The fact that foreclosures are at a 52 year high is well known now but what is not well known is that this has thrown up never before opportunities for profiting from real estate. It is also a fact that most people shy away from properties facing foreclosure because the owners of these properties have borrowed to the hilt. Actually most of these real estate property owners owe more than they own! They have used up all equity in the property and are facing huge loans. This scenario is enough to scare away most people who may be interested in buying or investing in such properties. It is because these people don’t know about short sale, from which they could profit immensely.
The concept of short sale is actually very easy to understand. All you have to do is to convince the bank to sell you the property at a huge discount. This way you will be able to purchase properties at unbelievably low prices. If you are a real estate investor interested in investing in low priced properties and making huge profits when the market turns, short sale of foreclosure properties may be just for you. Also this is the best way to buy your dream house cheap. However, if you wish to find really ‘great deals’ you have to go out and look for them.
Many people however, wait until they receive their list of foreclosure properties from a subscription service they have joined. This is a big mistake because many other subscribers will also have received the same list. Also most people tend to write to the home owner making an offer sometime after receiving the list. By that time the homeowner facing foreclosure he/she will most certainly be receiving tons of letters from credit repair agencies, foreclosure scam artists, attorneys, other list subscribers, etc. Most of these letters will end up in the trash. It would be more fruitful to visit the owners personally and you will have an advantage if you do so.
The key to finding good foreclosure property deals, is to act quickly and write or contact the owner the same day that the notice appears in the local newspaper or at the courthouse. This requires a great amount of discipline, because any delay will work to your disadvantage. If you are writing, your letters must go out on the same day. The other good sources of foreclosure information are your local title companies and bankruptcy attorneys. When you approach the homeowner facing a foreclosure you should be looked upon as a ‘rescuer’ and not a ‘poacher’. Even though the owner may have run out of options, you need their cooperation to benefit from the process.
Once you have the homeowner on your side you should obtain a signed ‘Authorization to Release’ that grants you permission to contact the foreclosing attorneys and lenders, a sales contract with the sale price left blank as this will depend on the negotiations with the lender, a financial statement showing that the homeowner can no longer afford to pay mortgage and lastly a hardship letter explaining the details of the owner’s difficulties. Once you have these, you can proceed to negotiate with the lender, bank or mortgage company, as may be the case. In most cases if you have been prompt, homeowners will cooperate because they will be anxious to avoid the credit penalties and short sales are not reported to the Credit Rating Agencies. You must convince the homeowner of the benefits of going for a short sale and that once the deal is through they can get on with their lives anew, free from the encumbrances that come with foreclosure. Do your homework well because the homeowners are more interested in knowing how they will benefit from a short sale rather than how you will. It is a matter of winning their trust.
The next step is to approach the bank that owns the mortgage. It is important to understand that the banks themselves try to avoid foreclosures because the process of repossessing and disposing off such properties can be very expensive and time taking. In the meantime the bank does not earn any money. Banks are not in the business of selling real estate and hence they will agree to a short sale even at a substantial loss. Once you are ready with the requisite documents you should approach the loss mitigation department of the bank with your offer. This is the department that handles properties in foreclosure. Tell the officer handling the account that you are trying to help their client to avoid foreclosure and tell them the amount that you are ready to offer. Of course this should be reasonable, but quite low. Justify your offer citing the condition of the property and real estate market conditions.
You must be polite but firm when the negotiation starts. Most of the larger banks will agree to a reasonable short sale because of the large amount of foreclosures coming up. For most banks short sales are are a necessary evil of the lending process and they are usually prepared for it. Each bank has its own approach towards short sales. Try to develop a good rapport with the loan mitigation department. Large banks like Wells Fargo and Fairbanks Capital handle many short sales. Keep an eye on market trends as this will help you while negotiating. In most cases short sales turn out to be win-win for everyone. If you are diligent enough and treat the homeowner and lender with respect you can work out a great short sale deal that will help you get a property at a huge discount.