Short Sale Process, what is it and how long will it take?

The Short Sale Process is time consuming and lengthy. It can take 6 months or longer to complete. Patience and persistence is the key to your success in short sale in real estate.

In a short sale the home owner must have a hardship and be behind in their mortgage payments. They must show why they cannot afford to stay in their home or to make payments toward their home mortgage.

You will also need the full cooperation of the homeowner to perform and they must be aware that they will not gain financially from this process. They will have to submit tons of paperwork including pay stubs, W2s, Tax returns, IRAs, Checking and Savings Account statements and any other financial statement they may have or requested by the lender.

Once the homeowner has agreed for your assistance during the short sale process you will have them sign a short sale contract and/or a purchase contract indicating you will be buying or listing their property for sale along with a power of attorney giving you the right to negotiate on their behalf on their liens against the property.

Now the fun begins. Start contacting the lien holder’s loss mitigation department and letting them know you have been contracted to act on behalf of Mr. and Mrs. Homeowner to short sale their property. The lenders will send out an appraiser to do BPO (broker’s price opinion) on the property.

Once the BPO has been completed you can negotiate with the lenders on a purchase price. Typically the second/third lien holder(s) will be willing to discount their mortgage dramatically. At this time you can decide if you want to purchase the property or tie it up and list it for sale as a FSBO (for sale by owner). You will need a purchase contract from the homeowners showing that you are purchasing the property.

If your strategy is to resell the property, it would be wise to start advertising the home for sale the minute you get the homeowner to agree to sell the property to you under a Purchase Agreement (PA). Short Sale Strategy in real estate can be very profitable if you have enough of a profit margin.

How can you make money selling a short a property? When you purchase the property under market value there is always a potential to make money because people are willing to buy at market value. There may be a need to clean up the property to resell it, unless it is already in move in ready condition when you purchase it.

If your strategy is to short sell real estate you may want to build a buyers list of investors or homeowners to move the process along quickly.

You will also need to build your team, a title company, funds to buy the property and possible an attorney. If you plan on reselling the property you will need to confirm with the both the buyers and seller’s lenders that they do not require seasoning so you can do a back to back close.

Lately there have been restrictions to hold title for 2 weeks to 30 days prior to reselling.

Now that you have the property, found the buyer, let’s get ready to close. There are two types of recording documents needed depending on if your state is a mortgage state or trust deed state.

You can Google each and get the documents on line if needed or ask your title company or attorney to prepare them. There will be two transactions. You will first close with the homeowner and then you will resell to your buyer.

That is the short sale process, it’s that simple! The short sale process can take a little while to get comfortable with, but if you are investing into houses it can become much easier over time.

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