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 beastAs 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
http://www.shortsaledeals.com
Mr. Fowler has been a real estate investor for over 15 years specializing in the area of pre-foreclosure/short sale investing. He has bought and sold over 200 homes in Georgia, Florida, Louisiana, and Tennessee using the same short sale techniques that he teaches in his course, Making Money with Short Sales: The Complete Guide to Acquiring Property Pre-Foreclosure. Mr. Fowler currently resides in Atlanta Georgia. He also spends many hours per month teaching his creative real estate investing techniques to other aspiring investors across the country.