Short Sale Process Questions
I have a few questions regarding Short Sale process and procedures.
I just contacted a lender today regarding their process for a short sale. I was told all that was needed was a signed sales agreement and a HUD-1.
1. I was under the impression that I would be required to provide market comps, hardship letter, seller's financials, repair cost estimates etc. As part of my compelling argument for the lender to accept my proposal should I include these items even if the are not "required"?
2. Who should complete the HUD -1? Should I even though I might not have actual figures regarding taxes paid and title charges or do I get a settlement company to do this for me?
3. Are there any special clauses that need to be put into the sales agreement that are unique to short sales? How do in insure that the lender regards the selling price as payment in full of the loan.
4. Finally, what is a realistic discount to expect off of the BPO?
Thanks in advance.
Criteria for short sale consideration will vary from lender to lender, servicer to servicer, and loan type to loan type. Generally speaking, if you ask for a discount, you'll have to justify the reasoning behind the request. Certainly, at a minimum, you'll need an executory contract and an estimated HUD1, or a less formal Seller's Net Sheet. A HUD1 may be completed by anyone familar with the document (title company, paralegal, etc.) and the applicable costs. Either document will indicate the mortgagee's net proceeds from the proposed short sale transaction.
My philosophy asks, "Why give the mortgagee any chance or reason to reject your offer?" So, give them more info than they'll need to approve the deal. Don't give them any chance to have unanswered questions.. which will stall your Proposal.
I don't advocate a 'shotgun approach' to short sale proposals... meaning that you submit multiple ss proposals... and see which ones fly. I carefully prequalify each ss candidate, then devise a comprehensive and compelling Proposal... one at a time.
Your Proposal (including market comps, hardship letter, seller's financials, repair cost estimates, etc)
will speak for you when you aren't there to answer their questions.
The Proposal will include many elements of your own due diligence, especially with the repairs data. In my opinion, the real profit on shorts will result of the rehab efforts.
Sure, you'll get a modest discount on the confirmed as-is, FMV, and that is terrific. But the real money to be made is in the cost effective rehab (major or minor) to raise the property's value...
No rule of thumb as to discounts... the FHA will consider accepting about 85% of the confirmed value. That 15% discount saves the FHA from additional spending on foreclosure costs, acquisition and holding costs, and liquidation expenses. Many other mortgagees follow similar guidelines... but that is subject to change as our economy and markets change, as REO inventory swells, and as mortgage money becomes more costly...
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Short Sale Practitioners can't predict, or guarantee results... but can take steps to insure the likelihood for success....[ Edited by TheShortSalePro on Date 06/05/2004 ]
Is your lender Household or Beneficial ( I get those two confused)? I have done two with them and they only want a P&S and HUD1 ... yeah! But they also do not discount much ... boo! They will only discount a very minor amount from the BPO. And if the house is in good shape, expect almost no discount.
As the SS Pro said, if it is FHA there will be about 85% discount from the BPO. I love FHA. But if not, I would suspect that they will not discount much from the BPO, especially if the house is in good shape. Why else would a lender only want a P&S and a HUD? For them is it all about the numbers. Household told me the number they would take over the phone. No negotiation at all.
So ..... still build an entire packet, what do you have to lose? But I would suspect that a lender that only wants a P&S and a HUD does not care much about the other factors.
So the BPO is the only chip that you have so make it work for you. Have comps for the person. Point out very thing wrong with the property. Point out suspected things wrong (termintes, mold, foundation problems, septic problems, well problems, roof replacement, etc). Do no clean it up inside nor out. Essentially, your entire SS Package is the BPO.
I have an excel spreadsheet that is a very professional looking HUD. But, if you are not realy good with Excel or you are not familiar with the HUD1 it won't do you any good. Do not worry about getting everything right. It is a preliminary. I make my offers in case and net the Lender the price on the P&S. So all costs are on my side. In my letter I tell them that their net will be the P&S price - underlined and in bold. And make sure the To seller (bottom of first page) is 0. I do not worry about taxes or misc fees. The only costs I put on the HUD are 1101, 1102, 1103, 1108, 1201, 1203. The lender justs wants to know what is their net.
Clauses are
House is sold AS-IS. Contract must be approved by the lender. Terms of lender approval must be acceptable to the seller.
You could also add the - Purchase must be considered a full repayment of the debt - a settlement in full.