Elk Grove, CA · Member since 2016 · 70 posts · 19 votes
Hi Everyone,
I'm new to real estate, and still looking for my first deal. Originally I was thinking about doing short sales, but after hearing about the process, I thought about just sticking to fixer uppers starting off.
I've read about the process it takes to get a short sale to work, but I don't know of the benefits of doing short sales. What is it about this type of property investment that would make it worthwhile?
Short Sales can make great buys because you may be able to pick it up at a discount. Yes, they can be a long process and at times they do not pan out. At times they are a quick process and they do work out extremely well.
Here is a very primitive example. You feel the home is worth 1M as-is and the bank does a value that comes back at Est. 900k ( mix of luck and comps in the area. ) You buy it hopefully in the low. 800's.
You are hoping the banks value comes back reasonable or on the lower end and then you may have a chance of picking it up at a discount of their established value. Guidelines differ from investor to investor in regards to their bottom line in relation to their FMV.
@Sheldon Alex Pro is getting a discounted property. Con is waiting and waiting for approval. I've had clients wait 6 months then get denied. I've personally purchased 1. It took 3 months as it was a pre-approved short sale at the asking price. I put in a full offer. I wouldn't limit yourself to just short sales. Keep an open mind and network with wholesalers to get discounted properties. Good luck and keep us posted.
Thank you @Brett Goldsmith and @Michael Barbari for sharing that. So what do real estate investors usually do with a short sale property once they get it approved at a discount? Do they fix it up and resell it or use it as a rental property?
@Sheldon Alex That is completely up to you. Every investor has their preference. I'm a buy and hold guy. Many on here make a lot of money fixing then selling. Find what interests you most then take action.
That's interesting to know @Brian Gibbons. So that can potentially give someone who buys a short sale property some level of flexibility on what they want to do with it after approved then correct?
Sounds good. Though it definitely won't be the only type of property investment I'll do, I'll attempt at doing one down the road. Thanks for the info @Brian Gibbons
I see! So overall your chance of getting the property at a discount is at the mercy of the bank. That's why short sales will never be my primary focus, though I won't rule it out. But I guess it's easier for banks to just foreclose properties to save the headache of the entire short sale process.
@Brian Gibbons you sound like you know what you're doing.
Can you help me out with the below scenario? I keep hearing that NET is the most important to a bank, but I can't imagine how they could possibly net. It's also a strange scenario as the bank didn't initiate the short sale or foreclosure for that matter. The owner hasn't paid mortgage in about 5 years, after vacating the property. It's destroyed. Do you have any tips at how to go about this? I found the owner and we called the bank together to talk through our options. I'm now authorized on his account and have been the one communicating with Citi Bank. Any tips on how to get ahead of the curve here? And influence the path this takes? I am lost...
Scenario below:
I met someone who has abandoned his house and mortgage. I have no idea how this slipped through the cracks and didn't foreclose...but it didn't. I've been dealing with Citi Bank, telling them the owner wants to give me the house, as he wants nothing to do with it. He owes $41k in remaining principal due and a total of $89,908 for all the past interest, unpaid taxes, etc. due. The house is all but falling over. It's not work even $25k. The bank got me started on paperwork to move through the process as a short sale. I wish we could settle, but this is what they say must happen. They are getting a BPO (I'll be meeting the BPOA at property to escort them into the house through the only window that isn't boarded up) and assigning the short sale to an agent. I plan on making the work easy for the BPOA by running all the comps, taking pictures, etc. basically doing the work for them. Citi wants me to work with them to help the seller fill out his paperwork, etc. One of the forms is a "Uniform Borrower Assistance Form". To fill this out in my advantage, what should I select for the "I want to" line item? The options are: a. Keep the property (no, owner wants nothing to do w/ it),
b. Vacate the property (owner has already done this, it's been abandoned for 5 + years)
c. Sell the property (he wants to walk away. so what's the difference between vacate and sell?)
d. Undecided
Owner just wants to get his name unattached from this house and move on, and I am trying to make it as painless as possible for him. From a bank's perspective, what would be the best option here? Remember, he owes $41k principal, $89k total balance, and the property is worth less than $35k.
The deal is basically between me an the bank, but I am assisting the homeowner.with the paperwork. Am I making any sense here? Is there high risk that this won't be approved for a short sale because of the condition of the house? I just don't understand why the bank would take it to foreclosure if I'm willing to make a reasonable offer at $30k with a remaining principal owed of $41k. After reading some notes here on BP I'm starting to wonder if this is going to quickly turn onto a foreclosure. Are there reasons why banks would go for foreclosure over short sale in cases like this? I just don't want to continue spending so much time here, only for Citi to take it to auction.
Another question on the Hardship Affidavit-is there one hardship that is the best to check, making this any easier? I'm leaning towards the "reduction in income" selection as it's true and it doesn't require hardship documentation....
As you can see- I need all the help I can get here... Thank you so much in advance to anyone who is willing to reply. :)