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