Buying a Short Sale Home

What is all this talk about buying a Short Sale home? How to buy short sale properties and what are the short sale strategies? Unfortunately I don’t have much experience in short sales. The good news is I know someone who does and they have agreed to write this detailed page on it.

So now I turn it over to my mom, Tracy Rosenberg.

Where can you find a homeowner to help? Your local County Recorder’s office posts Notices of Defaults. You can get a list of defaults from going to your local recorder’s office. Then it’s door knocking or mailers. I find door knocking to be much more personal and this strategy tends to work better than mail solicitations. It’s all up to you and how you want to structure your short sale business.

Once you get a legitimate short sale candidate the paper work process begins. You must first get the homeowner to sign a release indicating you are working for them and have their permission to speak to their lender on their behalf, a power of attorney/authority letter form works great and holds more credibility if it is notarized.

The homeowner must also understand they are not to gain financially from this short sale and you will need their cooperation to get the necessary documents to their lender for a short sale acceptance. You are there to help them and you are an investor. They must understand this is your business and you will be gaining from their loss.

Documents that may be needed are Tax returns, pay stubs, bank account statements, 401Ks, basically any financial asset(s) along with a hard ship letter from the homeowners own words.

Your next step is to contact all lien holders Loss Mitigation Department including Mortgage Lenders in first position, second position, and third position as well as any liens against the property such as IRS, Tax, HOA, Contractors, etc.

You can determine the liens against a property by having a title company conduct a title search on the property.

Your first initial contact with the lien holders are to let them know you have been hired by the Mortgagee (owner of the property) to review a possible short sale on said property as the Mr. and Mrs. Property Owners are in a financial hardship. You will then forward them the hardship letter and financial date you have collected. Then negotiations with begin.

While you are working on the short sale acceptance you should begin marketing the property to sell. If you wish to hire a real estate agent to post the property for sale that is fine, or you can post it as For Sale by Owner. Finding a qualified buyer, either cash or mortgage buyer is fine. Just find a buyer!

Your goal is to profit from what the bank will short the property for and what you will sell the property for after all your fees are removed. Fees could be closing cost, realtor fees, private loan fees , etc. There are many short sale strategies that can assist you will direction.

The basic strategy is to buy the property at the short sale price you have negotiated and turn around and resell it to the buyer you have found for a profit. If your buyer is seeking a mortgage, you need to confirm there are no seasoning issues that could prevent them from closing on it.

What if you don’t have the funds to close on the property yourself? Don’t worry there are private lenders and transactional lenders that are willing to fund your deal if you can close quickly and don’t mind paying their points and fees for their loan.

If you have patience and time buying a short sale home can be profitable. It will take many months for you to profit on all your hard work, But it is both a financially and emotionally rewarding business.

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