Short Sale Checklist For Investors
Here is a Short Sale Checklist for those who need the step by step blueprint of what to do next. This is assuming you’ve found a property that is a candidate for a short sale.
-
1) Meet with Homeowner and Determine Value of Property – make sure they understand what you are doing and willing to cooperate with you during the whole process. It can take months before a short sale is approved and the homeowners need to cooperate the whole way through.
2) Know your Exit Strategy – do you plan to keep the property, rehab it or flip it to an end buyer. Depending on what exit strategy you use, the process will be a little different and financing plays a big part in knowing your exit strategy.
3) Sign Paperwork – Authorization Form, Disclosure Form, P&S Agreement & Escrow Letter
4) Fax Authorization Form to lender(s) and wait 24-48 hours – Get direct number and email of person handling account.
5) Request Short Sale Packet – It may be online so you can grab it on the lenders website if you don’t have a fax machine or they can email it you.
6) Check Title – Depending on your relationship with the title company, you may be able to do this for free. This is a preliminary title report.
7) Complete the Short Sale Packet – The lender has certain requirements that are needed and then you will send EVERYTHING back to lender. This is a critical piece to getting a short sale done quickly and efficiently. The majority of mistakes from rookie investors are made because they don’t send the lender all the documents they require. If there are certain documents that cannot be provided, it’s important to send an explanation of why you can’t provide such document. You can also include supporting documents if it helps to build your case.
8) Start looking for end buyer – put a for sale sign in the yard if the home is in a good location with lots of traffic.
9) Follow up – with bank (daily/weekly), let them know they are to contact you and don’t give up.
10) Meet the appraiser for the BPO, show up with supporting documents – This is another critical piece. It’s so important to meet the appraiser at the home. Make sure you point out all the flaws. You want the BPO to come in as low as possible so you can sell the property (if that’s your exit strategy) to your end buyer.
11) Find an end buyer – Cash buyer is always the best. There are resources out there that provide lists of cash buyers.
12) Secure Funding – Transactional funding is a great way to use someone else’s money that is not dependent on credit or income. It is only used to flip houses and it’s extremely cheap to use. For rehabs, you’ll need private or hard money.
13) Receive acceptance/payoff letter from lender(s), schedule closings – usually within 30 days
14) Close A-B transaction
15) Close B-C transaction (for quick flip)
16) Deposit money in bank account
17) Do it again!
There you have it. A complete short sale checklist of the things you’ll need to do in order to complete a successful short sale. The process does take time, so don’t give up because the rewards can be phenomenal.
Have been looking at a house for awhile, the house is likely headed to foreclosure, I am 90% sure an NOD has been received by homeowners. I want to buy the house for my family, not flip it or anything.
House is listed for 680k, I originally made offer of 610k. 4 months later, I have no answer, no yes, no no, no counter.
I began to wonder why and all I can guess is that broker is negotiating with bank on a short sale and holding my offer in back pocket. Whenever I call, I get a different excuse why no answer on my offer. (I pulled my offer last week)
That pisses me off, can he do that? He is not presenting best offer to bank, I am sure (not 100% positive) that he has a deal with homeowner that he will kick them back some cash if he can buy house and make commission them immediately flip it to me for a profit also.
I want to negotiate with banks on the short sale myself, I emailed owner and they are in denial and told me to speak to agent, probably not a chance of them signing authorization to release info to me, unless of course said broker advises them to. If that happened I would try and get a signed contract with homeowner.
Here’s some info.
566,000 first, payoff is now 604,000 on it. (It is with Columbia)
106,000 second, payoff is around 114,000 now.
House listed at 680,000 which makes NO SENSE as 680,000 doesn’t satisfy mortgages with accrued interest and missed payments.
They paid 707,000 for house in October of 2005. House is vacant and in good shape, homeowners moved across the country.
Work I would need and want to do would cost me $50,000.
House would probably appraise for between $625,000 and $725,000 now. Close to $775,000 when cleaned up and work I want to do completed. This is in suffolk county NY.
I know I just rambled, but I will summarize all questions here, some will be dumb, but all help is appreciated.
1) If I am allowed to negotiate short sale with bank, at what price should I try and get homeowner to sign a contract for.
2)I think I am responsible for all liens in a short sale, is that correct>
3)Can broker do what he is doing in this situation>
4) When negotiating short sale, what will be the starting point with the first mortgage bank, the 566,000 original loan, or the 604,000 payoff number.
5)If homeowners are filing for bankruptcy, what impact will that have>
6)Do I obtain deed, and if so, how>
7)Best place to find all current liens>
Thank you. Thank you. Thank you.
Robert
Robert,
It is hard to say what is happening. If the agent has a contract with the homeowner, then yes, he can do this. It sounds like there is something going on between the two. The problem you have is that the homeowner is the one who controls the deal. If he is on the realtors side, there is nothing you can do – except wait for the auction. The only way to do a short sale is with the homeowners cooperation.
1) If I am allowed to negotiate short sale with bank, at what price should I try and get homeowner to sign a contract for.
You give the homeowner a full price offer contingent upon short sales being accepted- then send the bank your discounted offer. We always start out 65% – 70% LTV.
2)I think I am responsible for all liens in a short sale, is that correct? Yes
3)Can broker do what he is doing in this situation? It depends. If he knows what he is doing, yes.
4) When negotiating short sale, what will be the starting point with the first mortgage bank, the 566,000 original loan, or the 604,000 payoff number? 566K
5)If homeowners are filing for bankruptcy, what impact will that have? It will stop the auction for a few weeks.
6)Do I obtain deed, and if so, how? Get the homeowner to deed it over to you. If they won’t do it, then obviously it’s not in your best interest to pursue this deal. Find another one.
7)Best place to find all current liens? Run a title report.
You need to purchase our home study course. It will answer all these questions and tell you how to do them in detail. The course will help you tons especially if you ever plan on doing a short sale.
https://www.foreclosureuniversity.com/products/
Thanks for the answers.
When you say sign a contract at full offer price, does that mean the price it is listed or the price you think bank will accept.
I don’t quite understand signing a contract with homeowner for $675,000 then getting it for $580,000 from the bank. What happens then?
This is for a house I plan on moving into, but if I go through the process and am successful, I will absolutely purchase your course and do it on the side.
You’re doing this backwards… You won’t need the course anymore if you are successful… Just saying…
Most homeowners want to know they are going to be taken care of and loans will be paid off. They want closure. So by signing an agreement with them that you are going to pay them full price or the amount that is owed, this is giving them closure that you are going to pay off the loans if short sales are accepted. (You can obviously skip this step if they homeowners understand you’re planning on paying less than what is owed, but will pay off the loan amounts.) Then you have them sign another P&S agreement with the discounted offer that gets sent to the bank. If the bank accepts your discounted offer, then you pay that amount which satisfies the existing loans and everyone is happy. If they don’t accept your offer, then you tell the homeowner your offer was not accepted and you cannot help them save their home. So make your P&S agreement to the homeowner is contingent upon short sales being accepted.