worthless.
6) Bank accepts or rejects your offer. If they counter, you counter, they counter, and so on until you agree on a price.
7) Set a closing date and collect your heavily discounted property.
Ok, so that’s an oversimplification but that’s basically how it goes. Things get a little more complicated if there is a second mortgage, if you’re wholesaling to a cash buyer, and any other assortment of issues that plague any real estate short sale. Check back for future postings that will go into detail on all of the steps, info on finding these deals, and every other aspect of a real estate short sale.
