It's probably becoming apparent to you that there is a lot that can go right in a foreclosure if it's handled properly. Of course, foreclosures - or the threat of them - are never fun for a homeowner, but you can see that in negotiating a short sale for a distressed homeowner, not only do you save them the pain and suffering - mentally and monetarily - of actually undergoing a foreclosure, but you make a profit and the lender saves a great deal of time and trouble. However, even if you're a seasoned short-sale veteran, it pays to bear in mind that this entire process works because you pay attention to details, and you don't want to overlook a red flag that could send the whole thing up in flames.
So bear these simple factors in mind when evaluating and negotiating your deals, and you'll easily save yourself time, trouble and even money.
Undisclosed debts. You may be thinking to yourself: "This guy owes the bank over $400,000, why on earth wouldn't he tell me about the home-equity loan he took out last year? At this point, what's another $40,000?" But you have to remember, these homeowners are embarrassed, stressed-out and not always thinking clearly. It may be taking all your client's got not to run for the hills as it is, and that $40,000 may have slipped his mind (accidentally on purpose) or be lurking in a pile of discarded mail that he's too ashamed to open. Remind the seller, the more they owe, at this point, the better you can negotiate a deal. This is true, since you're making the case to the lender that they'll never recoup their investment. However, you as an investor also want to be sure that you know what you're getting into, and so you need to convince the homeowner to show you all the skeletons before you buy the closet! Time is of the essence. We've all read this phrase, and as a real estate investor, you've probably read it more often than most! And no place is it more accurate than in short sale negotiations. Before you even commit to handling the deal, evaluate several things. Is the homeowner responsive to questions, or do they lag on your requests for information? Some people are too resigned - they've decided that not caring is easier than salvaging what they can from their sinking financial ship. If your homeowner is one of these people, they may render your negotiations futile by not providing adequate or accurate information. You are prepared and prompt at all times. If your homeowner is consistently slow, you may need to reevaluate your investment. Meet all the owners. If you're going to invest in this property, you need to get a look at the deed. In the event of divorce or separation, for example, the distressed homeowner may not be the only person with interest in the property. And it's possible that the other party on the deed - say, an ex-husband living 500 miles away - does not know anything about the current resident's troubles, or that she's trying to resolve them via a short sale. You need to be sure that you have all the necessary permissions from all the owners before proceeding with your talks with the lender. Get a solid contract. And once you've got it, never let it go. You do need to cover your legal bases, and if you're not a lawyer, it will pay in the long run for you to get all contracts, etc. checked over before you sign. Make a checklist of the things that you personally feel are necessary for you to feel confident when taking on negotiations for a short sale. If a property or its owner don't meet the criteria, you may be better off walking away. Remember, no one can make everyone happy all of the time, so you should pick and choose who you try to please, and bear in mind that in the end, you're an investor and you must protect yourself.
About the Author
Our names are Neal and Cory Barnett and we haven't always made a lot of money. We are two brothers who came from a large family raised in a small town in beautiful North Carolina. We came from a family of factory workers and farmers because that was about all there was to choose from that far out in the country. TO find out more go to www.discovershortsales.com
