Every short sale guru has a secret to share, but their secrets to successfully negotiating a short sale approval can get pretty crazy. Their spreadsheets have never been seen before, they’re the only ones who know the magic words to open the approval door, and they know how to work an inside job in the loss mitigation department. It’s mostly a bunch of baloney.
After surviving hundreds of short sale negotiations, my colleagues and I have found that there are several components to getting a short sale approved – and none of them involve immediate acceptance. It’s about knowing what challenges to expect and implementing a few strategies to make it easier to meet them.
The real secret is to get to know your opponent. You have to learn how loss mitigators look at a short sale and what they need to get out of the deal if they approve one. If the property goes into foreclosure, the lender always loses money. Debt collection involves paying attorney fees and losing interest income from the unpaid mortgage. Maintaining REO properties involves appraisal fees, realtor fees, and property maintenance fees. Having another foreclosed property on their hands is not in their best interest.
There’s no baloney about achieving real success in a short sale negotiation. Here are my ten best tips for making the most of your deal.
1) Submit a complete short sale package and make sure it gets assigned to a mitigator quickly. If it doesn’t get assigned, the offer will never be seen. Make sure to follow up and see if the lender has received your offer. Lenders lose short sale packages all the time or claim they never received them. Don’t let this happen to you.
2) Be persistent. Lenders are swamped with foreclosures. They have trouble keeping up with all the short sale cases they are working. The only way to push things forward is to make sure you are pleasantly persistent. Don’t call every day. Call every other day or every third day. When you call, don’t leave a message every single time and make your first impression as a pest. Just hang up and call back.
3) Find out who owns the loan (FNMA, FDMC, FHA, VA, conventional). Make sure to ask the mitigator who owns the loan and record this in your notes. Trust me – it will make negotiating much easier. Each loan investor has their own idea of what they will and won’t accept from a short sale.
4) Summarize your offer for the loss mitigator and ask them to get an interior appraisal or BPO as soon as possible.
5) Conduct an effective BPO.
6) Pull a title report after the BPO is done so you can resolve any outstanding issues before the closing.
7) Ask the loss mitigator what value the BPO appraiser submitted. They may not tell you, but then again they might. Expect to pay around 90 percent of the appraised value.
If the bank will not tell you the BPO, you have to get them to make a counteroffer. (Most of the time, their counteroffer equals the BPO figure anyway.)
9) When you submit your counteroffer, include additional documentation to back up the amount you’re offering. You can use repair estimates, low comps, negative news reports about the neighborhood, and even the MLS listing itself, which shows how many days the house has been on the market.
10) Make sure the lender knows you’re a cash buyer and can close quickly.
We’re not selling any magic potions, and we’re not selling any hyped-up baloney. The truth is much more powerful. Lenders don’t normally view short sales as their best option, but short sales aren’t their worst option either. All you have to do is convince the loss mitigator that your solution makes the best financial sense for them. If you’re ready to educate yourself, develop a good attitude, and be persistent, you can successfully negotiate a short sale.
Need to learn more about negotiating short sales? Check out the Strategic Real Estate Coach website and gain access to everything you need to know about loss mitigation in America!
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