The Real Estate Short Sale Process Step-by-Step

Real estate investors can frequently make very profitable purchases of real estate through a short sale. Many short sales do not get approved or fall through for a variety of reasons. Learn here the step-by-step process to initiate a short sale, starting with the homeowner-borrower and moving through lender negotiations to the closing.

1
8 Tips To Get You Started In Short Sale Representation

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The short sale niche is certainly growing in importance and popularity.  Lenders are overwhelmed with foreclosure properties, and the word is that they're getting a little easier to deal with on short sale offers.  A successful short sale helps the lender to avoid yet one more foreclosure home on their books.  These 8 tips will give the real estate professional a quick look at what they need to be aware of in working with sellers and lenders in a short sale transaction. More

2
The Property Valuation Analysis for a Short Sale

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Short sales will not work if there is sufficient equity in the home for the lender to sell it and at least break even in a foreclosure. The homeowner must be "upside-down" in their loan. Learn how to determine if this is the case.

**Update:  Since this was written short sales volume has dropped significantly as markets improved.  However, even into 2016, there are still homeowners underwater in their mortgages.  Prices have been rising, so they're not as far under as in the past.  

The good news is that it gets easier to come to a price agreement when the home's value is closer to the mortgage.  People who have been waiting for years to get back the equity they lost during the housing and mortgage crash may not have any more time to wait.  This could be a good time to look at helping them out through a short sale and getting a great deal on a good home as well.

3
Contacting the Lender for a Short Sale Application

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Jim Kimmons

Lenders will not talk to investors, potential buyers or real estate agents unless they are instructed to by the borrower. You will need to get their approval in writing, contact the lender with that approval, and make the first telephone contact. Learn about it here.

Don't expect a hearty welcome.  They really aren't excited about short sales or working with investors.  You may have to keep after them to get the process in gear.

4
Writing the Hardship Letter for a Short Sale

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The hardship letter is the cover for the short sale package. It is a lot like the cover letter for a job resume. It must be convincing and complete. The lender must get the first impression that it's a short sale or a foreclosure or bankruptcy.

"Hardship" means exactly what it says.  The more you have to convince the lender that the borrower's back is against the wall, the more likely you are to get a good response.

5
Backing Up the Numbers With the Short Sale Package

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The meat of your short sale presentation backs up the statements made in the hardship letter. You prepare a thorough and detailed set of documents and financial data to support the claim that a short sale is a good solution for the lender.

Do a CMA that supports the view that the home isn't going to sell for as much or more than your offer in the current market.  

6
Elements of a Short Sale Purchase Agreement

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Learn the things you need to consider in the preparation of a short sale purchase agreement. Where should you get one? Do you need an attorney? What elements need to be present in the purchase agreement? More

7
What the Lender Does With the Short Sale Package

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If you prepared a thorough short sale package, the lender will be evaluating your numbers and getting some of their own. Learn about it here. More

8
Negotiating the Short Sale with the Lender & Going to Closing

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You may have to go back and forth with the loss mitigation department at the lender to get an acceptance of a short sale. Learn about this negotiation and the importance of a fast close.