Hi, this is Frank Chen with REIClub.com, the only site you need as a real estate investor. Today I've got a quick video on some common short sale questions.
1. Define a short sale?
A short sale is really a form of pre-foreclosure sale that occurs when the mortgagee, usually the bank, agrees to accept less than the loan amount to avoid foreclosure. As the investor, you negotiate for a discounted purchase price. You would finance the acquisition much the same as in any conventional realty acquisition… but without the luxury of time.
2. What happens to the seller's credit if they allow an investor to short sell their property?
What typically happens is the loan will show up as “paid” on their credit report; however there will be a notation that says “settled for less than originally owed” or something along these lines. It is more favorable for a homeowner to short sell than to have a foreclosure on their credit report.
3. Where can I find Short Sales?
Best place to start looking are through realtors. Most pre-foreclosures are handed over to real estate agents to manage.
4. Where do I find investors interested in short sales?
Depending on where you live, you may see investors who advertise with bandit signs or in your local newspaper. Call the investors directly and ask them if they are experienced in doing short sales and if they would be interested in working with you. Another good place is your local real estate investors club meeting.
5. How do bankruptcies affect the possibility of doing a short sale?
Most mortgagees won't consider a short sale if the homeowner is in bankruptcy…why? Because negotiating a short sale payoff is considered a collection activity. Collection activities are prohibited in bankruptcy.
6. What documents do I have to include in a short sale package?
Each lender has different requirements. It is typical to require hardship letter, purchase and sales contract, settlement statement (HUD 1), net sheet, pay stubs, bank statements, personal financial sheet (monthly budget), amongst other things.
7. How late in the pre-foreclosure process can you start a short sale?
Try to allow a window of at least 90 days before negotiating a pre-foreclosure Short Sale.
8. What if the owner has some amount of equity in their home?
If a property has enough equity, chances are the banks would consider allowing the property to foreclose and then reselling it closer to the retail value. As an Investor, focus on homes that do not have much equity. Your job will be to create the equity in the home by negotiating a successful short sale.
I hope you enjoyed the video. I do have other videos on this topic, simply visit and search our channel for short sale videos.
Again, this is Frank Chen with REIClub.com. Please take the time to leave your comments for this video below and please subscribe to our YouTube channel so you'll be automatically notified when we upload more quick video tips for you. Take care and good investing.
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