Pre-Screening Short Sale Leads

I am very picky on the short sales that I will buy and process.  I prefer to do less deals that I know almost 100% of them are going to go through and receive higher profits.  The houses that I don’t want to buy are still good leads, just not for my investment company.  So what I do is refer them over to my brokerage company who then lists their house.  I’m a believer in quality versus quantity.

The House

The deals I’m looking for are houses in need of repairs.  My exit strategy is fix and flip or fix and hold.  So any home where the BPO has a better chance in coming in low, the better.  It’s very hard to justify a pretty house to come in low.  But if it’s an ugly house, our odds of the BPO coming in favorably get increased substantially.  The houses I’m looking for are complete rehabs, dated, cluttered, don’t show well.  Any home that a normal buyer would not want is what I’m looking for.  I always have my assistant verify the condition.  I’ve had homeowners tell me their house is beautiful and they end up being complete rehabs.  Everybody’s opinions regarding their house will vary. I’ve had homeowners tell me their house is so trashed and needs so much work and it looks nice.

The Sellers

I only work with sellers who want my help and won’t give me a hard time.  The must cooperate in order for the short sale to proceed.  This is going to be a long term relationship and they must be willing to work with you or your realtor by providing documents in a timely manner.  If the homeowner is hostile, rude, mean, crazy or asks me to do illegal things, I refuse to work with them.  I’ve been burned too many times and have learned my lesson.  I once had a homeowner call my assistant up screaming asking us to remove them from the mailing list then hung up.  We removed them from the mailing list.  Months later they call us back desperate for help and apologized for their rude behavior.  I did the short sale for them and got an approval letter to buy their house.  As soon as I got the approval letter they said they didn’t want to sell and wouldn’t close.  They just wanted to use me to buy them some time.  Avoid those kinds of homeowners as well.

If any of my homeowners show any sign of craziness I won’t work with them.  Sometimes you won’t know until you get involved.  We have a short sale that is listed right now and under contract and the seller has suddenly decided he wants to sell his house with no appliances, no kitchen cabinets, no doors, and no light fixtures.  He is selling to a retail buyer getting a loan and he is not willing to cooperate anymore.  When homeowners get to this point, it’s time to cut the cord.  If you don’t things will get heated and escalated and that’s when they start bad mouthing your company or turning you into the BBB for no reason.

The Foreclosure

I have a rule of thumb that if the foreclosure is less than 2 weeks away I won’t work with them unless they first call their bank to get permission to do a short sale this late in the game.  There is no need to make this a rush in the last minute to try to get the sale postponed.  It’s too stressful.  There are some banks that will postpone right before the auction, however you need to have a 100% completed short sale package.

These are just a few ways I pre-screen my sellers.  There certainly are more things to look out for.  You definitely will learn as you go and you’ll encounter a lot of crazy things deal by deal.