How To Get A Great Deal On A Short Sale Property
When a homeowner is facing foreclosure, they may opt to list their home for sale with the hope that a sale finalizes before the foreclosure is filed. Sometimes, the mortgage lender will encourage this in an attempt to get more revenue on the home sale than they would from a foreclosure auction. This type of sale is called a short sale, and it gives you the opportunity to secure a home for less than the homeowner's current mortgage balance. In the sale agreement, the lender commits to taking that purchase amount and writing off the balance. Here are some tips to help you get the best possible deal when investing in a short sale property.
Choosing the Right Property
The very first step to a successful short sale is choosing the right property. Don't rush into the first short sale that you find just to try to get a deal. Look through the available short sale listings with your real estate agent and a real estate attorney before you make a decision. That way, you can be sure that you understand the restrictions and requirements put in place by the lender before you look at any of the properties.
Once you have narrowed down the properties that are good fits for your needs, you'll need to do a bit of research. You'll need to have the home inspected and you'll need a thorough property valuation. It's also important that you do some research into the title condition and ensure that there are no further outstanding liens on the home or the land. Your real estate attorney can help with this part of the process.
If the lender holding the current mortgage has agreed to a short sale, they are going to be looking to finalize the deal quickly so that they can recover some of their financial loss. For this reason, it's important that you seek a pre-approval for your loan before you pitch the offer on the property.
Include your pre-approval letter with the offer package. That way, the lender knows you're serious and committed to the process. If you'd rather work with the current mortgage lender, submit a mortgage application with your purchase proposal.
What to Expect of the Process
Once you've drafted your purchase proposal, it's important that you contact the right individuals at the mortgage company. If the current owner has already received a foreclosure warning, it means that the account has already reached the foreclosure department of the lender. Foreclosure representatives are typically restricted in the types of resolutions that they can accept on an account.
To avoid this type of problem, work with the loss mitigation team at the mortgage company instead. While the foreclosure team's interest is recovering the full balance from the property owner, the loss mitigation department is simply working to recover any of the investment on the home. Your real estate attorney will need to get signed authorization from the current homeowner for you to negotiate with the lender, though, because you're trying to settle a mortgage loan that isn't yours.
Be prepared to tell the lender how much you're willing to pay and how you arrived at that number. Your proposal should include a hardship letter from the homeowner that illustrates why the mortgage is past due and why a short sale is the better decision. Your real estate attorney and the sales agent can help you with the proper wording for this.
You'll also want to include financial statements to show the mortgage company that you can meet the obligation. This way, they know that they are recovering money on the property and not likely to find themselves back in this position again. The more supporting information you can provide, the better your chances are of getting a great deal on the property.
With the information presented here and the support of both a skilled real estate agent and a real estate attorney who is experienced with short sales, you can secure a long-term investment in a good property at a great price.