Short Sale Ins and Outs

Foreclosures
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Short Sale Ins and Outs

Matt DuSold
Lender · Phoenix, AZ · Member since 2008 · 351 posts · 40 votes

So I think I have some of the process down but feel lost still. It might be because I feel it should be more complicated than it is.

Get lead then work with the owner of the house. Get all the necessary paper work to make the process move forward. I pretty much know the paper work and its mapped out in “9 keys to short sale success†(I think). I know this sounds stupid but why do you negotiate a price with the homeowner I thought you only negotiated with then bank?

After all that, you get in contact with the bank and start the process with them. Make sure to give them low comps, and a long list of necessary repairs to “de-value†the house. I have seen in other posts you start your offer at somewhere around 50% FMV, is this correct? They will do their BPO and come up with their price and you try to negotiate as low as possible.

After that comes through you have X amount of days (is there a typical amount, like 30?) to find a buyer. You get with a title company, get transaction funding and get your cash buyer lined up and you finish the deal.

Is this it? Am I just making it harder than it is? How often are you able to get short sales under say 60-65 ARV (minus repairs) in order to make enough money off of them?

As you can see I have some spots I’m not too clear on. If you are interested in short sales in Arizona I would be more then willing to find a few deals for a fee and for you to teach me the process.

Thanks in advance!

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Justin S.
Residential Real Estate Agent · Chandler, AZ · Member since 2009 · 1k+ posts · 928 votes
16y

"It's not just sold it's DuSold!"

Hey Matt, long time since I've seen you post.

I have not done any shorts in a while, but when I was doing them I would offer roughly 50% of FMV. If the homeowner is negotiating with you on this, then they probably not motivated and they should stick with an agent.

For finding your buyers, lot of investors have the homeowners sign an addendum that states you can market the property to find an end buyer. Most do not have an issue with this because if you are not able to create a spread, you at least have a backup buyer waiting to purchase the property. You should be marketing for a buyer as soon as you are allowed.

Getting spreads is a lot harder now than it was a year ago, but I believe there are still a few still doing it. Uglier the house the better. If its a track home with lots of comps, it will be hard to get the spread you want and if your end buyer is not cash, it will be hard to find a lender to close within 24 hours.

And always always always disclose to both the homeowner and the bank your intentions. (i.e. you are an investor and you intend to make a profit)

Bottom-line, they are a lot harder than they used to be but people are still doing them.

Good luck and nice to see you back on BP.

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  • Justin S.
    Residential Real Estate Agent · Chandler, AZ · Member since 2009 · 1k+ posts · 928 votes
    16y

    "It's not just sold it's DuSold!"

    Hey Matt, long time since I've seen you post.

    I have not done any shorts in a while, but when I was doing them I would offer roughly 50% of FMV. If the homeowner is negotiating with you on this, then they probably not motivated and they should stick with an agent.

    For finding your buyers, lot of investors have the homeowners sign an addendum that states you can market the property to find an end buyer. Most do not have an issue with this because if you are not able to create a spread, you at least have a backup buyer waiting to purchase the property. You should be marketing for a buyer as soon as you are allowed.

    Getting spreads is a lot harder now than it was a year ago, but I believe there are still a few still doing it. Uglier the house the better. If its a track home with lots of comps, it will be hard to get the spread you want and if your end buyer is not cash, it will be hard to find a lender to close within 24 hours.

    And always always always disclose to both the homeowner and the bank your intentions. (i.e. you are an investor and you intend to make a profit)

    Bottom-line, they are a lot harder than they used to be but people are still doing them.

    Good luck and nice to see you back on BP.

    1Reply
  • Maryann L.
    Specialist · MA · Member since 2009 · 858 posts · 306 votes
    16y

    Matt, one issue I'm running into is finding C buyer lenders. My c-buyer's agents are inexperienced so we have to walk them through things so we can double close. My latest buyer has a 665 credit score AND 10% to put down and they are having a hard time finding a lender. We've given them a list of 5-7 credit unions that may do it.

    We have one local bank we can work with but their minimum credit score is 700 to do it.

    So far that's one of our bigger challenges....LOL AND getting approvals.

    0Reply
  • Matt DuSold
    OP
    Lender · Phoenix, AZ · Member since 2008 · 351 posts · 40 votes
    16y

    Awesome, Thanks for the responses guys! It sounds like the B-C side is what is giving a lot of people problems.

    I know this idea may be out there but I am just curious if anyone has tried it. Can you do somewhat of a fix and flip to the short sale you are working. If you are able to get the property at enough of a discount and then buy the property FHA and put some money into it and sell after your 90 days? I know this could get dangerous holding on to the property but I figure if you can get it at a big enough discount and still sell at a discount it is a possibility.

    I know there are some rules out there but didn't know if that is a strategy that a lot of people worked? I am just trying to figure out what's hot right now I guess. Its crazy you get away from the game for a little while and everything changes. I think I learned my lesson with that...

    Thanks guys!

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  • Nick Reuter
    Real Estate Investor · Bradenton, FL · Member since 2009 · 99 posts · 42 votes
    16y

    Make sure you document everything wrong with the property. Highlight the negatives, and look outside the property for neighborhood statistics like crime, comparables, and so on.

    Remember, you have to be (and should be!) ethical, but that adage holds true: Lies, Damn Lies, and Statistics.

    Use Statistics.

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