Here are 10 frequently asked short sale questions that are very helpful
especially if you are just getting started or considering short sales as a
means to acquiring pre-foreclosures.
10
Frequently Asked Short Sale Questions
1. What happens to
the seller's credit rating when they allow an investor to short sell their property?
What typically happens is the loan will show up as "paid"
on their credit report; however there will be a notation that says "settled
for less than originally owed" or something along these lines. It is more
favorable for a homeowner to short sell than to have a foreclosure on their
credit report.
2. Where do you find investors for Short Sales?
Depending on where you live, you may see investors
who advertise with bandit signs or in your local newspaper. Call the
investors directly and ask them if they are experienced in doing short sales and
if they would be interested in working with you. Another good place is
your local real estate investors club meeting.
3. Define Short Sale?
A short sale is really a form of pre-foreclosure
sale and occurs when the mortgagee agrees to accept less than the loan amount to
avoid foreclosure. A negotiated short sale results in a discounted
purchase price for the buyer.The buyer would finance the acquisition much the same
as in any conventional realty acquisition... but without the
luxury of time.
4. Can an owner profit from a Short Sale?
The seller cannot profit (monetarily) from a
pre-foreclosure short sale..
But there are always exceptions to the rule.
5. How do bankruptcies affect the possibility of doing a
short sale?
Most mortgagees won't consider a short sale if the
homeowner is in
bankruptcy...why? Because negotiating a short sale
payoff is considered
a collection activity. Collection activities are
prohibited in bankruptcy.
6. Can somebody tell me what
documents do I have to include in a Short
Sale package?
Documents depend on the lender. Each lender has
different requirements.
It is typical to require hardship letter, purchase and
sales contract, ECOR,
settlement statement (HUD 1), net sheet, pay stubs,
bank statements,
personal financial sheet (monthly budget), amongst
other things.
7. What percentage of mortgage companies send someone out for
an
appraisal on a possible short sale?
All lenders order a BPO or full appraisal of the
property before making their
decision to accept or reject the short sale offer.
This is there only way
of assessing the value of the property.
8. How late in the
pre-foreclosure process can you start a short sale?
Try to allow a window of at least 90 days to
effectuate a mortgagee
approved, pre-foreclosure short sale.
9. What is a Due on Sale Clause?
"Due on Sale" Clause (DOS) Provision in a mortgage
or deed of trust calling
for the total payoff of the loan balance in the
event of a sale or transfer
of title to the secured real property. A contract
provision which authorizes
the lender, at its option, to declare immediately
due and payable sums
secured by the lender's security instrument upon
a sale of all or any part
of the real property securing the loan without
the lender's prior written
consent. For purposes of this definition, a sale
or transfer means the
conveyance of real property of any right, title
or interest therein, whether
legal or equitable, whether voluntary or
involuntary, by for deed, leasehold
interest with a term greater than three years,
lease-option contract or
any other method of conveyance of real property
interests. Standard
language which states that the loan must be paid
when a house is sold.
10. Will banks allow
a short sale when the owner has some or a good
amount of equity?
If a property has what the lender
would consider a substantial amount
of equity, chances are they would
consider allowing the property to
foreclose and then reselling it
closer to the retail value. Focus on homes
that do not have much equity. Your
job will be to create the equity in
the home by negotiating a successful
short sale.
D.C. Fowler author of
Making
Money with Short Sales
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