Short Sales!

 

A Short Sale is when the lender accepts less for a property than is owed.  Why would banks ever accept a short sale?  The answer to this is relatively straight forward:  First the person making the payments on the property is unable or unwilling to make the payments.  This could be because the person is experiencing financial hardship or  because the home is damaged and they don't have money to fix it, or they are relocating for a job, etc.  Second, banks just aren't in the business of owning property.

 

Short sales are negotiated everyday for both single family homes and commercial property.  Because the volume of short sales is so high, on average it takes between 6 - 9 months to complete negotiations on a short sale.  It is also a very time intensive process to do it right and have a greater chance of success. 

 

The best candidate for a single family home short sale is a property that is damaged in such a way that the bank really doesn't want that property back.

  

We now have 5 short sales pending in our investment pipeline.  One of these houses offers a good example of why a short sale might be accepted by the lender.  The owner of the property called in response to one of our marketing campaigns.  He stated he just wanted to sell the house, didn't want anything extra, and asked if we could help him out.

 

We did our due diligence, looked the home up in the MLS and tax records to get a better idea of what the house might be worth.  We were pretty excited to go see this house because when it was listed seven years ago the listing stated that everything in the house was new and he also had low payments.  The big drawback was that he owed much more than the house was worth.  Nevertheless, there were several strategies that could be used to capture the house and help this owner out.

 

When we walked into the house we knew the primary strategies we were first anticipating were not appropriate for this house.  There was one room that was only partially finished in the house but the biggest challenge was the walls in the house were very dingy. I wasn't sure what this was at first but it looked far from new and shiny as the MLS had stated. 

 

In talking to the owner we discovered that this was smoke damage.  We also learned that he had lost his business, was 70 years old, and working for someone else to make payments on the house.  He also told us that he was tired and wanted to live with his daughter.   This house is a perfect candidate for a short sale. 

 

We estimate that with the damage the owner probably owes 8 - 10 times more than the house is currently worth.   You want a tough job, try explaining that to a homeowner, any homeowner.  In this case the owner was realistic he already knew he owed more on the home than it was worth and just wanted to get rid of the burden so the explanation was a little easier.

 

He is still living in this house, in our opinion an unhealthy environment for anyone but even more so for a 70 years old.  Because the property needs a lot of work the bank is even more likely to negotiate toward our offer on this house. 

 

One note of caution though: our goal is to create win-win solutions.  Short sales must be packaged correctly or the property owner can be surprised with a 1099 for income for the difference between the sales price and the amount owed or the bank could still come after them for the difference.  For a bank to accept a short sale, in almost all cases, the property owner is behind on payments.  A short sale may impact their credit scores.  So if you are contemplating a short sale make sure you are performing it in such as way as to best mitigate these  possible negative outcomes.

 

1. They help distressed homeowners move on
2. They expedite the market corrections
3. Once renovated and sold, the houses' new value helps bring up the value of surrounding properties.
4. Last but not least it is a nice way for the trained investor to make a living while helping others.

 

A very successful attorney parked his brand new Lexus in front of his office. He was ready to show it off to his colleagues but just as he was getting out, a truck came along too closely and completely tore off the driver's door.

Fortunately, a police officer was close enough to see the accident and pulled up behind the Lexus with his lights flashing.

Before the officer had a chance to ask any questions, the attorney started screaming hysterically about how his Lexus, which he had just purchased, was completely ruined and would never be the same, no matter how any car body shop tried to make it new again.

 

After the attorney finally wound down from his rant, the cop shook his head in disbelief.

 

 "I can't believe how materialistic you attorneys can be," he said. You're so focused on your possessions that you neglect the most important things in life."

 

"How   can you say such a thing?" asked the attorney.

The cop replied, "Don't you even realize that your left arm is missing?  It was severed when the truck hit you!"

"OH, NOOO!!!" screamed the attorney.

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"My Rolex!" 

 

 

We apologize if we have offended any of our attorney friends.  After all we love the work you do.......... as long as it is in our best interest.