Foreclosure is a costly and time taking process for lenders. Short sale is a smart option for lender to wrap up this mess and quickly retrieve the invested amount. Short sale is a better option to avoid a major loss that can happen in case of foreclosure.
After foreclosure lenders own the home and has to maintain, insure and pay taxes on this home. Instead of pulling out invested money lenders has to incur more expenses every month. Short sale offers an opportunity to overcome these all complications and let the lenders to pull out their money.
Short sale is a lucrative option for investors who want to make money. They purchase short sale homes with the hope to sell them on higher price after making some cosmetic changes. But, investing in short sale homes can be risky. Here is the guide which can be helpful for you while buying short sale.
Detailed Short Sale Process For Buyers:
Identify Potential Short Sales:
Identify potential short sales in your area. You can also find lucrative short sale opportunity in online database, search local short sale listing and contact skilled short sales agents in your locality. First, try to calculate the amount owed by the property in relation to its market value. If the market value is less than owed amount, then you should do not invest in this property and look for some other opportunity.
Examine The Property:
Examine the property if you find some short sale opportunity that interests you. If the property needs only cosmetic changes, then it is better option to invest but, if the condition of home is not up to the mark and need major consortium work then you should consider the cost of construction.
Do Your Math:
Calculate the net value of the property, expected expenses, net profit margin and the time required to pull up the invested amount. If your all calculations are positive, then you should go for investment otherwise you should not opt for this option.
Find All Liens and Mortgages:
Ask the seller or his agent what liens are on the property, and which lender is the primary lien holder.
Figure Out the Financing:
This is a critical part of buying a short sale process home because you are going to invest in property that have some bad marks attached to it. If you have a good credit score and clean record your existing lender may lend you again because he already has enough information about you in short sale paperwork, it may be able to expedite the loan application process. It is critical to understand that in case of short sale you have to be very quick. Once the agreement is worked out, it is common practice to for the lender to require closing less than thirty days.
Contact the Lender:
You or your representative should talk to the loss mitigation department, but try to contact resource recovery department instead of collection or customer services which are only interested in recovering the pas-due loan payment. Finding the best decision making authority can be little bit challenging. First, you will need homeowner’s complete sign, an authorization letter that delegates the power to discuss the mortgage situation.
Complete the short-Sale Application:
Complete the lender’s short-sale application if you have it. Many lenders have an application for short sale request. Fill out the missing information and analyzed the application and try to provide the maximum required information.
Assemble the Proposal:
After going the above given process, now you need to assemble the proposal. Short sale proposal normally consist of application and authorization letter. The major thing that should be attached with this proposal includes
- The Purchase and Sale Contract
- A hardship letter
- A statement of the property’s value
- Detail the costs and liabilities.
- A settlement statement
Negotiate with Lender:
It’s not uncommon for the lender to reject your offer or to come back with a counteroffer. Before going for short sale, you should know about your highest limit and don’t hesitate to leave the deal if lender don’t meet your expected amount.
Finalize the Deal:
Once you arranged and agreement that all three parties accept you, the seller and the lender, get everything in writing and sign from all the parties involved in this deal. Make sure the terms and conditions are mutually understood and agreed to avoid any kind of complication later on.