Seven Critical Elements In A Killer Short Sale Package

“Seven Critical Elements In A Killer Short Sale Package”

A Short Sale is a technique utilized to allow you to negotiate with the lender of a property and get the lender to discount the pay off owed on the property to more effectively manage a profitable real estate transaction.

Before we discuss some of the “Seven Critical Elements In A Killer Short Sale Package”, we need to understand when a short sale is applicable.

There are many investors out there that attempt to short sale properties and then apply the strategy of a short sale inappropriately; which not only frustrates the investor and the property owner (whether it is an investor or a owner-occupant) but also frustrates the lender. The misapplication of the short sale strategy and technique often creates an adversarial relationship between the lender’s short sale and/or loss mitigation departments and investors. You have to know how to apply a short sale technique, to make it very effective.

Short Sales Help Avoid Foreclosure

Q. In what situations should you consider a short sale?

A. A short sale is not going to work just because you can’t negotiate the seller down to a price point which is advantageous for you to make a wholesale profit on a transaction. The situation that the seller has to be in, is one in which the current as-is value of the property is less than what is owed on the property.

Stated another way, the lender has a greater exposure on the loan relative to the value of the property held as collateral on the mortgage. In these situations, lenders will be flexible with considering a discounted pay off because they realize that if they were to foreclose and take ownership of the property, the lender would not have the ability to sell or would be able to sell the property but not recover all of the funds that is owed on the note and mortgage.

In situations where you can prove to the lender through the “Seven Critical Elements In A Killer Short Sale Package”, the lender should be very open to discounting the payoff because a foreclosure will just add

a) Additional expense;

b) Turn them into a real estate owners.

Real estate lenders and mortgage companies are not in the business of owning real estate. They do not want significant amounts of real estate owned on their balance sheet.

When you provide a “win-win-win” solution for the property owner who’s in a situation where the current value of their home is less than the balance owed on the property; and you can offer a “win” for the lender providing them with a path of least resistance to minimize their losses in the shortest amount of time in a way where they don’t have to incur additional costs. Additional costs would be incurred thru the foreclosure process (attorney’s fees and other foreclosure related costs) and then taking a property back onto their balance sheet as real estate owned property (REO).

I think we all understand with this introduction that a short sale is a technique that must be applied in specific situations where everyone is motivated to be cooperative, and when the lender, the seller, and the investor all are going to have a beneficial outcome.

This technique is not going to work when only one party will benefit or only two parties benefit; it’s only going to work when all parties benefit and again, that’s typically when a property owner is financially distressed, meaning that what is owed on the property is more than their current as-is value of the property.

It’s also going to be a situation where the seller cannot invest in the property to generate the addition value required to bring the property substantially above what is owed on the property, and it has to be a situation where the investor can make out in some way by a short-saling or discounting the pay-off.

Let’s get to some of these key elements – there are Seven Key Elements In A Killer Short Sale Package. Now let’s go over each one of the seven elements…

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Andre Johnson

Andre Johnson is the CEO of Key Solutions, LLC, a marketing and business consulting company based in the Baltimore-Washington area. Andre’s consulting businesses have directly helped a countless number of business owners and entrepreneurs to take their businesses to the next level with various marketing and business consulting services.