As real estate investors constantly in search of a bargain, we obviously are drawn to short sales as a way to buy properties at steep discounts to market value. And, as a basic strategy, this is a viable approach to profitable real estate investment. The problems come from the process and the time restrictions to get it done before foreclosure or bankruptcy.
First, the sooner you locate a homeowner ready to move on it, the greater the chances of success for a short sale. If you’re advertising for them, be quick with responses to their information requests, and follow up religiously. So, you have a willing homeowner, and you would assume a willing lender. Not so fast. Though it is logical to assume that a lender would rather save the costs of a foreclosure by taking a short payoff on the mortgage, they just don’t seem to be logical.
The delays experienced in the short sale process are largely systemic. The banks simply are not set up with efficient systems for handling short sale offers. They have spent huge amounts of money and time on systems designed for lending, not ending bad loans. So, you’re not dealing with a well-oiled machine, ready to respond to your short sale offer with dispatch. Intentional delay is usually not the plan either.
You can help them along, however. The quality of your short sale package can make all of the difference. Your goal is to convince the lender that your proposal is the fastest and least expensive way for them to get out of this loan. This requires a very thorough outline of the dire straits of the borrower. It will also be very important to justify your offering price with believable comparable sales data. Five good comps are better than three, but seven is better yet. Don’t just stop with sold data either. Show them what is currently on the market as competition, especially comparable homes with long days on market and prices below levels that would make their foreclosure efforts rewarding.
Be professional and courteous with their staff, but don’t let them skate on you. Follow up regularly, and each time you communicate with them, ask when you should follow up next. The most effective strategy you can employ is your due diligence before you begin. If the numbers do not show a lucrative return, you may want to pass and look for another opportunity.