Walk me through a short sale?

Question

I understand the overall concept, but can some of you that have more experience give me some advice / guidance on what to do during this process.

I have my authorization from the owners.
I faxed it over.
The property has been sitting vacant, filled with mold and needs gutted. Loan balance is around 15k  ARV 110k  Repairs 50k

How do I negotiate with the bank?
What should i NOT do?

Thanks

Justin S. · Answer

Terry-
                    
                    How much to bring it current?  Or how long to foreclose?  You could sub2 it, save yourself some transaction fee's, closing costs, etc and do it that way.
                    
                    But to answer your original question:
                    
                    1.  First, establish that the homeowner is in a hardship situation.
                    
                    2.  Gather the following documents from the homeowner:  Last two years tax returns, last two paystubs (or proof and loss statements if unemployed, last two months bank statements, income/expense report, and a handwritten hardship letter.
                    
                    3.  Put the property under contract and create a preliminary hud-1.  Submit a authorization to release.
                    
                    4.  Submit your offer at 50% of the price you'll pay for it.
                    
                    5.  When they counter you, submit your repairs estimates, photos, sex offenders, etc.

6.  Call religiously every week for the next 3 months and hope they respond to you via email or phone calls.

7.  When they accept, close the puppy out.
                    
Do this for all mortgage on the prop.  Good luck.

Vikram C. · Answer

Why is a short-sale ridiculous?  Just because he can make money buying it for 15K does not mean that he should not try to get it for less.

Steve Babiak · Answer

Just tossing my $0.02 worth in here.

It will make money even if it is not shorted by the lender.  The OP has never done a short sale.  Put those two together and this is a good one to learn how to do a short sale.  Can't really lose either way, and there is something monetary (and educational) to gain by shorting.  There is time to lose by waiting out the short sale process though.

Justin S. · Answer

Is 15K a typo?

G. F. · Answer

If ARV is 115k, it needs 50k in work and has a 15k balance, my guess is the lender will gladly foreclosure and sell it at the foreclosure sale. Factoring in foreclosure cost, this thing will probably foreclosure for under 65% of ARV. I'd buy it.

Terry Royce · Answer

Well if you get "retail" contractors to fix it it would prob come in at 70-80k in repairs. Of course I have investor friendly contractors that can do it for less.

The roof on the entire property has failed, there is mold growing on all the drywall, and literally a 5x7 bed of moss in the living room.

someone abandoned a car in the back of the rowhouse as well.  It is plagued with problems including the shell that neighbors it.

If the bank takes it back, and tries to sell it they will never recoup their costs, and take a bigger loss.

I have spoken with several investors and they say this is a great candidate for a short sale.

Herm M. · Answer

Can someone please tell Terry how ridiculous it would be for him to buy this as a short-sale, if he's going to make 30k in profits regardless...

Herm M. · Answer

You're not making sense at all.

If the loan balance is 15k, then this is not a short sale.

If the ARV is 115k, and the repairs are 50k, that puts the current value at 65k.

If the property is THAT bad, then let's cut that 65k in half, and say it's worth 32.5k.

That STILL leaves the LTV at under 50%.

I don't think you understand what a short sale is.

Herm M. · Answer

Actually, after reading that again:

You say shells go for 8-13k in that area.

So 50k in repairs will bring the value up to 115k?

I don't feel like 115k is correct, but let's say it is:

Why would you waste MONTHS trying to negotiate a short payoff if it's only going to bring you 5k-7k in extra profit...?

Why don't you just payoff the loan of 15k and spend the 50k to repair it. So the property cost you 65k, let's say 70k.

Then sell it for 100k and make yourself 30k.

Why waste months trying to get this property for 8k instead of 15k...?

I don't know what to say....something about these numbers just doesn't make any sense.

Terry Royce · Answer

Basically, after my authorization for release of information is received how do I present my case to the bank?

Walk me through a short sale?

Most Popular Reply