The Steps to complete a short sale transaction

Well, I have decided to Blog about the steps to take to complete a short sale transaction.  A few major points must be pointed out.  I feel that this is the most important thing- many of these steps will need to be performed along side of others.  If you are not able to multitask, get help.  I recommend that for the first transaction, you either have someone assisting you or have someone that will be available to give you guidance.  Another major point to understand right off the bat, this process is not easy.  I think that too many people out in the real estate investment world make short sales sound simple.  They are not simple, but the challenge will be one of the most gratifying parts of the transaction.  One must notice that I have not stated that short sales are impossible.  Because they are not impossible!  As you do more short sales you will find yourself developing a “system.”  This is a very important part of the process.  By forming a “system” to conduct business, two(2) things will happen.  First, you will streamline your time and catch errors and mistakes faster.  Secondly, you will be better equip to handle more properties at a time.  Both of these items equal to; more business, more money!

Step 1- Marketing to Sellers

There are many, many ways to find property owners in the foreclosure process that are willing to sell their property.  The situation we utilize, is to mail directly to the property owner.  We get the information for all properties in our area that a has been filed. (In Florida, filing a is the first step to foreclosure.)  By obtaining this information, we sort out the properties we want.  We then send out a direct mail piece to each property we are interested in purchasing.  Once a property owner calls our office, we have a few questions to further weed out the properties that do not fit our criteria.

Another way to acquire sellers is to get the information from a Realtor.  Due to Realtors having access to properties that are listed, or even listing properties themselves, they have the ability to forward you the property information.  If this is the route that has been decided to take, make sure you fully explain your intentions to the Realtor.  This will remove any misunderstanding on either party. * We do NOT use this manner!

Step 2- Negotiating the Deal

Once a property that meets our purchase criteria if found and the property owner is interested in selling the property, we set up an appointment to view the property, talk to the property owner about the short sale process, inform the property owner that they will NOT PROFIT ANY FUNDS from this transaction, and make sure the property owner is willing to gather the needed paperwork to fulfill the short sale requirements.  We further explain that we are a real estate investment company and will be purchasing this property for investment purposes only.  Another point of interest for the property owner is that our intentions are to purchase the property for the lowest price we can, and then sell the property for a profit.  While discussing this process, we make it very clear that we will be working directly with their Lender(s).  (We make it very clear that we will attempt to perform a short sale.  No guarantee can be provided!)

Step 3- Signing of Contract and Gathering Required Paperwork

Once both parties agree to perform the needed actions for this transaction to close, we set up a time to sign the contract and gather the needed paperwork.  We get the property owner to give us a timeframe it will take for them to gather the needed paperwork.  Once all paperwork is gathered, we will meet to sign the contract.  At this meeting we review all paperwork to verify everything is included, sign the contract, sign all addenda, and once again fully review the short sale process.  We cover the short sale process several times to make sure the property owners understand the process.  An update is offered to the property owner anytime during the process.  Copies of all documents are supplied when requested.

Step 4- Negotiating with the Lender(s)

In my humble opinion, this is when the fun begins.  When all paperwork is collected and signed, you then start the short sale process.  Once authorization for the Lender to speak with us is acknowledged, we request their short sale requirements.  Upon acquiring the requirements, we fax the package to the lender.  An important note- the initial offer is where the negotiating begins.  Each lender will take the opportunity to order a BPO (Broker Price Opinion).  We request for the BPO to be scheduled through our office.  After the Lender receives the BPO, they will make a counter offer.  At this point, we negotiate back and forth until we both (Lender and us) come to an agreed purchase price.  Once this price is agreed upon, we request for 30 days to close.

Step 5- Close the Property

This is the step in the process where you actually purchase the property.  To be able to conduct this step, a few items must have been previously set up.  First item, getting a title company to perform the closing.  It is highly recommended to take the time to discuss with any potential title company the entire plan (i.e: Buying property through short sale and then resell property for profit.).  Second item, financing.  Funds must be lined up in advance of the closing.  And third item, making sure the property owner signs the closing documents.  This might sound a little confusing, but remember that a property can not be purchased unless both the Seller and Buyer sign the closing documents.

Step 6- Sell the Property

Selling the property is without no doubt my favorite part of the entire process.  Why you ask?  This is where the profits are obtained.  Although this step might sound simple in name, this is where most investors fail.  The ability the find a potential Buyer is a stumbling block.  But, is used correctly, a few simple items will assist in locating Buyers.  First item, the property must be marketed to located Buyers.  This step must be performed while the above steps are being completed.  Second item, negotiate selling price.  Just as the purchase price must be agreed upon, so does the sell price.  Third item, setting up the closing to sell property.  Once again a title company must be utilized to perform this action.  Once the closing is set, show up and sell the property. (If all things have gone correctly, walk away from this closing with PROFITS!)

 

These are the “basic” steps to a short sale transaction.  In the near future, we will break down each step separately.  As each step is broken down, we will address a multitude of things that must be completed for each item.  Once again, many of these steps will need to be performed in coordination with each other.

 

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