A short sale begins in the same way as any other business transaction. First, you’ll need to locate a suitable property. In this scenario, we’re looking for a home that’s currently in the foreclosure process. It should lag by a few months, perhaps as much as four or five.
The short sale is great because it allows us to work with the seller’s inflated numbers. In business, it’s always a plus if you can find a way to cheat the system. I say it’s unrealistic since we’re trying to secure a discount from the bank on that property. Therefore, the bank is prepared to reclaim the property if the owner is four, five, or six months late on payments. They are ready to initiate foreclosure proceedings and sell the property at auction.
This house is unlikely to sell at auction in the current market, leaving the bank in possession of yet another foreclosed property. If all of the homes owned by these banks were gathered together, a small metropolis could be constructed. Whatever the case may be, these banks have too many properties and cannot lend as freely because of it. As their real estate holdings increase, their ability to lend decreases.
Get your hands on a home that is currently in the foreclosure process. You shouldn’t count on this as a method for rescuing your home. If you’re ready to sell your home but don’t want a foreclosure on your credit report, this is for you. They’re merely eager to complete the sale and leave. They are prepared to do anything to escape the house. They typically agree to sign the house over to the bank and return it.
We will then attempt a short sale. You, the Buyer, sign a contract with the Seller to buy the house at the best price the Seller is willing to sell it to you for based on the terms offered by the Bank. So, the Seller won’t accept $200,000 for a home that costs $200,000 to build. I’d aim for a salary of $115,000 to $12,000. These days, you should go for at least 50%; however, in some cases, that goal may be unattainable. However, it would be best if you aimed low.
Short sales are best used on properties that have two mortgages. A larger second mortgage is preferable. If a home has two mortgages, one for $150,000 and the other for $50,000, and the $150,000 mortgage forecloses and takes back the house, the bank loses the entire $50,000 on the second mortgage. Therefore, a hefty second mortgage on the property improves the chances of a successful short sale. If the bank forecloses on the property, it will receive nothing.
Even a house that needs repair is usually an improvement. The bank will reclaim the property, and ideally, it will be in perfect condition. You might be in a stronger position if it needs some fixing up.
The Seller must be willing to sell you the house for the amount he owes, or you may borrow from the bank if you want a Contract to purchase the home. There is often no monetary value attached to the Contract. You get a Purchase and Sale Agreement or Option to Purchase from the Seller and decide not to fill in any information. The Seller agrees to sell the property to the Buyer at a price negotiated by the Buyer and the Lender. In other words, the Seller will sell the house for whatever amount the Buyer and the bank agree upon.
The buyer gets nothing, and the seller receives nothing. Nothing is given to them. The bank would prefer that the Seller not get any money if it has to write down the property’s value. Ultimately, the Seller must be willing to walk away.
You need a Seller who is eager to make concessions to your needs. A letter detailing the financial hardship must be sent. They must also give the bank the necessary short sale documentation. The bank will require the last two years of tax returns, the previous two months’ worth of bank statements, and, if applicable, the latest two weeks’ worth of pay stubs. At first glance, all of this documentation may seem like a lot of effort, but it will look like a breeze after you cash your first $50,000 check.
You will now bargain with the financial institution. The bank has a division whose job it is to prevent losses. They serve primarily to lessen the damage. They contribute to avoiding repossessions. You are going to get in touch with them to talk about this. You should negotiate for the lowest possible price. The time required for such talks is typically several months. You should strive to give as little as possible while they try to take as much as possible. They may even inform you they don’t participate in short sales. In a word, yes. That’s why they have a separate division. Don’t back down and maintain an air of authority. Look for a tool that can assist you.
You will start selling the house while you’re still in negotiations. We recommend holding an auction, listing it with a real estate agent, or selling it independently. We plan to have a sale soon. We won’t be seeking the most excellent possible price. Since we landed such a great bargain, we hope to pass our good fortune on to a family needing a new home. Finding that buyer is essential to us reaching a bank settlement.
Then, we’ll conclude the deal twice as fast. You’ll find a buyer; the bank’s offer of $120,000 on a $200,000 home means you can probably ask for $160,000 or $165,000 from yours. Once again, you need to understand the figures and the market. Then, the two closings co-occur on the same day. Buying the home outright from the bank is the first closure. The property is now legally yours. The sale to the buyer constitutes the second closing. You pay $120,000 to the bank for the property and then sell it to another person 10 minutes later for $160,000, pocketing the difference of $40,000. However, there is more to it than that, and it does become less complicated with practice.
You might wonder if you can afford to buy it from the bank for only $120,000. Some companies offer such a service. Some financial institutions can lend you money for a day at interest rates as low as 4%. After borrowing it for a day (without a credit check), you pay it back to the bank. It’s an excellent bargain if you can sell it to the other man on the same day and pocket the difference. Have fun!
Here are the fundamentals of a short sale:
Look for a home that is behind on payments and facing imminent foreclosure.
o Offer the bank any price you like to purchase their property.
To finish the short sale package, the bank or your outsourced short sale negotiator delivers you.
o Bargain with the bank’s “Loss Mitigation Department” for a much lower price than the store would typically sell it for.
o Obtain a loan from a business that will give you the money you need to purchase the home in ONE day.
· Coordinate a simultaneous closing with the escrow business.
Close on the property and acquire it from the bank.
o Have another closing right away to complete the sale to the buyer.
o Deposit the check for the profit made after deducting the selling price.
Nick Cifonie invests in real estate, coaches, and mentors full-time. Nick hosts [http://www.REI-TV.com], where users can join for free and access dozens of instructional videos on real estate investing.
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