Short Sales

The bank will give you a deadline in which it must receive the short sale payoff. Arrange the closing to take place prior to the stated date. Always use your title company or attorney whenever possible.

* It's a bad idea to wait until your last day to close in case something happens and you need a few more days.

Should you need a few extra days, have the title company/attorney call the bank and ask for the extension. Typically, if the title company/attorney asks for it, it won't cost you anything. If you ask for it, you'll have to pay the daily per diem, which could run into the thousands.

* When the bank agrees to accept your offer, ask what their "per diem" rate is just in case you can't close on time.

Be sure all the necessary people are present at the closing and that the money is there. Once the property is closed, you can rehab and retail it, keep it for long-term rental, or do what we do %u2026 wholesale it quickly.

* You can make most of your money by combining two techniques: Short sale the deal and then wholesale it to a rehabber.

Please note that if you want to wholesale your short sale property at closing, you must coordinate a "double or simultaneous closing" with your closing agent and buyer.

This is perfectly legal and requires no cash or loan from you.

In a nutshell, the rehabber comes to the closing with cash, you buy the property from the homeowner and immediately sell it to the rehabber. The rehabbers funds pay for both transactions. When interviewing title companies or attorneys ask them if they do double closings. If they say no, they are not investor friendly so keep looking.

One of the easiest ways to find an investor friendly title company/attorney is to attend your local REIA group. These type of people are members and are actively seeking your business.

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It is important to realize that when submitting a short sale package, you are building a case. The better the case, the deeper your discount. Think of yourself as an attorney preparing for a court hearing. If the attorney shows up unprepared, the case will be lost.

Before you submit your first short sale package, let's look at an overview of what you are about to do:

You are going to submit a total of three offers. Each offer will have a different focus and will be higher than the previous.

The first offer will focus on the homeowners, their distress, the distress of the property, and the overall hardship of the situation. This will be your initial offer and your lowest.

The second offer will focus on the distress of the neighborhood, crime, job losses, natural disasters, or whatever is happening in the area. In this offer, you'll raise your initial offer to get closer to the number the bank countered at.

The third offer is your highest and final offer. In this offer you will focus on the financial loss to the bank by denying your short sale. You'll break down, step-by-step, how much the bank will actually lose, how long this will take, and you'll send a copy to the loss mitigation reps boss.

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A short sale can be done anytime during the default prior to the lender taking the property via the sheriff's sale, courthouse steps, trustee sale, or foreclosure sale - it is called different names in different areas. we'll use the term "sheriff's sale" to keep it simple.

• Several states have what is called a "redemption period" after the foreclosure sale.


• Most banks will still negotiate a short sale during the redemption period.

When a property has a redemption period and has "gone back" to the bank at the sheriff's sale, contact the homeowners and speak with them about working out a short sale with their bank. Remember, technically the property still belongs to the homeowners until the last day of redemption.

It is important for you to understand that in a redemption period homeowners cannot make up back payments. Their only option is to pay off the loan completely or the bank will take the property. Selling it to you is considered paying it off.

Some areas have very long redemption periods (up to two years), which make it almost impossible for investors to bid on property at the sheriff's sale itself.

To determine if you are in a redemption state, simply call your county courthouse and ask for the foreclosure department. The clerks who answer the phone are usually very cooperative in answering questions and can tell you how long your redemption period is, if you even have one.

Is there a benefit to living in a redemption state? Absolutely not. Where ever you live, is great!

Banks do short sales for many reasons - too many properties in default, quarterly reports due, year-end reports due, you built a good case, they are worried that you might file bankruptcy and stall the process, you have several properties and the bank wants to cut its losses, and many more reasons.

What the bank requires is lots of real information to prove your case. We then gather as much information as we possibly can. These items are not required by the bank, but they will help you get a yes. The bank doesn't usually have a specific requirement other than you prove there is an actual hardship. It is very easy to prove hardship because it is real.

• A cover letter stating why we are asking for the short sale - we would use different cover letters here - one from a homeowners point of view and a different one from an investors point of view.


• A hardship letter describing your situation with as much detail as possible and lots of proof - investors and homeowners alike need to do this step.


• Low comparable sales or other foreclosures or distressed properties in your area.


• Pictures of any disrepair your property might have.


• A net sheet showing the bank what it will make, after expenses, if it accepts the short sale. The title company doing the closing will do this for you.


• A sales contract showing that you have a buyer - if you don't have a buyer yet, now is a good time to start looking for one.


• Some statics showing how many properties are on the market right now compared to last year.


• Have a real estate agent prepare a list of price drops in the last three months.


• A list of the registered sex offenders - this is not necessary, but has a great shock value when trying to negotiate with an out of state bank rep.


• Pictures of boarded up houses in the area.


• Pictures of new construction in the area.


• Crime reports in the county and neighborhood.


• Tax returns showing your loss of income.


• Copies of medical bills.


• Copies of any and all late bills and payments - phone, electric, credit cards, water, car payments, insurance, or anything that you can get your hands on.


• Paycheck stubs or lack thereof.


• Bank statements showing that you have no money.


• If you have any accounts that got closed, send that as well.


• If you have pawned anything to pay for bills or groceries, show the stub for that.


• If you have filed bankruptcy - show the papers.


• If you are going through a divorce, show the lawyer papers and fees.


• If you are involved in a probate situation, show whatever paperwork you have.


• Anything else you can think of that will show the bank all the reasons it should accept a discount and let the property go for less so that you can get a fresh start in life.

The more information you can provide, the more hardship you can prove, and nicer you are to the bank rep, the better your chances will be to get a deeper discount. The deeper the discount, the easier it will be for you to sell the property and get a fresh start.

There is no specific number of payments that must be delinquent. Even one
payment is enough at times. Often homeowners will call you when they are not yet
in default, but cannot make any more payments. In this case, contact the bank,
let them know that the homeowners will not be making anymore payments, and open
negotiations for a short sale before the payments are even late.

Reason's why banks short sale:

• The mortgage is in arrears or foreclosure.


• The property is in poor condition.


• The homeowners have hardships and cannot make the payments anymore.


• New homes in the area are being chosen over existing homes.


• The area or neighborhood has depreciated in value.


• The bank's shareholders are concerned when there are too many defaulted
  loans on the books.

Banks have reports due at the end of each quarter. They are more inclined to accept short sales at the end of a quarter to "clean up their books." The absolute best time to get short sales accepted quickly is the last quarter of the year. I have called banks on December 10th and been told the short sale would be accepted if I'd close by the end of the month! If you are reading this program in January, don't let that piece of information discourage you. Banks short sale all year, they short sale faster in the last quarter.

• Some banks are required to prove a loss each month%u2026 let's help them out.


• Some banks are required to keep a cash reserve of up to six times the
  retail value for each REO.

It breaks down like this: The bank has a $200,000 property and is required to keep six times that amount as a cash reserve. This means the bank is sitting on $1,200,000 in unlendable money. Imagine if the bank has 2,000 foreclosures across the nation! The homeowners could drag the foreclosure on for two years utilizing the bankruptcy system. Would it be better for the bank to sit on $1,200,000 for two years or accept a short sale today? The answer is obvious. The short sale is a relief.

• The area is crime ridden.


• The area is riddled with foreclosures proving a decline in the area.


• Many people don't realize that banks wholesale money. Banks borrow money
  from larger banks and lend it to you. These banks must show reports in order
  to borrow this money.

Think of it like a credit report: Every defaulted loan is like a black mark on the credit report. The more foreclosures a bank is carrying, the riskier it appears. If you were a larger bank lending to a smaller bank, would you lend your money to the bank with more or less defaulted loans? Exactly %u2026 less! The bank needs to borrow this money as inexpensively as possible so that it can make money lending it to you.

As you can see, a short sale is often a welcome answer to a big problem. If the bank takes the short sale it can write the loss off and clean up the books before any reports are due.

I submitted a short sale and the bank said no, so what is my next step? Great question.

First of all, it's important to realize that you're only going to get 70% of your short sales accepted. That means that 30% of your deals will fall apart. If you submit ten short sales, you will close seven. Knowing your numbers going in will prepare you mentally when the bank does say no. Don't take it personally; remember, it's just a numbers game.

The bank may say no for several reasons: high BPO, an inexperienced loss mitigation rep, or possibly a foreclosure sale date that is just days away. One of the most common reasons the bank will say no is because the BPO came in too high and the bank feels the property is worth more than it actually is.

What is a BPO? It means "Broker's Price Opinion." When a short sale package is submitted, the bank will send a real estate agent or Broker to the property to judge its value. To insure a low BPO, we like to meet the agent at the property. We take the liberty of giving the agent our complete short sale package. We run comps for the agent, give copies of our pictures, our list of repairs, and walk the agent through the house room-by-room. We want to make the homeowner come to life by showing the agent the property, family pictures, and explain how a low BPO will insure a successful short sale thus giving the homeowner a chance to start over.

Usually, agents and appraisers are asked to value properties at the high end of the scale. Most homeowners trying to purchase a home need top value in order to qualify for the loan. Therefore, it is unusual to ask for low numbers. This is why we meet the agent at the property: to plead our case and ask for the lowest BPO possible.

Assuming the bank said no because of the BPO, our first step is to challenge it and request a second opinion. Our conversation with the loss mitigation rep goes something like this: "My friend is a real estate agent. She ran comps and says the person who did your BPO is crazy. My friend also says the numbers are way too high. She works this neighborhood and is certain about the property values. Does your agent specifically work this neighborhood? If not, he might be steering you wrong. It would be a shame for your bank to take the property at the sheriff's sale, only to lose money. Why don't we do the right thing and schedule a second BPO. I'm sure if you choose someone who actually works this neighborhood, that person will agree with me that the property is only worth $___________. Your bank is not in the business of losing money, is it? I didn't think so. When is the best time to schedule another BPO, today or tomorrow at 5:00?"

The purpose of your conversation is to make the bank question the first BPO. Banks are not in the business of losing money. An incorrect BPO will come back later to haunt the loss mitigation rep.

Once we schedule a second BPO, we do our magic again. We meet the new agent at the property and plead our case. We had a recent deal where the first BPO came in at $295,000 and the second one came in at $215,000. The property was realistically worth $450,000 with a $350,000 balance. We originally offered $199,000. The bank was firm at $300,000. With an $80,000 difference in the BPO's, the bank lowered its number from $300,000 to $250,000 making the deal work. It was a sweet deal for us. The key was the second BPO.

If, after a second BPO, we still can't get the bank to see it our way, we pass and move on to the next deal. Your new four letter word is: NEXT. If one deal doesn't work out, move on. Remember, you will lose 30% of your short sales. This is why we advise our students to work at least ten short sales at the same time. Then when one does fall apart, you'll have no problem saying %u2026.NEXT!

In a nutshell, a "short sale" is negotiating with a mortgage holder to accept less than what is owed as payment in full.

A short sale is my favorite strategy when I have a distressed homeowner who owes the bank close to or more than what the property is worth.

Here's how it looks: The homeowners owe $200,000 to their first mortgage holder and the payments are in arrears. Their property is worth $200,000 in retail condition. With the proper negotiating strategies, you get the bank to accept $100,000 as payment in full. Therefore, purchasing a $200,000 retail property for 50% of its value. Sweet, huh?

With proper negotiations you can take deals that most investors pass on and turn them into amazing deals. There is a lot of controversy surrounding short sales. Many investors state that banks don't do them or that you can't get good deals any more.

The key to successful short sales is to build a great case and a replicable business. When you get a short sale accepted, do something nice for the bank representative. Take the time to build relationships within the banking industry. Building these relationships will insure your success. At some point, you'll be able to call the reps and simply make your offers verbally. Once the offers are accepted, the rep will tell you what to send.

What is all the fuss about short sales? Everywhere you turn, there is another seminar, another guru, or another boot camp all teaching the same thing. Can so many people be right? How many different ways can there be to do the same thing? Folks, believe it or not, there are not one hundred different ways to do short sales, there is only one. What you have is people trying to put a spin on it to seem original. My partner and I were the first to bring this topic to the forefront. It is very exciting for us to see how this incredible topic has exploded in the last few years. I am going to review the short sale concept and show you just how easy it actually is. My students and I have done hundreds of short sales. If you will do what we do, you can expect the same incredible success.

A short sale is simple: Through simple negotiations you get the bank to accept less than what is owed as payment in full on a property. For example, you find a homeowner with a property worth $100,000 that has a $100,000 mortgage balance. You work with the bank to negotiate a discount on the payoff. The bank agrees to accept $50,000 as payment in full and you have just completed your first short sale.

Is it really that simple? You bet! The key to successful short sales is to understand the mindset of the people involved and make the deal appealing to each person. There are basically three parties involved in a successful short sale: the homeowner who is interested in getting out of foreclosure, the bank who wants to get a bad debt off its books, and the rehabber who wants a great property to fix-up and sell retail. In each situation, we strive for a win/win outcome.

Let us start with the homeowners. Their motivation is obvious. They are behind in payments or already in foreclosure. Creditors, banks, attorneys, mortgage broker's and more everyday, are calling them. They just want to sleep at night and get out from under the stress of this situation. Their downfall: they have no equity. They have called every investor in town and have been turned down by everyone because they have no equity. They call you and you say, "No equity? No problem!" You explain the short sale concept, get the property under contract, and get busy.

"Why would the bank accept less?" you ask, "The bank can just take the property back at the sheriff's sale and then retail it." Well, let me ask you this: do banks want to lend money or own homes? Correct, lend money. Is a foreclosure an asset or a liability? Right again, a liability. Folks, banks are in the business of wholesaling money. They borrow money from bigger banks and then lend it to you. They have to show their credit report, just like you do, to get a low interest rate on the money they are trying to borrow. If you were going to lend millions of dollars to a bank, would you lend your money to the banks with the low default rates or the banks with the high default rates? Right again, you would lend to the banks with the smallest number of defaulted or foreclosable loans. The banks motivation to accept a short sale is to clean up its books so that it can borrow more money, at a cheaper rate, and then lend it to you for more.

Were does the rehabber come into play? You have to have someone to sell your properties to once you negotiate a successful short sale. Rehabbers are the perfect outlet. Rehabbers like to purchase fixer-uppers at 65% of the retail value. In the case of the $100,000 property, a rehabber wants to buy it for no more than $65,000. In order for this to happen, you must get the bank to say yes to your offer.

So, how do you get the bank to say yes? You build a great case. Think of it like an attorney defending a case. The better case you build, the better your chances are to win. I send as much information as I can to the bank to show the bank why it should accept my low offer now instead of waiting out the foreclosure and bankruptcy process and getting the house later.

How do you build a good case? Send: a sales contract, signed by the homeowners, for the amount you want to offer the bank; an "authorization to release information" form; low comps; bad pictures; a detailed list of repairs; a hardship letter written by the homeowners - backed up with proof such as late notices, shut off notices, bank statements, job layoff papers, medical bills, tax returns, or whatever you can find; a crime report; a list of sex offenders in the area; articles from the newspaper that negatively reflect the area - job layoffs, crime, natural disasters, foreclosures up, bankruptcies up, and whatever you can find that is detrimental to the neighborhood; net sheet; and a cover letter from you stating why you couldn't possibly pay full price for the property.

Submit that information to the Loss Mitigation department of the bank and you are in business. The rep will negotiate with you and once you settle on a price, wholesale the property to the rehabber. You become the middleman and make the difference between what you negotiated with the bank and the price the rehabber is willing to pay.

Folks, short sales are that easy. There are millions of dollars being left on the table. Get busy and put some of it in your pocket. Good luck! For more information on short sales, please contact me at www.1234closures.com

When investors find out we specialize in short sales, they always have so many questions. Here are the answers to some of the most common. Hopefully, these answers will give you a better understanding of a short sale and how to do one.

WHY DO THE BANKS SHORT SALE?

*The mortgage is in arrears or foreclosure.
*The property is in poor condition.
*The homeowner has hardships and cannot afford the payments.
*New homes in the area are being chosen over existing homes.
*The area or neighborhood has depreciated in value.
*The bank's shareholders are concerned when there are too many defaulting loans on the books.
*Some banks are required to prove a loss each month%u2026 let's help them out.
*Some banks are required to have an amount equal to or up to six times the retail value of each REO "on hand" - ouch, that hurts.
*An REO is a liability, not asset. Too many liabilities will cause any business to go under if not dealt with quickly.

CAN I SHORT SALE A NICE PROPERTY?

Absolutely! As you can see, banks short sale for many reasons other than the poor condition of the property.

WHAT STEPS DO I TAKE TO COMPLETE A SUCCESSFUL SHORT SALE?

1. Find a property owner in distress.
2. Put a deal together with the homeowner.
3. Have the homeowner sign an authorization to release form.
4. Fill out a sales contract for the amount you want to offer the bank and have the homeowner sign it.
5. Call the Loss Mitigation department at the bank.
6. Fax them your offer along with the following:
1. Your cover letter explaining why you can't offer full price.
2. The sales contract.
3. Justifying comps of the area.
4. Pictures, if you have them.
5. A net sheet or closing statement (a sheet that shows the bank exactly how much they will net after closing costs, taxes, etc. are paid).
6. A hardship letter from the homeowner that mentions the dreaded word%u2026. bankruptcy.
7. Estimated list and cost of repairs, using retail repair prices that the normal homeowner would pay for these items.

WHAT HAPPENS TO THE HOMEOWNERS CREDIT?

When you negotiate a successful short sale, keep in mind that the agreed upon price is payment in full. However, the homeowners may still owe the difference between the mortgage balance and the discounted amount via a "deficiency judgment." If granted, this judgment will affect the homeowners and their credit report just as any other judgment. You must get the bank to agree to accept "payment in full without pursuit of any deficiency judgment."

In addition, you need to explain to the homeowners that the discounted amount (the difference between the mortgage balance and the short sale) may be declared as income on their income tax return by means of a "1099." The homeowners can speak with their accountant for advice. Since the homeowners have been in such duress and probably haven't made much income, a 1099 may not adversely affect them.

We hope this sheds some light on short sales. As you know, nine out of ten deals have no equity. To be successful in this business, trends call for you to be a short sale expert.

Closing Arguments - When the bank says no, there is still work to do. I cover how to place your second and third offer, how to delay the foreclosure, how to give the homeowners money, bankruptcy, 1099 and deficiency judgments, when the 'first' makes the 'second' take zero, and so much more.
Building Your Case - Learn how to find deals, put together your packages with the banks, have the crucial conversation that will 'make or break' your deal, how to pin down loss mitigation, how to handle the banks inspection, getting the deed, and more.

Advanced Short Sales: The Case Studies & Key to your Sucess 1 & 2 - Dwan Bent-Twyford walks you through case study after case study, embedding new lessons in each and every one! See how others are closing deals for huge profits. 4 CD set with case studies and the bank information. Includes written material.

Advanced Concepts 6 pack CD - Dwan and Sharon give you the combination to success in this outstanding program that covers hot topics such as note buying, wrap-around mortgages, owner financing, forbearance agreements, subject-to's, and so much more! When the bank just won't budge on the short sale, open the vault to success with these award wining concepts that will add thousands to your bottom line. There are millions to be made on these little known concepts. 6 CD set.

Short Sale Workshop - This is a live three day class that Bill and Dwan teach. We cover many of the things covered in the telebootcamps, with a few exceptions. There will be a lot of role-playing. You get the chance to put actual deals together, practice your scripts and objections, and more. You will overcome all of your fears about dealing with banks. This class is a lot of fun and very fast paced. Get started with the Short Sale Workshop today!

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