Anyone who has ever profited from doing a short sale has also without a doubt
had one or two rejected at some point. Guess what? It is just the
nature of the beast…As with all types of sales; you’re playing a numbers game.
There are very few investors who truly
know how to successfully negotiate a Short Sale. We find that most
investors have the perception that all that is necessary is to submit an
offer and wait for the bank to give you an answer. If all goes well the
offer will be accepted but in many cases it’s not that simple.
That’s why a strategic plan is
necessary. “What do you mean?” You ask. A strategic plan means making
the deal go your way by persuading the lender to agree with your offer.
There are several steps that will ensure
your success when negotiating with lenders.
First of all, you must be able to
determine if you indeed have a short sale opportunity on your hands. Many
investors are under the misconception that every homeowner facing
foreclosure is a good short sale candidate. This could not be any further
from the truth. One of the most common mistakes made by investors is
attempting to fit a square peg into a round hole. Not all deals are good
short sale opportunities. You must know the difference between a good and
a bad deal. Period! You’ll have to analyze the deal and develop an
excellent plan of attack if you want to truly master the art of the Short
Sale.
Second, you must not take no for an
answer. No can never be the final chapter to your negotiation. If the
lender says no you must ask yourself why. There must be a reason. Why
did they say no? Is there anyone else I can speak with? Was my offer to
low? How does the lender determine their bottom dollar? What else can I
do? What was the BPO amount? These are just a few of the questions that
need to be addressed each time you are met with some resistance from the
lender.
We’d like to share an awesome deal that
one of our students closed recently. His name is Thomas Stockman.
Thomas got a call off of one of his
signs from a gentleman that had two properties in foreclosure. The two
properties were on the same street and were bought as rental homes within
the last year. Consequently, they were also financed by the same mortgage
company. One property had a mortgage balance of approximately $150,000
and was in need of several thousand dollars worth of repairs. The other had a
mortgage balance of $156,000 and was currently being rented for $1,100 per
month. Both properties had very little equity but the neighborhood had been
very active over the last 9 months. After qualifying the two potential
deals he decided to attempt short sales.
He contacted the bank and began the process. His offer on the first house
was $89,900 and $95,800 on the second house. The bank rejected both and
asked for higher offers. After several conversations and some additional
documentation to justify his offer, Thomas was able to get both properties
for a total of $60,000 below market value. Thomas rehabbed the first property for
$3,500 and put it on the market for sale. Since the second property was
already occupied by a tenant he decided to keep it. His mortgage is roughly $400 per
month (interest only loan/taxes paid at year end) he makes $700 in monthly
positive cash flow. Not bad for a beginner (wink).
This would have never happened if Thomas
accepted NO from the bank. If he would have not known what pressure
points to touch and how to counter without increasing the offer amount we would not be talking about these deals.
This type of outcome is customary when
you are equipped with the necessary tools and know how to turn a “No” into
a “Yes” just by slightly adjusting your approach. Thomas got two great
properties with lots of equity and a constant cash flow, the homeowner
avoided TWO foreclosures, and the bank was satisfied.
Remember, the next time you are putting
together a short sale offer, be prepared and take control of the deal.
Never take NO for an answer. Be proactive not reactive. Don’t just
submit offers without having a game plan. Do yourself a favor and take
advantage of the opportunity to make lots of money in an industry where
great deals are hard to come by. We hope that you have learned something
and are on your way to much success.
Best Regards,
D.C. Fowler, Real Estate Investor/Educator
Click Here to
read excerpt from Making Money with Short Sales entitled
Let's Get Started: Your First Phone Call From
the Homeowner.
