November 29, 2009 by admin
Filed under Real estate Investing
Ever wonder what makes a property a good short sale candidate? If you are new at this, your answer would probably be short and sweet. “Why, as long as they are behind on payments and upside down on the value, they are a good short sale candidate, “you’d probably say.
If you’re more experienced you may say something along the lines of, “upside down and behind on payments definitely makes them a candidate….. for foreclosure, but let’s take a look see at the circumstances surrounding this property before we all go jumping off a short sale cliff!”
The fact of the matter is that there are short sale opportunities EVERYWHERE, but if you go after every one you are going to waste a lot of time chasing your tail. Let me tell you from experience that it sucks real bad to work a short sale for six months only to get nothing out of it. Its going to happen on occasion, but let’s talk about some things you can do to eliminate it from your business for the most part.
DISCLAIMER: If you are new, go out to all of your appointments and see what you can make happen. Its important to build your skills and the best way to learn is to screw something up. If you have moved past the screw up stage, lets talk some turkey.
Banks want to spend basically no time reviewing all of your reasons that you think that they should eat $100,000.00 so you can make some cash. So make sure that there are some glaringly obvious characteristics going on in the properties that you do choose to work. Don’t have enough leads to be picky? Then reference the above disclaimer and get to work! Also, keep in mind that these are generalities to keep you from wasting your time. I’ve had some ridiculous deals put through (and denied) with no logic involved, but those are exceptions these days. At least absurd acceptances are pretty rare. I still see absurd rejections all of the time. Stop seeing rejections by making sure that you have the following:
COMPS: You are going to need some comps that are going to support the value that you want to pay for the property. If you can’t find any low comps, chances are you are going to get a high BPO unless you have defects with the property.
PROPERTY DEFECTS: These are your best friend in the short sale biz (except for the BPO agent when you go to meet him… Make ‘em feel special). Most banks are not spending the time or effort to fix a house before they try to sell it. They are much more willing to give a big discount on a defective house. This can be anything from being non-functional, like a bad layout, to a 3” carpet of mold in the house. Document all defects and submit a contractor’s bid with your short sale package. Check out the video out to the right for a great example. My apologies to the Blair Witch for stealing her video style!
LEGITIMATE HARDSHIP: On the one hand, the bank does not care about anything but the bottom line for them. On the other hand, they often seem to put credence in the actual hardship before they will begin to work your file. Truthfully, if you are behind on payments, you should be able to come up with a good hardship. Most people aren’t missing payments for the hell of it. However, you’d be surprised how many people there are that are looking to job the system. While you very well may be able to get a short sale done for a client who doesn’t have much of a hardship, you’d better have strong comps and property defects, or you’re probably wasting your time.
BEHIND ON PAYMENTS: Its no longer a must, but typically, a bank has little motivation to short a performing loan. Most of your short sales will be in pre-foreclosure or foreclosure status when you find them.
So there are a few things to look for in a property that you may short sale. Next week, we’ll go over a few things that you can do to make sure you run your end of the short sale correctly so you maximize your time.
