Methods for Buying a Short Sale Investment
When you’re in the market for a home, you may come across many short sale opportunities. A short sale is when the house goes into foreclosure with virtually no equity, which often means the owner owes more than the property is worth. In many cases, the banks that hold these properties are willing to simply accept less than the full amount in an effort to get out from under the house quickly.
It’s sad to assume that someone who has spent so much money and time investing in their residence will eventually have to sell it because they can’t make the payments, and the property will be valued at less than what they paid for it, but this will also be helpful to you as a buyer. . The real problem here is that the process of acquiring these properties is often a daunting task.
One of the many problems is finding a bank officer who can actually settle for a reduced offer. The actual division of these short sales is called the “loss mitigation division,” although all banking and lending institutions may call it by entirely different names. You must be patient and wait to be put on hold or transferred from one department to another until you find the right person.
Now, from the lender’s perspective, a short sale can eliminate many of the problems associated with the foreclosure method. These can include charges from legal professionals, bankruptcies delays, problems getting the owner out, as well as property damage. These are just some of the costs and issues associated with the process. The concept of a short sale on your behalf as an investor is always trying to convince the loan company that selling the house at a reduced price is a much wiser choice than having to wait and pay all these extra prices on top of the individual value of the property.
As a person looking to spend funds on short sale homes, you will have a responsibility to make some sort of deal with the original owner and then bring this information to the lender. The lender will also want to know exactly how much the house is worth and will hire a real estate agent to find this information. This is known as BPO, or Brokers Opinion of Value. You can also hire your own appraiser, or provide information on the values of different properties in the area. Also, at this point, he should present as much negative information as possible, in an effort to persuade the lender that it is in their best interest to let the property sell for a reduced amount. These can include damage to the house, what the locality is like, and the poor financial situation of the locality. He must get bids from contractors for all repairs, and since he wants to express the prices involved, he wants to show them the highest bids.
The next step in the process is when the bank verifies all background information on the current borrower. The borrower has to prove to the lending institution that he cannot afford to make his payments. This can come from notices that they have been laid off or laid off, with no new opportunities available to them. In addition, they can send a “hardship” letter, where they give an account of what happened in their life that resulted in their inability to pay. This too is often a long progression, with a lot of data being exchanged between the lender and the original owner.
The lender will also need to see the contract of sale between you and the original borrower. That’s so the lender can make sure the contract only addresses the amount of the sale and that the owner doesn’t walk away with any funds. Because of this, the investor usually takes full responsibility for the transaction and the net money only covers the lender’s expenses. In addition, you may need to provide a HUD 1 statement, which can be difficult to obtain because escrow corporations do not like to provide these statements in advance.
Now, while the process can be considerably lengthy, you could come out ahead in the long run, paying less than the house is actually worth, saving you a lot of cash.
