Short Sales

Foreclosure Wealth System is a program by DC Fawcett for real estate investors wanting to profit from short sales. Let’s dispense with the basics first.

In theory short sales are cool.  Banks don’t want to own houses. They don’t like to foreclose.  Going through a statutory  process of sending notices, hiring a law firm, complying with timelines for posting a home for a sale, and tfinally taking it to the auction block is already pretty expensive.

Bidding At The Auction

Most loan balances called out for bidding at the courthouse auction are high, so bidders aren’t exactly going crazy.  An average EBay auction probably sees a lot more action than a 1,000 overfinanced houses posted for auctions combined might produce.  

No wonder banks end up with most houses posted for foreclosure auctions. But they’re far from done yet. They have to endure a lengthy and painful REO listing cycle with more expenses on vacancy, property taxes and commissions, and even an occasion repairs.

Selling REOs Is Expensive

To add insult to injury,  investors hunting for bargains smell blood as soon as they learn the house is an REO. These bargain hunters will bombard the REO department with low ball offers.

Considering all of the above, they want to entertain other options whenever they have a bad loan on the books.

Other Options For Bad Loans

One of them is loan modifications when the owners want to keep the house and have the means to pay.  However, a lot more common scenario these days is when the owner doesn’t care to continue making payments on a home that’s 25%-60% under wanter.  I.e. the mortgage balance is A LOT higher than current property value.

Than a short sale offer might be considered by the bank. I.e., they’ll look at the offers at prices well below the loan balance and will entertain taking less for their loan balance owned to them… Sometimes a lot less.  

The #1 Problem With Short Sales

On paper it all sounds good. And yet, short sales are the LEAST favorite buying strategy for most real estate investors. The most annoying part of short sales is – they just drag for too long. An average investor doesn’t want to wait that long for a decision, and doesn’t have the skills and patience to keep coming back again and gain to the bank’s loss mitigator to get that short sale approved. 

Why Does It Take So Long?

Bankers, just like you, like to keep their jobs. They don’t want to take responsibility for selling off the loans at big discounts on onesy-twosy basis. Certainly, they’re not goin going to discount the loan in response to the the first low ball short sale offer they get.  Sometimes there may be multiple investors who own the loan…

Either way the decision making could take a long time.

So Do You Abandon Short Sales Altogether?

Most investors submit a couple of short sale offers that linger in the LA-LA land, never get a response, get fed up with the entire process never to return to short  sales again. 

Yet some investment companies hire staff, train them and hang on in the game long enough to make short sales pay very well. They do all the paper pushing, play  the waiting games, keep tabs on lots of files,  establish relationships with bank loss mitigators, learn to negotiate with them, keep re-submitting offers again and again… until the magic happens and they get that ridiculously low offer accepted.  

The more successful companies also figured out to play for bigger chips. They specifically target more expensive, high end properties that are harder to sell and cause the biggest amount of disconcert to lenders.  Bank tend to be more lenient, negotiate discounts more aggressively and make decisions faster when it comes to high end properties. The investment companies playing in the “luxury home” league also line up short term financing to tie up and flip the property to another buyer.

Short Sales For Small Under-Funded Investors

For those investors who don’t have the stomach to endure short sales paper pushing, waiting game and follow up offer submissions, there is a way to play too. It’s to partner up with one or more companies that run an outsourced short sale negotiations program and have these companies negotiate their deals with lenders.  Some companies in this business work for a flat fees. other for fees based on the loan size they negotiate. Yet others work for a piece of action (partnership profit split).

One cotcha in this area is to look out for the upfront fees, so called “submission” fees that negotiators can charge upfront regardless of whether or not the short sale negotiations are successful. Your best bet is to avoid companies like this. It’s always safer to pay of your profits, even if it’s a bigger cut you’re giving away.

If you owned a hot dog stand, would you take it to the university parking lot during a weekend football game…

OR

would you drive it to a park on the other side of town?

That’s a no brainer, isn’t? You’d be selling to tailgators all day long.

Then why aren’t you putting your real estate investing stand where the biggest opportunity in real estate investing is — the government endorsed and subsidized Short Sales?

You could become filthy rich by following the biggest short sales trend we’ve ever had. And it’s reenforced by powers that be as we speak. It’s the trend that’s happening with or without you. You can stay ignorant, or you can make the trend your friend. More >