House Buying Hacks: 5 Tips to Getting that Short Sale

House Buying Hacks: 5 Tips to Getting that Short Sale

A short sale is when a house is sold at a lower value than what is owed on the loan, often in order to evade bad credit when foreclosure is looming on the horizon. Whether you’re flipping houses or just trying to find an affordable home, a short sale is sure to be a bargain. However, the process can be long and painful, so here are a few tips:

1. Use a realtor and a lawyer with a lot of short sale experience. If your lawyer looks like Al Pacino, reeks like a martini, and/or runs a commercial where he busts through a styrofoam courtroom wall, gets in the camera’s face, and lets out a war cry, “Leo the Lawyer: Attorney at Large!”, you clearly haven’t done your homework. Bad lawyers and realtors are a dime a dozen. Bite the bullet and hire one that’s worth your buck. Even if they’re a little pricier, you’ll actually save more money with a reputable professional in the long run. Leave Leo the Liar to the suckers at large.
2. Use the bank that is selling the house for your mortgage. You’re probably thinking the bank with the lowest interest rates on a mortgage is your best bet. It makes sense—and hey, I like the way you think. However, in this situation, I’d strongly recommend using the same bank that is the lien-holder on the house. Even if the interest rates are slightly higher. This is because you both have a vested interest in making the deal go through. And in addition to expediting the process it’s going to make communication easier since you’re dealing with the same bank. Make things easy on the bank—and yourself too.
3. Have a really strong offer. I mean, the bank says it’s alright to put down 5%, and I like the idea of a 5% down payment, so why not start with 5%? Why not? Because it’s goddamn cheap. It’s tipping $2.50 on a $50 dinner and walking out the door with your tail between your legs. Because it looks bad—that’s why. Put down at least 20%.
4. Offer more than list price. Now if you really want to come out swinging, I suggest beefing up the list price a little too. When it’s all said and done, you’ve just tipped $25 on a $50 dinner bill—the next time you come back the owner himself will pull out your chair for you, bring you a complimentary bottle of champagne and lend you his exotic mistress for the evening. Congratulations. You’ve made an impression. The bank wants you to have this house.
5. Push your paperwork as fast as possible. Before you even go searching for a mortgage broker, have all of your documents ready to rock. It shows that you want this house too, and it keeps the process moving. Don’t let paperwork hold you back. Unfold it, fill it out, file it away—keep it moving forward.

It may sound like I’m undercutting the very idea of the short sale bargain by asking you to pay potentially higher interest rates, hire better lawyers and put down a bigger offer. But keep in mind that short sales can take a very long time (6-12 months) and you’re bound to be competing with other bidders. Following this advice will expedite the process and increase your chance of winning the bid. Done correctly, you’ll still make profit on a flip or save a pretty penny on your dream home.