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