Q. What is a short sale?
Ans. A short sale is when a mortage holder of a property agrees to do two things:
1. Accept less than what is actually owed on the note.
2. Release interest in the property and allow you purchase it.
Short sales allow you to discount the loan from the lender. This applies to to anything that is on the title; Banks, Second Mortgages, Mechanics Liens, Private Mortgages, Federal or State Tax Liens, and Judgements.
Q.
Why do banks discount notes?
Ans. Banks are not in the business of owning property.
A non- performing asset is a measure of how much bad debt banks have on the books. This bad debt is comprised of foreclosure properties the banks have had to take back. For every dollar the banks hold in non-performing assets, they must keep seven to ten dollars in cash reserves. They need to get rid of these properties off of their books as quickly as possible!
Q. How do I know if this is a good deal for a short sale?
Ans. You know a short sale is a good deal when:
1. There is a large second mortgage,
2. There is equity in the property that will give you good profit,
3. Or, if the property is distressed ( the bank would have to get fixed or forced to sell below market value).
Q. What makes a bad deal for a short sale?
Ans. When considering a short sale, be aware of the following:
1. There is a small profit and you know it will be time consuming,
2. One or Two bedroom houses are harder to resell or rent,
3. Mobile homes that do not include the land ,
4. It is the biggest house in the area,
5. Or, if the property is lower-end housing and much less valuable then the median comparable home prices within the area.
Q. How do we find leads?
Ans.
1. Notice of Defaults or Lis Pendings in the legal section of the newspaper/courthouse,
2. Vacant Properties,
3. Referrals,
4. and, deaths or estate issues.
Q. What do I need signed by the home owner?
Ans. The Warranty Deed, Purchase and Sale Agreement,
Authorization to Release Information, and Disclosure.
Q. Why do I need to tie up the property?
Ans. You need to tie up the property so you have control of the property and being able to talk to the bank is a must!
Q. What is the diffference between a Quit Claim and a Warranty Deed?
Ans. A Quit Claim transfers only individial interest.
A Warrnanty Deed transfers full ownership to a new party.
Q. What two contingencies must you have in your contract with homeowner?
Ans. Contingent upon lender discount and buyers attorney approvel with final inspection.
Q. What will the bank require from the homeowner?
Ans. The bank will require the following;
1. Account number
2. Social Security Number
3. Signature in order to be valid
4. Get a notarized Power of Attorney (so you can work with Bank)
5. Copy of Mortgage statement if possible
6. 2 most recent copies of tax returns
7. 2 most recent bank statements
8. 2 most recent pay stubs
Q.How much do I offer?
Ans. Before making your offer, there are few things to consider:
1. Get comparatives ( from realtors FSBOS or flyers from homes in area )
2. Estimate of repairs ( learn what things cost )
3. Take 90% of what you consider to be market value minus repairs and offer 75% to 85 % of this figure.
Q. What points should the Cover Letter have on it?
Ans. The Cover Letter should include the following:
1. Cash Offer
2. State "no money to seller "
3. State you are the contact for access to the property
4. Summarize repairs needed.
Q. What should be in the short sale package?
Ans. Cover sheet, Cover Letter, Autorization to Release of Information, Purchase and Sale Agreement, HUD 1 Settlement Statement, Tax Returns, Pictures of Repairs, Estimate of Repairs, Paystubs, and The Bank Financial Forms
Q. Why do I need to order the title search?
Ans. You must order a title search to make sure you know who is on the title if there are any other issues that you need to be aware of.
Q. What is a BPO?
Ans. Brokers Price Opinion or appraisal. Make yourself the contact for the BPO show and meet to make sure you point out all the repairs needed. Give them a target price they need to understand that the bank is wanting to firesale this and does not want the highest appraisal Give them comps that you have come up with and and estimate of repairs. Make sure they can verify the information you have given them. Do not let them knowyou are buying the home let them think you are working for someone. This will keep them from asking you to many questions.
Q. Who do you ask for at the Bank?
Ans. Loss Mitigation, Foreclosure Department
Q. What do I need to get from the bank?
Ans.The contact person from here on out and fax number then fax everything in. Be friendly and realize they have no vested interest in your deal or the banks they are paid employees.
Q. When should you follow-up?
Ans.Give them about 5 days and call to make sure they have gotten everything, then about 10 days call to see if offer has been accepted.
Q. Who do I need on my team?
Ans. Good Real Estate Attorney, Good CPA, Title Company, Real Estate Agents , Handyman, Mortgage Brokers HArd money Lenders.
Q. How long from the time of the acceptance of short sale till closing?
Ans. 30-45 days you can have this in contract.
Q. Do I have to pay cash?
Ans. No you can get a mortgage, from a different bank you can take on JV partner, hard money or private money ( Remember you will put in contract this is cash so they know you will close).
Q. What if the bank counter-offers?
Ans. Do not get emotionally involved, know what your top price is, and walk if the numbers do not work for you.
