How to Negotiate a Real Estate Short Sale
Published: 01/26/2010 by Jennifer Minge
Finding the right short sale home takes time. If you are looking to make a nice profit, don't rush out and scoop up the first available short sale you find. Do your research on the web to find listing. Connect with homeowners who are more than three payments behind because at this stage they have already received a Notice of Default.
Both the homeowner and the lender are motivated at this point. It is unlikely that the homeowner will be able to catch up payments, and the lender is willing to salvage any losses from the property.
Once you identify the property you wish to short sale, it is important to maintain a professional relationship with your lender. Finding the Loss Mitigation Department of a bank can be perplexing. Many banks have a different name for this department, so if you call it is best to ask for someone who handles pre-foreclosures.
After you establish a relationship with the lender, a short sale packet will be mailed out to you. Take your time to fill out all the paperwork. Never return an incomplete packet. Lenders are running short-staffed and it is likely your packet will sit at the bottom of a pile for a long time.
It is likely that your lender will request a hardship letter explain why the homeowner can no longer make the mortgage payments. You will also need to provide income tax returns, paystubs, and several months' bank statements to verify income.
Two other key elements to a short sale are the BPO, or broker price opinion, and the HUD-1 settlement statement. The BPO is obtained when the lender sends out a licensed real estate agent to appraise the property. Essentially, they provide an opinion as to the properties fair market value. This is your negotiating leverage. The lower the BPO, the better the bargaining price.
A preliminary HUD-1 settlement statement itemizes all of the fees charged to the homeowner and yourself during the transaction. It also assures the lender that the homeowner is not profiting from the sale of the home. It should state that you pay all of the fees associated with the deal.
Real estate short sales can be highly profitable. Think of your first one as a test run to work out all of the knots in your investment strategies. The more short sales you work, the easier they become. Always find the right home, establish a professional relationship with the lender, and come prepared with all the necessary documentation in order to successfully complete your transaction.
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