What's the benefits of Short Sales?

Question

Hi Everyone,

I'm new to real estate, and still looking for my first deal. Originally I was thinking about doing short sales, but after hearing about the process, I thought about just sticking to fixer uppers starting off.

I've read about the process it takes to get a short sale to work, but I don't know of the benefits of doing short sales. What is it about this type of property investment that would make it worthwhile?

Sheldon

Brian Gibbons · Answer

Bank of America is not an easy bank and neither is Chase

Find a short sale realtor that knows Bank of America and have them earn their commission

Wayne Brooks · Answer

@Rachel Trimble No need to keep posting the same post 4-5 times.

Rachel Trimble · Answer

@Brian Gibbons you sound like you know what you're doing.

Can you help me out with the below scenario? I keep hearing that NET is the most important to a bank, but I can't imagine how they could possibly net. It's also a strange scenario as the bank didn't initiate the short sale or foreclosure for that matter. The owner hasn't paid mortgage in about 5 years, after vacating the property. It's destroyed.  Do you have any tips at how to go about this? I found the owner and we called the bank together to talk through our options. I'm now authorized on his account and have been the one communicating with Citi Bank.  Any tips on how to get ahead of the curve here? And influence the path this takes? I am lost...

Scenario below:

I met someone who has abandoned his house and mortgage. I have no idea how this slipped through the cracks and didn't foreclose...but it didn't. I've been dealing with Citi Bank, telling them the owner wants to give me the house, as he wants nothing to do with it. He owes $41k in remaining principal due and a total of $89,908 for all the past interest, unpaid taxes, etc. due. The house is all but falling over. It's not work even $25k. The bank got me started on paperwork to move through the process as a short sale. I wish we could settle, but this is what they say must happen. They are getting a BPO (I'll be meeting the BPOA at property to escort them into the house through the only window that isn't boarded up) and assigning the short sale to an agent. I plan on making the work easy for the BPOA by running all the comps, taking pictures, etc. basically doing the work for them. Citi wants me to work with them to help the seller fill out his paperwork, etc. One of the forms is a "Uniform Borrower Assistance Form". To fill this out in my advantage, what should I select for the "I want to" line item? The options are: a. Keep the property (no, owner wants nothing to do w/ it),

b. Vacate the property (owner has already done this, it's been abandoned for 5 + years)

c. Sell the property (he wants to walk away. so what's the difference between vacate and sell?)

d. Undecided

Owner just wants to get his name unattached from this house and move on, and I am trying to make it as painless as possible for him. From a bank's perspective, what would be the best option here? Remember, he owes $41k principal, $89k total balance, and the property is worth less than $35k.

The deal is basically between me an the bank, but I am assisting the homeowner.with the paperwork. Am I making any sense here? Is there high risk that this won't be approved for a short sale because of the condition of the house? I just don't understand why the bank would take it to foreclosure if I'm willing to make a reasonable offer at $30k with a remaining principal owed of $41k. After reading some notes here on BP I'm starting to wonder if this is going to quickly turn onto a foreclosure. Are there reasons why banks would go for foreclosure over short sale in cases like this? I just don't want to continue spending so much time here, only for Citi to take it to auction.

Another question on the Hardship Affidavit-is there one hardship that is the best to check, making this any easier? I'm leaning towards the "reduction in income" selection as it's true and it doesn't require hardship documentation....

As you can see- I need all the help I can get here... Thank you so much in advance to anyone who is willing to reply. :)

Sheldon Alex · Answer

I see! So overall your chance of getting the property at a discount is at the mercy of the bank. That's why short sales will never be my primary focus, though I won't rule it out. But I guess it's easier for banks to just foreclose properties to save the headache of the entire short sale process.

Becca Summers · Answer

A short sell, the bank is getting shorted on what is owed the bank. It benefits the seller so they don't have a foreclosure on their credit.

Banks have different rules, one I had the bank would only sell it for 95% of appraised value. You save money the worse the condition is on the home.

I've noticed short sells in my market aren't getting approved as often and banks are just forclosing.

Brian Gibbons · Answer

I train on pretty houses with little equity with

subject to existing financing,

lease options,

JVs w sellers

and

wraparound mortgages

I hate short sales personally

Sheldon Alex · Answer

Sounds good. Though it definitely won't be the only type of property investment I'll do, I'll attempt at doing one down the road. Thanks for the info @Brian Gibbons

Brian Gibbons · Answer

@Sheldon Alex

You buy it then

You can mortgage it, rent it RTO it, sell it, exchange it

Sheldon Alex · Answer

That's interesting to know @Brian Gibbons. So that can potentially give someone who buys a short sale property some level of flexibility on what they want to do with it after approved then correct?