So You Have a Short Sale Lined Up - Seller Issues - Step #5
by John Occhi, Hemet - San Jacinto Valley REALTOR
Hemet - San Jacinto CA Real Estate
By now you should knot that getting involved in buying and investing in short sale properties can be very rewarding financially. You should also know that you, as an investor, are walking a fine line between your own financial success and future and the downside of the homeowner who is probably losing more than their home- their credit, all for the money they have put into the home, the memories, relationships and all sorts of negative issues that good people find when bad things are happening to them.
When you are negotiating a short sale, whether it is for a Hemet, CA home for sale or property anywhere else you know the homeowner is not having a good time. The homeowner and their family are often under a great deal of stress and are suffering both monetarily and mentally. Just the thought of finding themselves in a possible foreclosure situation can be daunting.
Remember, if you are approaching the transaction with integrity you are a force that can save them much of the stress, help the bank save a lot of time and money as well as getting to walk away with a nice little profit, when the day is done.
I just can't emphasize enough though, not top be a cheesy, sleazy slimy shark - the homeowner will see many that fit this description and in the vulnerable situation they are in, may easily be taken advantage of. Remember, this has to be a win-win-win situation for everyone: The homeowner, the mortgage lender and only then can it truly be a win for you as an ethical investor.
As a short sale investor, you still have to keep your eye on the ball. You know the rule about Murphy - if anything can go wrong, it will. Remember, the only real way that the deal will close is because you are diligently holding together all of the pieces. The last thing you want to do is overlook a red flag, because you feel warm and fuzzy inside.
So, let's take a look at what can go wrong:
•1. Undisclosed Debt: Don't ask me why, but homeowners will often not tell you about all of the debt secured against the property. Perhaps it's embarrassment; maybe the homeowner is stressed and just not thinking straight, an maybe it really has just slipped his mind.
What you want to educate the homeowner to the fact that the more debt they have against the home, the better deal that can be negotiated. After all, if a home is only 3% upside down it is hard to convince the mortgage lender to accept an offer of 76% LTV. Now if the home is 30% upside down - then there is a whole lot more incentive for the lender to look at your offer seriously.
As an investor who is ready to invest their time, expertise and financial resources to make this deal happen, yu have to make sure that the homeowner is 100$ upfront and honest - letting you know everything that there is to know about his debt.
•2. Time is of the essence: We have all seen this clause on contracts - especially real estate contracts. Time is always of the essence - but perhaps never as much as when you are facing the ticking time-bomb of a foreclosure auction on the court-house steps.
As the investor, you have to make sure the deal will work for you on multiple different levels. Not only must it make financial sense but it has to make sense to work with the different parties involved. Certainly, if the homeowner has a shotgun across their lap telling you they will never give up the family home, then it might be a good time to move on.
Another less dramatic - but all to common scenario you have to try to avoid is the homeowner who is in denial. They have stacks of unopened mail and they just never seem to get you what you want as quick as you need it. Chances are this head in the sand homeowner will end up losing their home to foreclosure.
•3. Do You Know the Real Owners? - There will be times when you meet one of the owners who may be divorcing the other owner who now lives 1000 miles away! Do you want to be in the middle of a family feud if they are not cooperating with one another?
Are there parents or siblings involved that have no idea of what is happening and the person you are meeting with is to embarrassed to share the bad news? Will they let you talk with them or are they trying to keep it a secret?
•4. The Devil is in the Details: Make sure you have a solid contract For homes in Hemet CA that have already been served with a Notice of Default (NOD) the California Association of Realtors has a special form to write the offer that allows the homeowner 7 days to cancel - after that, it is a binding deal.
Unless if you are a lawyer by training I strongly suggest that you have an attorney review your document package. Perhaps, if you are planning on a string of multiple foreclosure deals, you may consider investing in having your own custom contract drafted that will protect you and meet the needs of both the mortgage lender as well as the homeowner.
Please never forget the importance of protecting what dignity the homeowner has left. How would you feel if you took unfair advantage of a situation and really raked the homeowner over the coals and they turned around and committed suicide the day before escrow was scheduled to close. You show up to the home, walk in and there is the homeowner swinging from the chandelier with a rope around their neck and a note blaming you for all of their troubles. Sorry for the strong graphic - but keep it in mind, after all your responsibility runs a lot deeper than your bank account.
Now Have a Blessed Day,
John Occhi, Hemet CA REALTOR
Mission Grove Realty
Loss Mitigation Consultant
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