DIY short sale real estate guide

According to numerous sources the current state of the housing market is only going to get worse as many more mortgages are going to reset to higher rates throughout the next year.  As this growth in foreclosures continues the market for the short sale is blossoming.  Banks are more likely than ever to want to avoid going through the foreclosure process.

First, do not buy into an expensive self proclaimed guru’s cd or dvd collection or expensive boot camps and similar.  The information you will pay thousands for is all available for free and many of the expensive programs offered by these gurus are actually scams where the only one who ever makes any money is the guru themselves.  For more on this be sure to read our expose on some possible real estate investment scams like Foreclosuresdaily.com. 

To start, short sales are where you catch the homeowner before it is to late in the foreclosure process and offer them a way out that is actually beneficial to them.  Without your help, they would be foreclosed upon, have their credit ruined and be evicted.  You contact the bank loss mitigation department and attempt a short sale where they settle for less than the balance owed on the mortgage. 

Now, how do you find these people in pre-foreclosure?  You can look this up and research it yourself at your local county courthouse.  There you will actually get the best contacts first.  You can also get it from your local, county and government newspaper (like the Mecklenburg Gazette in Charlotte, NC).  Regardless what all the foreclosure list services say, they get it from the same newspapers – they may claim they have people that go to the county courthouse in every city, but they don’t – they just get the local governmental paper in most cases. 

Now with this information you have contact information, names and addresses for the homeowner in pre-foreclosure.  You will also have the amount owed that is bringing on this pending foreclosure process.  Next step is to call these people, mail them and do what ever else you can to get them in contact with you.  Remember, there are thousands of pre-foreclosure real estate investors both experienced and novice alike doing the same thing so you need to try and be first and make yourself standout and be easily remembered. 

So use bright, non standard stationary and be polite and professional.  The ratio is around 50 – 70% that the homeowner has already vacated the property.  So it becomes an odds game, the more you contact the better you will do.  Next, if you do happen to get to talk to one of these homeowners state that you are going to try and help them.  Do not guarantee anything.  Even though you know the foreclosure amount and it may look like a easy deal as the properties value is much higher, you do not know how many other loans or liens are attached to the property and this is extremely important.

Have younger looking, wrinkle and acne free skin. Treatment actually used by dermatologists that is guaranteed to work - TCA peel skin peel - Bestskinpeel.com

Restore worn, cloudy, yellow headlight lenses to new and save big money over replacements with the New Lite headlight restoration and cleaning kit from mdwholesale.com. Proven and guaranteed to greatly increase your night time driving safety!

After contacting the homeowner you make an appointment to go and see the property and will interview them.  You want to know all outstanding loans and possible liens attached to the property and all necessary contact information for these banks, lenders, etc…  If after this you think there is enough equity or chance of a good short (short sale) by the lender, then you will get the home owner to sign a few forms, one of which gives you the authority to get their personal mortgage information and consult with the banker (written authorization to release loan information). 

You will also have them sign over their property rights to you subject to the outstanding liens and mortagage.  It is important to understand that every state is different in their paperwork requirements and you must become aware of this and follow your states requirements (there can be very severe penalties if you don’t).  There are worksheets and ebooks you can purchase cheaply that will have most of these forms and documents pre made for you.  You just copy them and then fill in the blanks (a great complete resource that covers everything you could ever want to know about short sales and pre-foreclosures is The Pre-Foreclosure Property Investor’s Kit By Thomas Lucier – it has more information than any real estate guru for only $20)!

You will also conduct a full property inspection inside and out.  This is both to determine the properties actual worth, but also to give you information that you can use to your benefit when dealing with the loss mitigation department.  No bank is in the business of fixing up nightmare properties.  The more you can make it sound like there is a substantial amount of work that needs to be done the more likely you’ll be able to get the loan shorted.  Don’t go overboard here as some banks will check require a report or estimate of all repairs needed and may even have someone look into it to make sure you aren’t lying (if you get caught lying by the banks once you will be through with that bank).

Next, you will deal with the bank or mortgage company’s loss mitigation department.  They can be quite difficult and heartless.  But with the current economy, mortgage and credit crisis you will actually find them to be quite receptive.  You will also be contacting any subsequent or secondary lien holders to get them to take a cut of 50% or more in the amount owed – the point here is simple if they don’t accept to your terms then they will lose everything when the property is foreclosed upon. 

You may also find yourself contacting contractors to remove mechanics liens for unpaid work and the IRS for tax liens.  Regardless what the homeowner told you, verify everything!  Sometimes you may get a bank that will not budge.  If that’s the case, try and negotiate, if that won’t work then move on to the next deal.  If they do come down to terms that are acceptable and leave you a decent profit – you need to get paid to do all this – you are not a charity and cannot afford to do deals for little or no pay – then get all the paper work filed, give it over to your attorney and then figure out what you are going to do with the property – wholesale for quick cash, fix it up, etc…

There is more to it than this and this is why I advise you read the above mentioned book.  Another great resource for an easier way to get into foreclosures and real estate foreclosure investing is HUD foreclosures.  And here is an excellent article entitled how to make it big in the real estate foreclosure industry on REO's (bank owned real estate) and other types of real estate investing which has fewer pitfalls and risks.  You can get it at your local Barnes and Noble or other bookstore and I highly recommend it to anyone considering pre-foreclosure and short sale real estate investing.  And stay away from the self proclaimed guru’s – there are only a handful  that are worth listening to (an interesting website for filtering through the guru’s if you still want to liten to them is Johntreed.com).  Also be wary of local real estate investment groups - they tend to be supported by scammy real estate guru's and shady predatory investors.  Good luck and I hope this was helpful to you.