Short Sale acquisition - positioning, strategy, information.

[Roy N.]

All,

Short sales are well known and understood by many investors on BP.  They typically do not occur here in Canada, so my partner and I have no real experience with short sales - and to be truthful, while I have a theoretical understanding of a short sale, I've not paid the concept a lot of attention in the past for that reason.

There is a property we've been following for some time.  It has now accumulated 2-yrs (almost 3) years of property tax arrears.  It has been sitting vacant since April of this year and I learned today it will be going to a short sale (but hasn't yet).

We have yet to put boots on the ground to assess the property in person, but under the assumption it checks out satisfactory:

• would it be best to pitch an offer on the property before the short sale or wait until it is listed as a short sale?
• how would one find out the mortgage balance owing on the property?  {I tried asking the broker, but that went no where}?
• how would I find a list of any other leans on the property?
• it it possible to negotiate down the balance owing the lender and/or purchase the note at a discount to obtain control of the property?   If we were to do this, is it possible to execute a transfer of title/deed from the owner to avoid a foreclosure?

I feel like a complete rookie with all these questions, but this is new territory for us.

[Kathryn C.]

Hi Roy,

I am assuming in my answers that things operate the same there as they do here which for the most part is a pretty safe bet due to the way mortgages work.  

Q: Would it be best to pitch an offer on the property before the short sale or wait until it is listed as a short sale? 

A: Really depends on your local market. If properties are selling quickly then do it before. If they usually take long time then you may be able to wait for a price reduction. Best thing you can do is get in with the broker.  Since it is a short-sale the owner has little incentive to choose one offer over another because the bank will generally set the minimum acceptable price after they do their appraisals, etc... You just need to convince the agent you're the buyer they want to sell to.   

Q: How would one find out the mortgage balance owing on the property? {I tried asking the broker, but that went no where}?

A: The only way you can get this is from the owner or if they don't know get an authorization to release information form executed by him to you can speak to the bank about it. Really since it is a short sale I'd be more concerned with what the property is worth because, in general, you will only get about an average of a 20%+/- discount off of that amount statistically.

Q; How would I find a list of any other leans on the property?

A: Title search.. But wait until after the short-sale has been approved so you do not waste money if it doesn't work out.  In fact, start your due diligence upon receipt of the short-sale approval letter if you can negotiate it that way.  You want to at a minimum make sure the house is substantially in the same condition as when you went in contract. This will also allow you to preform all your home inspections etc.. after approval.

Q: Is it possible to negotiate down the balance owing the lender and/or purchase the note at a discount to obtain control of the property? If we were to do this, is it possible to execute a transfer of title/deed from the owner to avoid a foreclosure?

A: Yes this is possible but depends on the lender and many more things and I am not sure you could get the note at a 20% discount but it is all based on the property.  I am not a note expert so I will leave this one to someone else who is but I know it can be done. And to answer the second part of this question you can offer cash-for-keys or they may walk to avoid foreclosure... 

Good luck!