Re: Short Sell - Posted by DavePA
Posted by DavePA on April 12, 2002 at 24:59:30:
Gerald, I believe you are talking about Dwan & Sharon. They have been doing real estate together for a number of years. I actually got to hear them speak at an investor meeting. They both really know how to properly handle a “short” sale. Alot, of times they will then flip the properties they tie up to other investors.
To answer question 1: Banks are NOT in the business of owning properties. If a lending institution has a “bad” debt, the govt. penalizes them. Say, the loan balance was 80K. That bank would not be able to lend 6x-8x that amount for future transactions. Which, in essence the bank would be losing $$$. As much interest that they charge, usually 10-20%, when they only pay the people who save $$ at their bank 2-5%.
Question 2: Yes, it is wise to tell the lender that you are helping the people out of a bad situation. You, do not have to tell them that you are a private investor. Either way it might not matter, but that will depend on the lender!
A short sale is a GREAT way to gain “instant” equity in a property. Usually you want to offer 40-50% of FMV. Right now I am currently working on a short sale with Citi-Financial Mort.
The property has an 84K mort. bal. right now. What I am going to do is get some pics. (the bad ones) of the property, do comps for the area, have the tenants sign a “hardship” letter, and whatever else the lender will need from me.
I have done my homework already, and know the house will only sell for 67-72K. Right then and there, no one else would even touch the property. NO equity right?
This is where the short sale works best. You would offer the lender a low figure. I will probably offer 32K for the property. Most likely they will come up with a higher #. They might say 40K. BINGO, you have just negotiated a price on a house that would sell for 67-72K, and are going to pay the lender 40K!! Right there, you can see that even if you sell below the market value at say: 65K you just made 25K. Or, if you need the CASH FAST, flip it to another investor for 10K and make money that way. You, don’t have to settle for the 40K, you can try and get them down lower. Remember, ALWAYS ask that 1 last important question!!! (Is that the BEST you can do?) They might surprise you and say 35K or 38K, either way you just made more $$$.
Better yet, if you decide to keep the property and sell for yourself using a L/O. You, then get to collect an “option consideration” (earnest money) up front. You, can then raise the asking price to 75-80K and make more money that way.
There are many possibilities on how you control and sell a property. I wish you the best of luck in working on these types of deals. I will tell you, it does take time to make the lender see your way!! BE PERSISTANT!.