Short sales have become more common across the real estate market in recent years. As more homeowners have struggled to meet financial obligations, some have opted for short sales to avoid foreclosure. In the short sale process, homes are sold for less than the outstanding mortgage balance based on an agreement with the lending bank. Buyers who opt for short sale properties can get great deals on worthwhile investments. If you want to capitalize on the short sale market, you'll need these strategies for successful negotiation.
The first step in a successful short sale process is choosing the right property. Start by looking through some current real estate listings for properties with a short sale tag or a listing that includes the restriction that it requires bank approval. These are indications of a property that is listed for short sale and may move quickly.
Once you narrow down properties that you may be interested in, it's time to do some research. You'll want to have some idea of the current home condition and its market value before you consider placing an offer. It's also important to confirm that there are no other outstanding liens on the property. To do this, you'll need a title company to do a thorough title search.
Since most lenders want to finalize short sales quickly to recover some of their investment, you'll want to be sure that you have all of your financial ducks in a row before you put the offer in. If you're going to be securing financing for the property, secure the pre-approval and include the letter with your proposal.
You may opt to use the seller's current lender to mortgage the property. If so, include the mortgage application with the paperwork that you submit for the offer. This shows that you are committed to the process and it starts the financing process right away. If you can show that the financing is secured, even with a pre-approval letter, you have a better chance of your offer being accepted by the bank.
When a property goes into a short sale status, it has typically already reached the foreclosure department of the mortgage lender. Most foreclosure departments have strict guidelines about recovery and may not be as flexible or receptive to offers on short sale properties. If you want to improve your chances of success, you'll need to start with the right person.
Instead of working with the foreclosure representative, you should reach out to the loss mitigation team at the lender's office. The objective of a loss mitigation department is to recover as much of the outstanding mortgage as possible, so they will be more inclined to work with you to secure the sale. You'll have to have the seller's approval to talk to the lender, though, because you'll be negotiating to settle a loan that isn't actually yours. Your real estate attorney may be able to help with this step, because he or she will have the legal knowledge to negotiate this stage successfully and within the legal boundaries.
Before the lender holding the outstanding mortgage is going to agree to any short sale offer, you'll have to provide a solid proposal that clearly details not only how much you plan to pay for the home, but why you're offering what you are. The proposal also needs to include a hardship letter from the seller explaining why the mortgage fell behind and why this sale is in the lender's best interest.
Finally, you'll have to go to sites and work with a real estate attorney and an agent to create financial statements and a cost-of-sale projection to show the lender why this offer is financially viable. The more supporting information you can provide, the better your chances will be of having the offer accepted. Since most short sales need to close within a matter of months, it's in your best interest to present a proposal that won't get hung up in negotiation for an extended period. If you take too long, the home may be foreclosed upon and you might lose the chance.
With the tips presented here, a qualified real estate attorney and a real estate agent with short sale experience, you can improve your chances of securing that short sale property you've had your eye on. Since short sales move fast and are often sold at exceptional values, acting fast and being prepared are key.