First Short Sale .......

I am a Real Estate Auctioneer / Broker in Wisconsin. I have recently started studying short sales as I come across leads very often. I have a few properties that I am going to look at tommorrow and I feel that one of them fits the bill.

Owner was in Foreclosure, now just filed Chapter 11...

Mtg balance of 120k

Property worth roughly 130k ( Appraised @ 145k 3 yrs ago, so just figuring in avg decline in value for the area )

Small town locale about 45 min from Madison Wi

This being my first foray into Short selling, I want to make sure my I's are crossed and my T's are dotted....

My exit strategy is to get the home discounted enough that it can easily sell at auction or flip to an end buyer...

Best strategy?? What to prepare for?? What paperwork is involved?? Can I even expect to do this since it is in Chapter 11?

And as a side note, I LOVE THIS SITE.. It is because of you all that I even realized that this option and many others have existed that I didnt know about.. Thank you all in advance and god bless!!

Edited: 06/26/2010 at 10:10AM

Mitch Freed

Real Estate Investor · Portland, Oregon

212 posts
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Icon_minipost Oct 22 '09, 08:45 AM

Hi Shane,

First step is to make contact with the homeowner in pre-foreclosure. Are these leads coming to you from a source that has a foot in the door...or are they just addresses and mortgage balances?

Let's look over the BK for now just to simplify.

You will need a purchase contract, letter of authorization, and proof of funds letter for starters. The letter of authorization is what gives you the authority to speak to the lender on behalf of the borrower.

What you want is to make contact with the foreclosing lender, fax in the auth letter and find out what sort of short sale package they require to you put together, if any.

Once you get the package submitted, your next step is to get the bank to order an interior BPO (Broker Price Opinion.) This is where an agent, hired by the bank, meets you at the house and valuates if for the bank. You want this value to come in as low as possible...so meet them at the house and point out everything that could possibly de-value the property. There are a lot of strategies here.

Once that value gets back to the bank...they will compare it to your offer, along with comparable sales that the BPO agent also submits...they will accept, reject, counter.

This is an overview.

Edited: 06/26/2010 at 10:12AM

Shaun Steckler

Foreclosure Specialist · Lafayette, Louisiana

68 posts
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Icon_minipost Oct 29 '09, 04:09 AM

You mentioned the seller filed a Ch 11, do you think it might be a 13 or 7? Just checking.

Once the seller filed for BK, everything stopped. The lender cannot foreclose and you cannot negotiate a short sale.

You will have to wait until the legal dust settles before moving forward on this one.

Edited: 06/26/2010 at 10:17AM

Marcus Mccray

Real Estate Consultant · Monrovia, California

73 posts
549 Influence
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Icon_minipost Nov 01 '09, 03:24 AM

I am in the same boat as Shane in looking for help. I do however have experience in negotiating short sales and closing them as a Realtor.
-Seller has verbally agreed to accept my offer which is less than what seller owes in order to resell it
-Seller owes $129K, home is worth $139k>
-So far there is no Realtor, agent, or broker involved just me and seller
-Seller is current on payments but in can't make Nov payment

Am I wrong in assuming its not safe legally to negotiate with the bank myself?
And if so how would you guys suggest I go about it?

Edited: 06/26/2010 at 10:20AM

Scott Hubbard

Rehabber · Tucson, Arizona

1025 posts
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Icon_minipost Nov 01 '09, 10:37 AM

Originally posted by Marcus Mccray

I am in the same boat as Shane in looking for help. I do however have experience in negotiating short sales and closing them as a Realtor.

With all do respect, negotiating a short sale for a retail buyer is completely different than as a investor. With a retail end-buyer, you need only to get somewhere near the BPO. As an investor, you will need to be far below the BPO and be able to justify that number. The difference is night and day.

Originally posted by Marcus Mccray

-Seller has verbally agreed to accept my offer which is less than what seller owes in order to resell it
-Seller owes $129K, home is worth $139k>

How much is your offer? It does not matter what the home is worth, it matters what it will sell for quickly.

Originally posted by Marcus Mccray

Am I wrong in assuming its not safe legally to negotiate with the bank myself?
And if so how would you guys suggest I go about it?

Legally you should be fine as long as you disclosed, in writing, your an agent.

Edited: 06/26/2010 at 10:20AM by Scott Hubbard

Marcus Mccray

Real Estate Consultant · Monrovia, California

73 posts
549 Influence
3 Awards

Icon_minipost Nov 01 '09, 11:22 AM

Thanks for your help on the other thread as well Scott! I have all that down as far as negotiating as Realtor and investor and needing to support your offer and have taken care of that. I focus on getting all my short sales approved at the lowest possible.
The real issue was if I would run into trouble if I negotiate w/ the bank myself even with full disclosure of being an agent (although not in that state) and being the principle as well as the normal wholesale disclosures.
I am willing to outsource but I am very cheap when it comes to something I can do myself and it being just to save time.

Edited: 06/26/2010 at 10:20AM