Short Sale question
Hello. The way I understand short sale process is that if money owed is mpre than the value of the property, one can perform short sale.
Do I have to get owner's permission to talk to the bank?
Does the owner have to contact the bank?
Which department of the bank handles short sales: collection, legal, etc...?
How much discount can I get?
Thanks in advance,
Alexander.
I'll tell you what I've learned. Perhaps someone else can explain the process even better.
You target a motivated seller in foreclosure trouble. Tell them that you are going to offer the bank an amount that's lower than the payoff amount.
If the seller agrees to accept your help and allow you to negotiate w/ his lender, you fax the seller an "authorization to release" form (basically just a signed statement saying that <your name> has permission to speak to <his lender's name> regarding the status of <seller's name> loan and to negotioate on his/your behalf).
Also fax the seller an "offer to purchase" agreement and let him sign that as well. The seller will fax both of these SIGNED documents back to you and you will fax them to the lender (usually the loss mitigation department or the person that he may already be communicating w/ from the lender).
Now you have your offer in front of the lender. Start low to allow room to negotiate back up toward your top limit. The lender MAY/MAY NOT consider your offer. If they do, you'll perhaps negotiate on an agreed price.
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Success and $$$ to us all!!
Sonia (Woodchuk)[ Edited by woodchuk on Date 02/08/2003 ]
Hi, Sonia.
Thank you for the explanation.
Please explain:
What is "offer to purchase" agreement.
Which department of the bank do I contact for short sale?
Thanks for your help,
Alexander.
P.S. How many short-sale deals have you completed. What is the typical discount?
Alexander,
The "offer to purchase" is a "Purchase and Sales Agreement". This is the contract you are offering the seller to buy the property.
Woodchuck did tell you the department, it's call the "Loss Mitigation" department with larger lenders. Otherwise find out who the sellers contact is with the lender and contact them first.
Some lenders will discount and some won't on a first mortgage. The discount amount is based on the equity betweenthe payoff and the FMV. The larger the equity the smaller the discount if any.
Second mortgages will take much larger discounts as their loan may get wiped out leaving them with nothing.
I've heard up to 20% discounts on firsts and up to 80% discounts on seconds.
I've learned a lot about it but before I try it myself, I will probably purchase a course. There are things to be aware of like how the short sale may affect the sellers credit as a deficiency judgement or be considered income to them on a 1099 which they will have to pay taxes on.
So much to know, so little time....
Keep on learnin.....