WHY SHORT SALES DONT WORK!!!!!!!! - Posted by M.Simmons

Posted by Andy on June 07, 2005 at 01:35:30:

Can anyone recommend a good economical course for Short Sale?

WHY SHORT SALES DONT WORK!!! - Posted by M.Simmons

Posted by M.Simmons on June 06, 2005 at 17:51:54:

This is an article I saw posted.I have never done a short sale but I was interested in getting into these pretty soon until I saw this article…Please post your thoughts especially the short sellers who are doing short sales…

Here it is::::

Does this sound familiar?

"With the latest in discounting techniques, you will learn how to steal
properties from the banks and create giant profits for yourself"
Welcome to the newest twist in Guru Marketing: ?Short Sales, The Hottest Topic in Real Estate Investing Today.? (Hot topic for WHOM, I wonder?)

Not a day goes by that I don?t get an email asking me about short sales?

how do they work? Do you do them? Are they the ?best way? to find a deal?? and so on. Before I answer those questions, let me give you a bit of background on banks and foreclosures.

So what are Short Sales?

A short sale occurs when a lender agrees to write off the portion of a mortgage balance that’s higher than the value of a home. A buyer must be on hand and ready, willing and able to purchase the property.

Why would a lender do that?

It would seem simple. Banks are in the business of loaning money, not managing and selling real estate. Although they may seem quick to pull the foreclosure trigger, they also want to minimize their holding expenses and any losses.

One way to accomplish this is to sell the property through the Short Sale process, to keep from owning the property (aka: REO property) through foreclosure. If they do nothing, and let the property go through foreclosure, they will end up owning a property they didn?t want in the first place, along with the costs of the foreclosure process, and holding expense as long as it?s on their books.

But there is more to it than this. Please read on.

When I first started in the foreclosure business in the late 1980?s, most banks didn?t have a REO (real estate owned) department. Forget about a Short Sales department, they just didn?t exist. Any bad loan simply went back to the loan officer, as a form of punishment. Great idea huh?

That poor loan officer (aka: REO asset manager) had to do it all. They had to foreclose on the property, hire the team to fix it up, manage it, and then sell it. As an REO property they had more time and costs invested, and often times sold their properties for a bigger loss than if they had ?cut their losses? by doing a Short Sale in the first place.

At the same time, during the late 1980?s, our real estate markets were in a mess, with a banking crisis, rising interest rates, falling property values, and a new tax reform act to swallow.

But back then; lenders just weren?t as organized as they are today. They did the best that they could. I was thankful for that. I bought a ton of property at very deep discounts. Banks wanted cash and ?as is? quick sales. And for that, I got tremendous deals. Those were the days?.

Fast forward to 2004.

Banks now have full Short Sale and REO departments and are ready and able to facilitate deals in the best interest of their bank. They have agents doing BPO?s (brokers? price opinion) for them, as well as doing all their legwork (for a measly 5% commission that they have to split with the buyers? agent). They work their agents to death, get their houses on the market quicker and sell their houses for over market value!

Yes, Banks are our competition now! (Read more about this here.)

What does the coming foreclosure wave mean?

Most agree foreclosures are at an all time low, but the foreclosure rate is now growing. It’s my belief it will continue on an upward swing for the next two to four years. (Read more about that here.)

More foreclosures mean more investment opportunities for investors. It also means that our escalating real estate values are not sustainable, and some of our equity run up will simply go away. How much equity will evaporate is hard to predict. (Read more about my thoughts here.)

But what I do know is that with less equity, fewer owners will be able to borrow their way out of trouble. These owners will be faced with doing a Short Sale or letting the property go back to the bank as a REO foreclosure.

What I also know is that as an investor the pendulum will shift from being ?hard to buy and easy to sell? to being ?easy to buy and hard to sell?. (Read more about that here.)

Here is Why Short Sales Don?t Work.

Yes, the Short Sale can offer a softer financial landing than bankruptcies or foreclosures, provided you survive the turbulence on the way down.

But, what no ?Guru? will tell you is the truth about the tasks required to get a short sale approved, or the likelihood that your wholesale price will not be accepted.

Short Sales involve much, if not more paperwork than the original mortgage application itself. Plus, it is an extremely difficult real estate transaction for a consumer to get approved. Here are just a few of the reasons:

  1. Tons of Paperwork:

Instead of the owners proving their credit worthiness and financial stability, as they must to get a loan, they now must document that they are broke. They must be without cash flow, and have no other assets, including savings, investments, trusts, liquid retirement funds or other finances to tap. Wait until you see the list of papers the homeowners will need to accumulate to prove they are worthy of doing a short sale. It will boggle your mind.

  1. Fraud from the Past:

Ironically, while they are proving their insolvency they may also reveal the dark under side of their original loan application. Their insolvency today could be rooted in financial trouble that began before they purchased their home. That spells trouble if they didn’t reveal things to their lender in the beginning, and who could now consider their tight lips at the time of application to be fraud from the past.

  1. Those who will Stand in Your Way:

Property encumbered by a second mortgage will likely kill a short sale deal, because the second lender often won’t remove its lien and risk losing its investment. A private mortgage insurance holder will also want to protect its interests.

  1. No Wholesale Deals:

Before the owner can even approach the lender they must have a firm ?market value? (you read correctly here that no ?wholesale? deals will be accepted) offer from a qualified buyer (that means you must be rock solid financially) and a broker who can negotiate the deal (like there?s room to pay a commission).

  1. More Costs for the Owner:

And when the owner can least afford it, they will have to hire an attorney to negotiate what the lender will report to the credit agency.

  1. Tax Bill Nightmare:

If they finally do qualify for the short sale, it isn’t over until the tax collector sings. Any remaining difference between their home’s value and the balance on their mortgage is considered a ?forgiveness of debt? and in virtually all cases, that means a 1099 is coming in the mail. Yes, you read right. The owner has to pay taxes on their loss, as if it were earned income that year.

closing short sale on friday! nt - Posted by ken in sc

Posted by ken in sc on June 08, 2005 at 06:18:02:

nt

Re: WHY SHORT SALES DONT WORK!!! - Posted by Rob FL

Posted by Rob FL on June 07, 2005 at 08:36:33:

I will have to remember all those excuses on the next short sale I do. I do agree that short sales are more difficult now then they have ever been because alot of the markets are booming. But I have been able to do about 10 short sales in the last 4 or 5 years, so I know that they can happen.

The big problem with short sales is that they take alot of effort for only a 50% or so success rate. I tend to shy away from them unless the deal looks solid except for the first lien amount.

Re: WHY SHORT SALES DONT WORK!!! - Posted by EquityHunter

Posted by EquityHunter on June 06, 2005 at 19:26:48:

Why don’t give the credit to foreclosures.com where you copied this article from. It’s true short sales don’t work in the majority of cases. Yeah, you could get lucky and so could I playing Lotto. The reasons stated are solid. And BTW, it doesn’t matter what area you are in if you are dealing with a national lender. They treat all short sales the same. If short sale really worked this site would be flooded with success stories, not one or two. Go for prefcs with equity and let the banks take the others back. You’ll spin your wheels and get so frustrated you’ll quit.

Re: WHY SHORT SALES DONT WORK!!! - Posted by Foster

Posted by Foster on June 06, 2005 at 18:45:48:

I post this to confirm the history portion of what you say. I remember back when and I do mean WAY BACK.
In the 1980’s in Southern Calif. The lenders were hurting to the point that a loan officer came to my office and offered me two SFR with 100% financing plus funds to do the repairs if I would take them as is. He knew I would fix them up and re sell PRONTO so he got his $$$ back fast with little risk. They say history repeats it’s self so lets get ready guys and gals!

Re: WHY SHORT SALES DONT WORK!!! - Posted by Greg

Posted by Greg on June 06, 2005 at 18:36:58:

First, Banks are not dumb. I think short sales can work. But this depends on the local market. It’s not easy for example to get short sales to work in the northeast metro area. Because even crummy areas can fetch high prices. In this case, depending on what is owed, the bank might be better to take back a home through foreclosure, and then they may get more for it. In other areas of the country, again depending on market conditions and demands, they might work. I know it not as easy as some of the course sellers would have you believe

Re: WHY SHORT SALES DONT WORK!!! - Posted by adam

Posted by adam on June 06, 2005 at 18:22:17:

wow thats pretty crazy. i was thinking about getting dwans course, i knew it had to be harder than she makes it out to be but not that hard. well i must say i know there has to be someone on here who is making it work. afterall we are all here to be creative

Re: closing short sale on friday! nt - Posted by sticky

Posted by sticky on September 28, 2005 at 11:38:19:

Ken-- is there a “success” story attached to your closing your short sale deal? I was hoping to hear a few stories (thumbs up or down) while in the middle of doing my own first s.s. deal. Thanks.

Re: WHY SHORT SALES DONT WORK!!! - Posted by Mike (Seattle WA)

Posted by Mike (Seattle WA) on June 07, 2005 at 13:17:48:

Gotta chime in. In Seattle, RE is red hot, and yet I’ve seen 2 short sales come to me as deals in the last month. They do work - but you may not get a huge amount of debt relief. Still, 20K off of a 350K loan is the difference between no deal and an ok one :slight_smile:

Re: WHY SHORT SALES DONT WORK!!! - Posted by Darren

Posted by Darren on June 07, 2005 at 12:26:52:

Do a key word search on Google for Mark Sumpter. Very smart and down to earth guy.

Re: WHY SHORT SALES DONT WORK!! - Posted by Bianca

Posted by Bianca on June 06, 2005 at 23:17:52:

Wow… what a lot of negative information…
Of course it works… and all of my sellers are still thanking me for doing theirs. It may not be simple at the beginning… but neither was riding a bike the first time you did that. This is not brain surgery, and it is a great service that gives people incredible relief. I only do 3 or 4 a month, but I know people that do 10 times that amount. The paperwork IS significant, but it’s the SAME paperwork each time so you can develop a template and checklist from your first deal and use it over and over again.
I do lots of other types of deals, but short sales have their very own type of rewarding uniqueness they bring with them. The key to short sales is empathy.
If you truly want to help people and you don’t make it all about the money… this is a great business… and don’t get me wrong… the money is pretty great as well. Word of advise… Don’t try to do it without taking a course. There are so many good ones out there. Some expensive, some very inexpensive.
I haven’t found the expensive ones to be all that much more informative then the inexpensive ones. In the end… whether you pay $10.00 or $10,000. Your return is still $.00 if you do nothing with it or you
give up too quickly.

Course Recommendation? - Posted by Rainbow

Posted by Rainbow on May 11, 2006 at 19:21:06:

Do you recommend any specific course?