Short sales are everywhere. You can't turn the corner without seeing a foreclosure, REO or a short sale listing. As a real estate agent and invest it is important to know what you can do and have to do to capitalize on this market trend. The most important part of a short sale is the home owner. They have to understand four important items.
1) They cannot get money from the sale of the house. You as a real estate agent can give them a closing gift but you are limited to the state law that the gift cannot exceed a monetary value of $50. If you have a home owner that wants $5K, $10K or even $2K then you have to explain to them that the bank will not allow them to receive any money when they are losing upwards of tens of thousands of dollars. You also have to explain to them that receiving money outside of closing is illegal. It is bank fraud and there is serious consequences to ALL parties involved.
2) The owner will have to provide a lot of documentation to the bank so they can justify accepting a loss on the secured loan. They will need 2 years tax return, 2 months pay stubs, income statement, authorization letter (if needed), a handwritten letter of hardship, child support, alimony and any other income statements. They will also need to update this information as the short sale process drags.
3) The homeowner has to know that this is a long process. Once an offer is submitted it is taking the banks months to process the deal. The bank will order an appraisal or a BPO then they will inform their investor of the value and the offer received and wait to hear back from the investor what they are willing to accept. This is a very short version of what they have to do and all the negotiating that is involved. Again, the important part is to know that it is taking the bank a long time to process. Your home owner and the buyer has to be made aware of this and be prepared to wait it out. The good news for the homeowner is that they can stay in the house all this time and are basically living rent/mortgage free.
4) Arguably the most important item is that you have to have 100% complete cooperation and understanding with the homeowner. If they are difficult in the beginning they will be difficult all the way through. This saying couldn't be any more than with a short sale. If the homeowner is reluctant or wants money, don't work with them. This item is more important with a short sale than a regular listing because the owner can kill a deal very easily. They have to get all the documents to the bank as requested. They have to move when sold. They have to sign all the documents required as needed. The delicate line is that at any time the owner can shut off. With a normal transaction there is a risk of lawsuit for non-performance. Often times a short sale homeowner has nothing so their less worried about the future problems.
The good news is that banks are finally realizing that the market is horrible right now. The bank and their investors are accepting bigger losses. You have to be persistent and have the cooperation of all parties involved. You have to have the willingness and dedication to spend a lot of wasted time on a file and understand that in a blink of an eye the bank could say no and the deal is dead. If this happens you may have to start all over again and there is also a chance that you will have a different bank rep so you have to do everything over when you have another offer.
I specialize in investing, specifically short sales and renovations. Please feel free to contact me with questions or if you have a short sale that you don't know what to do with.
Thank you,
Dominic Kirchner II
781-985-6010 Cell
Comments(1)