It is virtually impossible to complete a successful short sale without dealing with the loss mitigation department at the bank. So, how does one deal with loss mitigation successfully? Hopefully I can shed some light on that today.
For those of you who are new to investing, you might be wondering what a short sale is. Good question. A short sale is getting the bank to accept less that what is owed as payment in full. For example: You find a homeowner in distress who owes $100,000 on a property that is worth $100,000. What do you do? Most investors walk away unless they know how to short sale. Using my “short sale secrets”, you get the bank to accept $55,000 as payment in full. You now have equity in a deal that had none, the homeowners are ecstatic as they can move on with their lives, and the bank has a defaulted loan off its books. Short sales are win/win for everyone.
Once you have your homeowner under control and your short sale package together, you are ready to deal with loss mitigation. When making the initial phone call to the bank, ask for the loss mitigation department. Some customer service reps may say that the bank does not have a loss mitigation department. Keep trying. Ask if the bank has a work-out department, foreclosure department, short sale department, loan modification department, or reinstatement department. The reason I ask for different departments is many times a new person is working the customer service phone and may have no clue what you actually want. By using a term they are familiar with, you will eventually get to the right person.
You have loss mitigation on the phone; it's time to get to work. This person will make or break your deal so be very nice. Your initial conversation should go something like this: “Hi, my name is your name here and I am calling on behalf of Bob and Sally Smith (your distressed homeowners). I have an “authorization to release information” form I'd like to fax to you. What is your fax number? (Stay on the phone while the rep retrieves the form from the fax machine) Great, I'll send it right over. – the rep gets the authorization and returns – As you know Bob an Sally are in foreclosure. I recently met them and they seem like sweet folks.
When I found out about Bob and Sally's dilemma, I said I'd try to help. They would like to sell their property and move on with their lives. I own several rentals in the area and am willing to purchase Bob and Sally's property. However, we have a big problem. I called a real estate agent friend of mine and ask her to run comps for me. Based on her comps and based on what I know about the area, Bob and Sally owe much more than their property is worth. As I said, I'm willing to help them out of foreclosure as well as helping you get a defaulted loan off your books, but I can't possibly pay the mortgage balance. Will you entertain some sort of short payoff or something along those lines? Great! What do you need from me?”
As you can see in my conversation, I do not come across as a professional investor out to make a killing on the banks loss. Many investors chose to present themselves that way. I have much more success as a friend trying to help poor Bob and Sally. Use whichever approach makes you feel most comfortable. However, don't lie to get the deal. I did recently just meet Bob and Sally, I do have rentals, I do have a real estate agent friend, and I am willing to purchase Bob and Sally's property. In your conversations with loss mitigation, be certain to refer to your distressed homeowners by name as often as possible. This makes them seem more real to the rep. I am trying to get a banker to make an emotional decision as well as a business one.
Once you build rapport with the loss mitigation rep, send your short sale package. I call my reps at least once a day to follow-up. Always ask the rep how the day is going, how the weather is where they are, how the kids are, and so on. You want the rep to look forward to your calls, not dread them. Find out who makes the actual decision, how long it typically takes, how long the rep can give you to close once your deal is accepted, etc. With a helpful attitude from you, your loss mitigation rep will push your deal through quickly.
Once your deal is accepted, get it in writing immediately. Find your buyer or arrange financing and get the deal closed. You don't want anything to happen between the acceptance and the closing to make you lose your deal. Once the deal is closed, send the rep flowers or a gift basket and write a letter to the reps boss. The rep will remember you and the next time you call about a short sale, the rep will be more than willing to help you again. Loss mitigation: Friend or foe? I say friend!