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    Real Estate Short Sales - Foreclosure Investing for Pennies
    by Jarad Severe


    Short sales are becoming more and more popular as more and more
    investors learn this creative technique which can create huge profits.

    A short sale is when a lender accepts a discount on a mortgage to avoid a
    possible foreclosure auction or bankruptcy. Instead of buying from a seller, you are
    purchasing the property directly from the lender for a discount. For example: A
    homeowner, who is facing foreclosure, has an existing first mortgage of $300,000.
    You write an offer to the lender for $220,000, which is accepted as full payment for
    the loan. This is a short sale. Why are they willing to take such a discount? Several
    reasons. First of all, banks do not like excess inventory and bad loans on their
    books; therefore, if they see an opportunity where they can sell the property without
    a huge loss, they will do it. Secondly, lenders know they could lose a lot more
    money if the property goes to auction. There are so many fees involved if the
    property goes to auction, that they would be better off taking the discount
    beforehand and be finished with the headache of it all.

    Foreclosures are spreading all over the country, which means there are
    opportunities everywhere. Lenders are being overwhelmed with properties they
    inherit because of bad loans. It is safe to say that most lenders will accept a short
    sale, however, you may come across one or two who will not discount. If the
    numbers work out for the lender they will do it.

    It is best to do a short sale when the property is in the pre-foreclosure
    state. Yes, you can perform a short sale when the bank owns the property, however
    your profits will more than likely be smaller. There are two stages within pre-foreclosure. The first stage being those individuals who are behind on payments and
    the second stage are those who are behind on payments with a notice of default. In
    order for this to work properly and for you to successfully get a short sale, you must
    find the homeowners who are in the second stage of pre-foreclosure or more than 3
    payments behind on their mortgage. Once the notice of default has been recorded,
    banks become motivated as well, so you are more likely to get a discount. Until that
    time, very rarely will a bank ever discount a mortgage that soon. Why would they?
    The homeowners still have time to cure the loan and make up the back payments.

    It does not matter what type of house or condition it's in, all mortgages can be
    discounted. Because of this, short sales are one of the most effective
    techniques for discounting loans in real estate. Short sales create huge
    investment opportunities and are a must if you want to be competitive in this
    market.

    One of the most important steps in the short sale process is getting the
    deed. Too many times, beginning investors will skip this vital step. Why do we want
    to get the deed from the homeowner(s)? Because all too often, homeowners change
    their minds, or want to back out of deals because they are scared, or they want to
    re-negotiate. Without the deed, they can back out of the potential short sale even
    after you have spent hours working on their property. When the homeowner signs
    the deed over to you, now you control the property (subject to) and you can go to
    work by calling the bank.

    There is a certain process for calling the bank when you're doing short sales. Banks
    can usually tell if you've never done this before. When you call the bank, you
    never want to tell them you are an investor. This one of the biggest mistakes
    rookies make and sometimes will result in the lender not accepting a short sale.
    Therefore, when you call the lender to request the short sales packet, you want to
    tell them you either represent the homeowner or you are the buyer. Sometimes they
    may ask if you are an attorney. Again, just tell them who you are - do not use
    "investor". Then you'll want to request the "short sales packet" or "workout packet".
    When the packet arrives it will explain exactly what you need to make this short
    sales deal successful.

    The lender will usually request a hardship letter, a HUD-1, and a financial statement
    from the homeowner. A hardship letter is telling the lender why the homeowners are
    not making their mortgage payments. Sometimes they will request bank statements,
    pay stubs, income statements, and so on. Be prepared to send them
    everything they ask for because if you don't, your short sale will not be
    accepted. Do not waste any time! Send everything the lender asks for back ASAP. It
    usually takes at least 3 weeks or more to get an answer back from the lender, so
    you can't afford to wait. If the auction is approaching, you can ask to extend or
    postpone the auction which in most cases they will, if they know it is a legitimate
    offer.

    Next in the short sales process is the BPO. This stands for Brokers Price
    Opinion. This is by far one of the most important steps in the whole process.
    Basically a real estate agent will come out and give their opinion on what the house
    is worth. The key to short sales is the BPO. You want to try everything you can to
    influence the BPO to come in as low as you can. The lower the better. You can
    influence the BPO by creating a list of (low) comps in the area, a list of repairs, and
    showing up at the property to point out every little item that needs replaced. When
    the BPO comes in low, the banks will usually accept your offer.

    Visit ForeclosureShortSales.com to receive a free audio on the 7 deadly mistakes short sale investors make.

    Jarad Severe is a leading authority and expert in Foreclosures. He is President and CEO of Foreclosure University. Jarad can be reached by email at: support@foreclosureshortsales.com or you can visit his website at:http://www.foreclosureshortsales.com to receive more information on foreclosures, short sales and more. Free audio on the 7 deadly mistakes short sale investors make.

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