Negotiating A Short Sale ? The High Road to Huge Foreclosure Profits

Buying foreclosures can be extremely profitable for real estate investors. However, most of these homeowners are mortgaged to the hilt. They have no equity, and big loan payments. In fact, many actually owe more than the property is worth!

Most investors will walk away from these deals because they see no obvious profit. However, you can "create" your own equity by negotiating a "Short Sale" with the bank or lender.

What is a Short Sale?

The concept behind the short sale is simple: your goal as a real estate investor is to convince the bank to sell for less that is owed as payment in full. Of course, this concept is easy - buy the foreclosure from the bank at a big discount, sell the real estate, and make money!

How to Negotiate the Short Sale with the Mortgage Holder

Once you have your secured a contract with the homeowner and have your paperwork in order, you'll be ready to deal with the loss mitigation department of the bank. Short Sales success relies on dealing with the loss mitigation department at the bank. Although most lenders look at short sales as a necessary evil within the lending industry, that doesn't mean that the bank will just roll over and do your bidding.

Understand the Bank's Perspective

With foreclosures at a 52-year high, the loss mitigation department at the bank is busy, if not highly overworked. Turn this disadvantage into an advantage - sell them the benefits of your short sale.

Short sales contracts help lenders unload unwanted property and spare many expenses associated with the foreclosure process. These expenses include, but are not limited to, court costs, bankruptcies, repairs and marketing. This is in addition to the $300,000 to $800,000 (or more!) normally held in reserve by lenders. Federal regulations require this reserve, which is usually many times over the actual price of the bad debt.

As the investor, keep these benefits at the top of your mind. After all, it's up to you to convince the lender that cutting their losses short is the best option.

It's time to hone your negotiating skills. Here are 3 Steps to help you out.

Step 1: Have Your Paperwork Ready

There is paperwork that all lenders will require in order for you to submit your offer for the short sale. Second, many of the larger institutional lenders have their own short sale package (their own forms to be filled out and signed).

Since many of these forms have to be signed by the homeowner(s), it's best to have them with you when you meet with the homeowner to work out a deal. At a minimum you should have the homeowner fill out and/or sign:

· Authorization to Release Information (homeowner's permission for the bank to speak to you)

· Purchase and Sale Agreement

· Hardship letter (showing why the homeowner can't make the mortgage payments)

· Financial statement (showing the assets, liabilities, incomes & expenses)

· Estimated HUD1 or Net sheet (showing the bank what they will get)

Second, find out if the lender has a package they want completed. You can do this usually by calling the lender and asking them to fax you the package. Get the lender information from the homeowner in a phone call, so you can get the package before you go out to the house.

Step 2: Approaching the Loss Mitigation Department:

One of the first challenges you'll face with the bank is getting your call to the right person. Some banks have systems set up in a way that when you call put in the homeowner's account number, the call transfers to the appropriate department.

If the bank doesn't have a system like this, call around to find the Loss Mitigation Department. Many banks have different names for this department, so you may spend some time getting bounced around. Other names to try out are "foreclosures department", "short sale" department, or "loan modification" departments.

Make sure you introduce yourself and be nice, polite, and patient when you reach the right person. This is the person that can make or break your deal. It's helpful to have some form of a script in front of you to get the conversation.

When you speak with them, make sure you cover the following:

· Introduce yourself.

· Name the homeowner, the account number, and the fact that you represent them.

· Ask for the fax number.

· Let them know you're faxing over an "authorization to release information" so that the loss mitigator can talk to you.

· Stay on the phone as you fax this information.

· Explain to them that you're interested in a short sale.

Once they have the paperwork in front of them, the negotiations begin.

Step 3: Begin Your Negotiations

Every bank has its own personality and approach when it comes to short sales. Some teach their employees to at least show resistance up front. One reason for this is that many investors call them expressing interest in a short sale, with no clue how to do it! These loss mitigators usually have about 80 to 300 files on their desk. They just don't have the time or desire to teach you! Let them know you don't need them to!

Many new investors have been advised to not reveal that they intend to invest in a property. However, it is better to be upfront and let them know that you are an investor, and you are buying the property. Being honest and upfront allows both parties know what is required of them, and what needs to be negotiated.

While speaking with a loss mitigator, make sure to emphasize the following points:

1. You're an investor and you know what you're doing. Although you do want to make profit, let them know you're not out to steal the property from them.

2. You understand that they are busy and appreciate the valuable time they are spending to negotiate with you. Find out what will make it easier on them.

3. Remember your selling points. The bank wants to avoid the homeowner filing bankrupty, and the bank needs to unload unwanted property without taking a huge loss. (And yes, while you are in it to make a profit, you're not trying to rip them off! You're just trying to use your expertise to do what you're good at.)

4. A short-sale is a win-win situation for everyone!

Once you have spoken to the loss mitigation department and given them your paperwork, the lender will need information about the property, the borrower and the deal that you are proposing. If the person you are speaking with tries to test your resistance, make sure you answer as many questions as thoroughly as possible to let them know you are a professional. Hang in there, answer and ask as many questions as possible, and they'll be more apt help you out along the way and walk you through what it is that you need to do.

The most important fact that the broker needs to know is: How much is the property worth? Banks usually hire a real estate broker or appraiser to evaluate the property. This is called a broker's price opinion or "BPO". The BPO is one of the largest hurdles you need to clear when perfecting your short sale negotiations. In the next article, you'll learn the in's and out's of the BPO and how to negotiate the BPO down to create profit for your short sale.

Richard Odessey along with his wife Michelle are founders of the premier site on the internet - http://www.InvestorWealth.com for training and teaching real estate investors to do high profit deals. They offer regular Free Teleseminars by the top real estate investors in the country and offer how-to tools and kits like the Deal Evaluation Tool (http://www.1shoppingcart.com/app/adt rack.asp?AdID=143414) to help investors to faster and greater real estate success. They also offer 4-8 hands-on training seminars with personal advice from experts that investors can take from the comfort of their home. Richard and Michelle have been investing for over 5 years and personally teach and mentor other investors.

This article may be reproduced in its entirety only if unaltered and the resource box is included.

---

Inspecting Your New Home - 17 Areas You Must Inspect Before Taking Possession

Congratulations! You've made your decision; you've chosen your new home... Read More

Santa Visits a Just-Moved Newcomer in South Florida

Twas the night before Christmas and all through the house... Read More

Finding a Great Listing Agent for Your Home: 8 Tips

If you've decided to list your home, you'll be paying... Read More

Panama is Hot - A World Class Retirement Haven Thats Ripe For Profitable Real Estate Investment

If you've followed any of the major survey agencies around... Read More

Property Investing Secrets 8

Property Investing: A Buyer's Secret Weapon When Purchasing Real EstateMy... Read More

Five Ps of Selling Houses

1. Planning:Know Your Target BuyersThink about your neighborhood and the... Read More

Basic Tips for First Time Home Buyers

Choosing a first home can be a daunting task, but... Read More

How to Choose Your Real Estate Lender

Because you need quick action when applying for a real... Read More

Home Equity ? Don?t Spend It on Risky Investments

The housing market has exploded in the last five years,... Read More

Why Should Sellers Be Absent During Showings?

If only there were a way to sell your home... Read More

5 Factors of Selling a Home

There are five major factors to consider when selling a... Read More

Investing in Real Estate Profitably: Eliminating the Need for Mortgage Insurance

In an earlier article, we presented various options for ensuring... Read More

Financing Houses

What Real Estate Lenders Look ForLenders control many programs --... Read More

Property Investing Secrets 1

When property investing, pay the seller their asking price but... Read More

How To Get The Best Rental Accommodation In The Area By Using Your Capital

My report is for you to use your power to... Read More

Real Estate Local FAQs.

There are many frequently asked questions and any local real... Read More

Prepare Your Property Like A Pro And Boost Profits

The housing market is hot, and you've decided to list... Read More

Buying A Home ? What Is That Noise!?!

You've found the perfect home, closed escrow and just finished... Read More

Wealth Building ? An Advantage of Home Ownership

As you grow older, the issue of wealth building comes... Read More

How to Use Design Psychology to Stage Your Home for a Top-Dollar Sale

A new business venture to help home sellers, home staging,... Read More

Real Estate Remains A Strong Investment

Opportunities to make big, quick profits in residential real estate... Read More

Beat the Crowd when Investing in Real Estate

We all are thinking about it and some of us... Read More

What To Expect From Your House Appraisal

Having your house appraised can be a scary step in... Read More

Real Estate Investing ? The Job Escape

Real estate investing is pretty unusual in lots of ways.... Read More

Legal Information About the Real Estate Contract

The conclusion of final agreement between a seller and a... Read More

Real Estate News

Happy New Year, Make it a better world. "Pay it... Read More

Home Not Selling In Todays Hot Market? Tips and Ideas to Help You Sell

So, your selling your home. Prepare yourself both physically and... Read More

Selling Investment Houses: Props & Profits

New Marketing and Design Psychology ideas help you stage homes... Read More

How to Choose the Proper Entity for Your Business

First, let me state that I'm not an attorney and... Read More

Buying A Holiday Home in Rural Ireland

Ireland has recently witnessed an upsurge in the number of... Read More

What to Look for in a Home

Searching for just the right home can be very exciting.... Read More

Quality of Life in Sussex County Delaware. Facts, Statistics, Observations and even opinions!

We Sussex Countians are fortunate in many ways as we... Read More

Buying Property in Bulgaria : How to Avoid Making A Bad Investment

Where is it possible to buy a property on your... Read More