In the real estate market today, finding a property where the seller is in default is not a difficult task. Default can be defined as the outstanding mortgage balance being higher than the value of the house. To profit, the investor may offer an exceptionally low price, get it accepted by the bank, and attempt to quickly sell the property an end-buyer. This technique, when successful, can yield impressive profits. Unfortunately, trying to this with short sales can be challenging for several reasons. First, the lender must approve the offer. Second, even if the investor can negotiate with the lender to accept the offer, if they have an inclination of a back to back closing the lender may not allow it.
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Very few investors actually know how to successfully negotiate a short sale.  In today’s market, short sales can be a great way to generate cash and if completed properly they can be very lucrative and rewarding.  Many investors make several common mistakes which can lead to frustration and nightmare.  If you can indeed determine that you have a successful short sale on your hands and avoid these common mistakes you will ensure your success.

The first mistake investors make is not having a complete understanding of the concept of short sales.  The lender is allowing the property to be sold for less than the amount due on the loan.  This provides an alternative to the seller who is heading towards foreclosure, avoiding the credit damage.  The process can take weeks and even months to finalize so patience and accuracy are vital.  Be sure to send everything that is being requested with the package.  Leaving bits and pieces out only draws out the process and makes the banks resistant to working with you.  You will be asked to include an Authorization to Release Information.  This is where the homeowner gives the lender permission to talk with you about their loan.  They will also require a hardship letter that explains why the homeowner has become delinquent in their mortgage.  They will also require copies of W2’s, pay stubs, and bank statements as a way of verifying income.  You will need to prepare a repair cost worksheet explaining the condition of the home to the lender.  The lender will also want to see comparable sales.  The first mortgage holder may require a pay-off letter from the second and vice versa.  These are just examples and actual requirements will vary by lender.

Before entering into a short sale deal it is imperative that you Read the rest of this entry