By Deb McMillan
Parts I and II of this article series detailed two mistakes to avoid when making a short sale. The first is not to believe that short sales are quick and easy. The second is to remember that banks do not lose money on short sales.
Now Part III tackles the final three mistakes you need to avoid when making a short sale.
Bogus Belief #3: Seller bankruptcy stops foreclosure.
Many sellers seem to believe that if they declare bankruptcy, the lender can't foreclose, allowing them to stay in the property forever without paying.
As the investor, this bogus belief makes trying to convince the seller to cooperate in a short sale difficult. Why would they want to sell if they think they can live free forever?
So it's your job to be aware of this myth and inform the seller that bankruptcy actually DELAYS the sale for a number of months but does not stop foreclosure. This is therefore a critical fact to remember when talking to sellers in pre-foreclosure.
Bogus Belief #4: If the foreclosure auction is less than 6 weeks away, it's too late to negotiate a short sale.
I used to believe this one myself. But that's because I was making the mistake I warned you about in Bogus Belief #2. However, once I discovered that banks lose more money by not letting investors buy the property before the foreclosure sale, I realized that some lenders are actually willing to delay the auction in order to complete a short sale.
By attempting to negotiate a short sale even if the foreclosure auction is less than six weeks away, you're helping the bank save money. And you're helping the homeowner save his credit.
Bogus Belief #5: The seller can't get any money if you're not paying the bank in full.
This is true. Unless you are creative.
It is true that the seller can't get any money for the sale of the PROPERTY that might appear on the closing statement. And this could be a deal-breaker for the seller who needs that $500 or $1000 in cash to move. Only there is a way to legally circumvent this dilemma.
Simply buy something else from the seller, such as appliances, furniture or any of his personal property you can use. Then put your purchase on a separate bill of sale, NOT on the closing statement.
It's perfectly legal for the seller to get money, but keep in mind that it is impossible to get the bank to accept a short sale when there's money for the seller listed on the purchase contract or the closing statement.
Most bankers realize you are probably giving the seller something to get out of the house. They just don't want or need to know about it.
About the Author: Deb McMillan, OPHP, CMI, is a real estate investor and writer, living in Hamilton, Ohio, and has written a home study course on Short Sale Success Systems detailing how to get deep discounts from the bank when buying pre-foreclosures. She has been investing in real estate since 1986 and buying, selling, and teaching short sale strategies since 2000. She teaches how to talk to sellers to get them to do what is necessary to save their credit and reveals strategies to negotiate with the banks to get deep discounts when you buy the real estate. She also teaches about bankruptcy and what you can and can't do once a homeowner files. Log on to http://www.shortsalesqueen.com for more information on how to make your deals close.
Source: www.isnare.com
