| Buying foreclosures can be extremely | | | | simply doing a job, not necessarily |
| profitable for real estate investors. | | | | assessing the value of a property they |
| However, most of these homeowners are | | | | are getting a commission from. |
| mortgaged to the hilt. They have no | | | | Sometimes the first BPO is simply based |
| equity, and big loan payments. In fact, | | | | on a "drive-by", which basically means |
| many actually owe more than the property | | | | that they're looking to see if the |
| is worth! | | | | property is still occupied and they want |
| Most investors will walk away from these | | | | to make sure that the broker's price |
| deals because they see no obvious | | | | opinion is still line with what they |
| profit. However, you can "create" your | | | | believe the value of the home is. |
| own equity by negotiating a "Short Sale" | | | | If possible, do the walk-through with |
| with the bank or lender. | | | | the agent and point out flaws and |
| Why Short Sales Don't Work | | | | repairs. Be assertive, but don't annoy |
| However, even experienced investors fail | | | | them. |
| to create successful short sales, | | | | This agent is experienced and does this |
| because they do not know the most | | | | kind of work for a living. Usually, |
| important secret of all when doing short | | | | agents and appraisers are asked to value |
| sales. Without this secret, an investor | | | | properties at the high end of the scale. |
| with the greatest negotiating skill will | | | | It is unusual to ask for low numbers, so |
| fail. Without this secret an investor | | | | it is important that you meet the agent |
| armed will all the right paperwork with | | | | at the property. Plead your case and |
| fail. And without this secret, even an | | | | ask for the lowest BPO possible. |
| investor with an air-tight case of low | | | | Step 3: What to do if the BPO is too |
| value including repair estimates, etc. | | | | "high" |
| will fail. | | | | If the bank rejects your short sale |
| It's not that negotiating, paperwork, | | | | because of the BPO, you're going to have |
| and a convincing case are not important. | | | | to challenge it. If the BPO agent did a |
| It's just that you've overlooked, the | | | | drive by and did not call you, you can |
| most important element that lenders use | | | | build a case that the lender did not get |
| to determine what they will take for a | | | | a true value because of the serious |
| property in default. It is therefore | | | | damage within the house itself. If you |
| The Ultimate Short Sale Secret | | | | have photos, now is the time to send |
| Ok, I won't keep you in suspense. | | | | them along with your rebuttal. |
| Here's the secret: In order to get big | | | | If you believe the comps are inaccurate, |
| discounts from a lender on a property | | | | make sure you have your own to support |
| facing foreclosure, you must control the | | | | your case. The info should be pulled |
| Broker's Price Opinion. (BPO). | | | | from an accepted database. |
| What is a BPO? In short, it is a value | | | | Request a second opinion. Remember - |
| appraisal. When a short sale package is | | | | don't haggle or ask to speak with a |
| submitted to the bank, they send out a | | | | supervisor. You don't want to get your |
| real estate agent or Broker to the | | | | file 86'ed by loss mitigation because |
| property to judge its value. | | | | you are overly aggressive. They're in |
| The broker or agent handling the BPO is | | | | control during this part of the game. |
| working with the bank. Their job is to | | | | All of your negotiations should be in |
| simply visit the property and give their | | | | writing and done by fax, unless they |
| opinion on its value "as is". | | | | tell you otherwise. |
| And here's the key: it's a broker's | | | | The purpose of your next conversation is |
| price OPINION! And since opinions are | | | | to make the bank question the first BPO. |
| subject, you have the ability to | | | | Banksare not in the business of losing |
| Influence that opinion. Learn how to do | | | | money, and an incorrect BPO can come |
| that and you can create $10,000's in | | | | back to hauntthem. It's your job to |
| your bank account with little effort. | | | | convince them to sell lower without |
| Step 1: Do Your Own Research | | | | sounding like you're trying to |
| Before you're ready to influence the | | | | "steal" the property from them. |
| BPO, you'll have to start out with doing | | | | Many banks will tell you that a second |
| your own research and preparing your | | | | BPO is too expensive. Most BPO's only |
| short sale package effectively. What | | | | costaround $75.00, but the cost can be |
| should you include? | | | | as high as 700.00 for an FHA or VA loan. |
| By this time, you should have already | | | | Tell themthat you'll pay the expenses |
| done a walk-through of the property. If | | | | and meet the agent at the property. You |
| you have not done so already, inspect | | | | want to be listed asthe contact person. |
| the property (preferably with a home | | | | · Get a second opinion. Meet the new |
| inspector or real estate broker of your | | | | agent at the property and plead your |
| own) and gather the following: | | | | case, using any additional research |
| · Photographs of the inside and outside | | | | you've pulled up as well as the other |
| of the property. This should include | | | | materials your previously presented. It |
| room-by-room pictures, cracks in the | | | | helps is this agent is local and |
| ceiling, other states of disrepair, you | | | | familiar with the property values in the |
| get the picture. | | | | area. |
| · A list of repairs that are needed, | | | | · Take all of your paperwork and give |
| from normal wear-and-tear to major | | | | it to the loss mitigators and agent. |
| improvements. Get an estimate for these | | | | · Sell your case. There should be a |
| repairs - try for the highest bid you | | | | difference in the BPO's and you can now |
| can obtain! | | | | tell them that the price is simply too |
| · Information on the neighborhood, | | | | high. |
| local economy, and other local factors | | | | · Use the sympathy factor - Everyone in |
| that can lower the value of the home. | | | | foreclosure has a sad story to tell. |
| Offer specific negative information | | | | Make sure the BPO agent knows their |
| about the property. This can include | | | | story. And tell them, that you're |
| local newspaper articles or information | | | | trying to buy the property as an |
| from the Vital Statistics office in your | | | | investor to help out the homeowner and |
| state. (You should be able to access | | | | save them from foreclosure, but you need |
| these from a local library.) | | | | the value to come in at or near (the |
| · Information about the family. | | | | price you need). |
| Remember, the Brokers and Loss | | | | Remember to emphasize anything |
| Mitigators are people, too. Photographs | | | | detrimental to the home value. If the |
| of the family, information about their | | | | house is ugly, you can tell them that |
| hopes, and concrete evidence of how this | | | | the inside of the house looks just as |
| short sale will help them move on with | | | | bad as the outside. An interior BPO is |
| their lives... | | | | the only way to reflect the true value |
| Now you're ready to make an offer. | | | | of the property. It's important that you |
| Submit the paperwork with your offer in | | | | stress the value of the interior |
| writing by fax to the loss mitigator | | | | inspection and do what it takes to make |
| with whom you are working. | | | | sure the bank agrees to it. |
| Now, follow up with the loss mitigator. | | | | Step 4: Close the Deal |
| Make sure that they have received all | | | | Sometimes the second BPO will be |
| your paperwork and offer. This is | | | | drastically different and the bank will |
| extremely important. It sometimes seems | | | | agree to negotiate down. You will |
| that lenders have a special fax machine | | | | still have to go back and forth, until |
| design to eat your paperwork. If they | | | | you guess the lowest amount the bank |
| haven't received it, fax them again, | | | | will actually accept. If that meets |
| immediately. | | | | your requirements - Congratulations. |
| Step 2: Influence the Broker's Price | | | | However, if after a second BPO, the bank |
| Opinion | | | | won't budge, it may be time pass and |
| When you are on the phone with the loss | | | | move on to the next deal. 30% of BPO's |
| mitigator, mention that the BPO agent is | | | | simply don't go through because of |
| to contact you, before going to the | | | | refusals to negotiate on the lender's |
| property, because you are the only one | | | | end. That leaves you with 70% success |
| who has the key and can let them in. | | | | with your other short sale properties. |
| Follow this up with a fax, so they have | | | | If you have presented all of your price |
| your contact info in their file. If the | | | | factors and they still disagree with |
| BPO agent goes out there without you - | | | | your offer, then it may be time to move |
| you're sunk. | | | | on. |
| If possible, take the package you have | | | | In fact, it may be for the best. |
| prepared for the short sale and bring it | | | | With mortgage fraud and refinancing, |
| with you to the property to meet the | | | | many foreclosed properties are leveraged |
| first agent performing the BPO. The goal | | | | at 125%. It's best to make sure that |
| here is to make sure that the agent sees | | | | the property has at least $20,000 in |
| it through your perspective. Remember - | | | | standing equity. If you need help in |
| in the real estate world, agents | | | | deciding what price to accept, check out |
| typically try to get the best appraisal | | | | our Deal Evaluation Tool at |
| values possible, because they have a cut | | | | The next article will help you make the |
| of the action. Most homeowners trying to | | | | most out of your profit, by teaching you |
| purchase a home need top value in order | | | | the best exit strategies when it comes |
| to qualify for the loan. | | | | to cashing out of preforeclosures. |
| With a short sale, however, the agent is | | | | |