How to Do Short Sales - Seven Deadly Traps

So here you are. Eager, excited, face scrubbed clean, clothes pressed, and ready to tackle your first Short Sale. Armed with all of your reference materials (each read through at least four or five times, with notes bleeding all over the margins), you are ready to make your fortune. You've even located what appears to be your First Short Sale Lead, using that 'long lost technique that only 115 year old Prospectors understand?, or so you were told. But it seems to have worked.

Even now you have 'spent' the first 40% of your future profits in your mind, so let's go and see if we can grab the rest of those profits.

It all seemed so easy on that Infomercial you watched late one frosty night. The check you sent for the materials was a little painful, but 'well, you just Know you'll recover all of that back and more, before the Spring Thaw, won't you?

There may be a few landmines hiding in the path leading to that golden reward.

The purpose of this brief paper is to help you navigate those landmines and give you an advantage in your pursuit of the ?Good Life?.

1. NOD - Has there been an NOD issued against the property owner? This is the first key to a successful short sale: if the Lender has not issued an NOD, they usually won't consider your short sale offer. After all, the Borrower is not in arrears yet, and for all the Lender knows, the Borrower is Ready, Willing, and Able (RWA) to continue making payments. The borrower must have missed at least three monthly payments in a row for the Lender to consider that the Borrower may just default on the loan, and therefore institute foreclosure action. The first step in the foreclosure process is for the Lender to issue an NOD against the property owner.

2. NEED - Can the Owner show need? Is the owner just tired of paying the mortgage, or has some catastrophe ruined the borrower's ability to continue making payments? Will the Borrower ever be able to make up those payments in arrears and bring the mortgage current. No demonstrable Need - no short sale. Very cut and dried.

3. Junior Loans - ? Which is in default, the loan in first position or a 'junior' loan (second, third, etc.)? If the loan going into default is not the one in first position, the lender may just allow the property to go to auction instead of negotiating. The holder of the first position doesn't care - he's protected. The junior loan is the one in trouble.

4. BPO - before the Lender will consider your short sale offer, the lender will ask for a second opinion on the property's value in today's market. If a BPO has not been ordered by the Lender, and/or if you can not find out what that the value of that BPO is, you may be in big disadvantage when trying to submit a short sale package. Lenders will not usually consider offers that are lower than 80% of the BPO.

5. Lender's Approval - before you can begin to market the property, you must have the Lender's approval. A guaranteed way to NOT get that approval is to submit an incomplete package. You must ask the Lender for a ?Short Sale Package?, and make double sure that all of the items asked for are included.

6. Repairs - one way that persons new to this business fall on their respective swords is to not take into consideration and account for repairs to the home and yard. So you 'win' the property, and then you find out that because you didn't cover the 'repairs' aspect, you just got your hands on a ?Money Pit?. Congratulations!!!

7. Tax consequences - this may or may not be your concern, but there could be considerable tax consequences to the borrower - by 'forgiving' the debt, the Lender has just told the IRS that the homeowner has received equity in this property which may or may not have considerable tax consequences. Although as an investor buying the property, that is not your concern, it is something you should be aware of and may mention it to the seller.

Here, then are the first set of ?Seven Deadly Traps' that the investor in short sale properties will face. None are insurmountable, but any of these are Deal Killers of the First Water if not attended to properly and in a timely manner.

More info on your stop foreclosure information search:

Get Free Foreclosure Advice and Free Refinance Quotes
Get your free on-line foreclosure refinance quote and free advice from foreclosure mitigation specialist in minutes. Compare real offers from top national subprime and hard money lenders... more...

Short Sale Training - The Biggest Short Sale Mistake
I'm writing to let you know about the #1 way to speed up the Short Sale process that very few Realtors actually know about. Not using this strategy is the Biggest Mistake most Short Sale Realtors make. It may not be what you think, because it's not a "traditional" real estate strategy... I can't ... more...

Short Sale 101
This occurs when the net proceeds from the sale of a home are not enough to cover the sellers' mortgage obligations and closing costs, such as property taxes, transfer taxes, and the real estate practitioner's commission. The seller is unwilling or unable to cover the difference. Some ? although by ... more...

Short Sales - 3 Key Factors Gurus Never Tell You About How To Do Short Sales
For those of you who are new to the Short Sale arena or new to real estate investment, let's first define what a "short sale" is and what it's SUPPOSED to accomplish. A short sale is the process of negotiating with a Mortgage Lender to convince them to accept less than the Homeowner's mortgage ... more...

Short Sale Questions
The main stream media continues to be rich with stories about the struggling real estate market, here in the Sacramento area as well as across the country. They generally revolve around the increasing number of foreclosures, the mortgage crisis and now some of the government programs that may or ... more...