SHORT SALES TIPS

Tip # 1: The Cover Letter and Short Sale Request.

The Cover Letter and Short Sale Request should be a one page, clearly defined document that:

  1. should briefly state what your buyer is willing to pay and the reason or "hardship" that is the cause of the request

  2. it should explain the documents that are attached in the accompanying full package

  3. it should define the offer as an "As-Is" All Cash Offer with no contingencies and should state that all inspections have been completed

  4. it should requests the BPO so that the bank can expedite their opinion of value

  5. it should state clearly how much the bank can expect to "net"

  6. it should state clearly as to when the closing will be.

The document should also contain your contact information, the loan number, the borrower's name and the Case Number.

Today's Tip is about the Letter of Authorization ..commonly referred to as the LOA,

Before you can even begin the short sale process, you will need to be given written authority to do so by the homeowner / borrower. Without having this document you can not even begin your short sale process. Simply put...no LOA..no short sale. It is that important.

Lenders typically do not want to disclose any of the homeowner / borrower information without written authorization to do so. 

You will receive better cooperation if you have the homeowner / borrower provide you with written permission to speak to their mortgage lender about their loan. 

The LOA should include the following:  

a. All Borrower's should be named
b. All Borrower's Social Security numbers should be listed
c. Property Address 
d. Lender / Creditor Names
e. Loan Numbers
f. Your Name 
g. The Date 
h. Your Name & Contact Information
  You will find this workshop to be unlike any other. 

Tip # 3

Bad things sometimes happen to good people. It is highly doubtful that the homeowner intended to default on his / her mortgage and end up in foreclosure. 

Most likely their enjoyment of the American Dream of homeownership was interrupted by some tragic event. 

Maybe the loss of a job, a bitter divorce, or the unfortunate untimely illness or death of a family member caused the homeowner borrower to default on his mortgage.

Whatever the catalyst, the lender wants to hear from the borrower just what happened to cause them to be in the financial situation they are in. 

If the bank is going to consider taking a short sale, they need to be convinced that something drastic has happened to the borrower that will make it impossible for the borrower to recover and that it is in the bank's best interest to accept a short sale on the defaulted mortgage.

Tip # 4: Property Improvement & Repair Estimate Report .

When things go bad...they usually go real bad. If a homeowner has not paid his mortgage in many months, it is likely that the house has been neglected. 

If funds were not on hand to pay the mortgage, then it is probably safe to say that they have not been able to perform proper maintenance and repair and the property may not in the best of shape. Especially if it is vacant or has been vacant for some period of time.

It is most probable that the mortgage lender does not know this. Unless the lender is local, it is quite hard for them to have an accurate assessment of the property from their desks in California , New York , Chicago , Texas or some other distant location.

With the advent of automated valuation models (AVM's), many banks are using the former appraisal together with an AVM to perform a "desktop valuation" of the property. 

The number they have in mind can be tens of thousands of dollars higher than it's true value. 

We'll talk about the BPO and comparables later, but before either of them can be properly completed, you are going to have to justify your estimation of value and substantiate your offer in order for the bank to look at your deal.

Having an extensive repair and improvement report performed by a local and licensed general contractor will significantly enhance your repair report.

You are going to want to take extensive pictures of both the interior and exterior to add substance to your corresponding repair estimate.

Tip # 5: Homeowner  Financial Package .

At our seminar, we show you how to properly submit the necessary financial information from the borrower / homeowner to illustrate to the bank that your client is worthy of a short sale and that it is in the best interest of the bank to accept the proposal.

Also by getting this information from the homeowner early in the process you will be able to determine if they are going to be able to comply. If they can't and something smells fishy at least you will know about it early on.

The homewoner needs to provide you with the following information:

* last 2 years W-2
* current financial / balance statement
* last 3-4 months bank statements
* last 2 years of tax returns
* last 4 pay period pay stubs

The homeowner financial information is important because the mortgage lender will want to see a snapshot of the borrower's financial situation. 

After all, when Mr. Homeowner applied for his mortgage he gave the bank what was assumed to be a realistic and somewhat verifiable assessment of his financial health when he received the mortgage.

Now that you are asking for a reduction in their payoff, and after you have submitted a real tear-jerker of a Hardship Letter, the bank wants to see how the hardship has affected the homeowner financially.

It's a way of saying "See Mr. Banker, John Smith only has $200 in his bank account and he is behind on his car payments, etc".

The bank statements and financial statements must show that the borrower is in a dire situation that is not likely to change. 

Are there W2's, are they from two different people, are there different dates on it, etc? 

Another reason, a hidden reason, why banks want to see executed Tax Documents is to check if the person in foreclosure has filed their personal income tax.

The bank needs to know if there is the possibility of an additional tax lien on the property.

A huge motivator for banks is whether or not personal income taxes have been filed in the past two or three years. Why?

Banks care only about the numbers . So the bank says, "OH WOW! If we foreclose on this property and we start this process and Uncle Sam comes in before we do, he could put a lien on this property and then we'll have to deal with their redemption period!"

This is a big deal. Your short sale may look more appetizing if the Tax Returns are not done.

However..be extremely careful….if the foreclosure is within 2 years of receiving a mortgage or refinance, make sure the before and after pictures are somewhat related.

Bank Fraud is rampant and submitting these documents could open a can of worms if either the before or after information is not explainable

Good Morning Chris,

We have been discussing the varying requirements that should be a part of the 10 Essential Elements of A Short Sale Package . 

Yesterday, Tip #5 discussed the  Financial Information from The Homeowner Borrower.

Today we will discuss the "BPO"

Tip # 6 The BPO...or where the show begins!

Some feel this is the most important "process" of a short sale. It is an aspect of the short sale process that you do not control...but must attempt to influence. Short sales can be won or lost based upon the outcome of the BPO.

The BPO ( Broker's Price Opinion), is the lender's field review of the property to determine what they will assert as the value of the property in question.

The lender may often use the services of a local real estate agent to perform this valuation and will use it in conjunction with an AVM to impute it's value of the property. As you can imagine, there is quite a bit of room for err in arriving at this number.

When the bank orders the BPO you need to be involved in every step. You need to be the contact that the evaluator contacts to gain entry to the property.

It is a very good idea for you to arrange for the homeowner not to be home so you can lead the evaluator through the house pointing out every problem point that you already know of.

Don't assume anything. Sometimes they arrive and do not even know the property is in foreclosure. 

Be armed with the following:

1. The comps that you researched and believe to be indicative of the value of the property
2. A completed repair and improvement estimate from a licensed contractor
3. copies of any code violations , if any
Be assertive, helpful and courteous without being argumentative. You need this guy to be comfortable with you as you never know when you may run across him again.

Sometimes, if you strike up a good rapport, they will tell you whether or not they can hit your number. Be smooth, be upfront and be yourself. 

Smile, be helpful, hold the dog, turn on the lights, bring an extra bottle of water...remember, this guy's attitude can mean the difference in your deal.

At our seminar, we show you how to effectively influence the BPO so that you can hit your numbers and begin active negotiations with the bank.

Call us at 561 626-8550 if we can help you sell or buy a new home
or e-mail to Realtor@RandRFlorida.com