The easiest way to receive a discount off a mortgage you can no longer afford is either loan modification or short sale. Loan modification is used when you cannot afford the house payments but want to keep your house. Short sale is used when you no longer afford the house and do not want to keep it. In both cases, the ugly foreclosure process is eliminated. This article will explain how you can take advantage of a short sale as an investor.
As an investor you must be aware that making a short sale work for you requires more attention to detail than if you were simply participating in a run of the mill real estate transaction. For example, did you know that many novice real estate investors fail to request the deed from the original homeowner? So many of these novices have seen promising and potentially lucrative deals slipping through their fingers because homeowners backed out at the very last minute, either renegotiating their mortgage terms or actually curing the default.
Conversely, when the homeowner who is party to the short sale signs over their deed to you, you may rest assured that the transaction is about to go through without a hitch. After all, the signed over deed empowers you to directly negotiate with the bank. In addition, you have access to the property and may begin any work that needs to be done. In some cases this is vital to prevent any damage to the property that may come from a homeowner's abandonment of the real property after signing over the deed.
Another crucial point to remember when opening negotiations with a lender is to not make it known to the bank officer that you are an interested investor but to instead simply requires a short sale packet. Since you are in possession of the deed, you can accurately identify yourself as the buyer or a representative of the previous homeowner. As the bank complies with your request, you will receive all the forms needed to make the short sale work for you. Instructions with respect to needed documentation will also be included and if you have never done such an investment before, read through these forms carefully!
A staple of the short sale package is the hardship letter that lenders require from homeowners who are unable to make their mortgage payments. Supporting documentation in the form of tax returns, paystubs, and also bank statements usually need to accompany the hardship letter. Another requirement you must fulfill is the furnishing of a HUD-1 form and a real estate purchase and sales agreement. Since the processing time might take three to four weeks, time is of the essence! Do not delay the submission of these documents to the lender.
If an auction sale is scheduled, most lenders will be happy to postpone the auction in favor of seeing through the short sale. Since the lender now sees you as a serious buyer and their ticket out of a costly real estate auction, the odds are good that a Brokers Price Opinion (BPO) is requested. This is the official assessment of the fair market value of the property. Your goal at this time is to ensure that the BPO comes back as low as possible. The lower the assessed fair market value, the less money you need to offer on the property. This really makes the short sale worthwhile!
