One of the hottest topics in the Real Estate industry right now is the short sale. Learning how to buy a short sale is a new requirement for the real estate investor. Savvy real estate investors realize that banks are willing to let properties be bought for pennies on the dollar in order to keep their inventory of bank owned property to a minimum. Unfortunately, the process is not as easy as you would hope.
In this article, I will lay out the exact process for learning how to buy a short sale. As stated earlier, the process is not easy, however it is simple. To get a short sale through, the home-buyer (or investor) needs patience, diligence, and flexibility. This process does not work well when a strict time-line is in place. Here is a can’t miss strategy for buying foreclosures.
When a home-owner misses a mortgage payment, their loan goes in default. At this point, a red flag goes off for the bank. Prior to missing a payment, it is highly unlikely that the bank will be open to conducting a short sale on the property. It is at this point that a home owner may decide to list their property with a real estate company. A good real estate company will contact the bank and begin the process of “selling short”.
The bank will require select documents to begin the file. At a minimum, the following documents will be required:
- Copies of the past two months bank statements
- Copies of the home-owners pay-stubs
- A hardship letter
- The past two years W2’s or 1099’s
- A listing agreement
At this point, the bank will ask the real estate company for an opinion of value. Some banks will take the real estate company’s word for their opinion of value. Other banks will hire a third party (real estate agent or appraiser) to establish a different opinion of value. Here is the key part when learning how to buy a short sale. Whatever value is given to the bank, they will strongly consider all offers that are with 80% of the Opinion of Value. The longer that the property sits, the less the bank believes in the opinion.
The next step in the process is to submit an offer.
Did you know that banks will consider selling homes for 50% of value? Can you afford to turn down an opportunity to save $30,000 to $100,000 on your next home? Knowing exactly how to buy a short sale can save you that kind of money!