If there was ever a time in the real estate business when learning a new skill could prove to be a lifesaver, this is the time. With the virtual wave of foreclosures hitting the already crowded market, the prospect of real estate agents and agents taking a hit to their own income is a very real possibility.
If someone could show you how you can fundamentally recession-proof your business by learning how to properly short sell your customers, would it catch your eye? Before you get too excited, in the spirit of “full disclosure,” know white label real estate crowdfunding software that short selling is just that; Work! There’s nothing short of the process, but knowing how to work them could flow enough money to survive this latest real estate cycle.
My name is Clyde R. Goulet and I am uniquely qualified to speak and write on the subject of foreclosure, having survived one myself. I’ve even written a book about it and give away far more copies than I sell.
The very grim reality here is that no matter where you are in the country, the amount of foreclosures filed has gone through the roof. Combine that with declining market values in some areas of the country and you have a recipe for real estate disaster.
Well, if that weren’t bad news enough, considering the banks and mortgage lenders that have already completed foreclosure on many properties now have an inventory of foreclosed homes. Combine that with the owners who have returned their properties to the banks by “deed in lieu of foreclosure” and you have another spate of distressed properties coming onto the market. If you are a property owner looking to sell, be prepared to wait a while.
It begs the question of what real estate agents, brokers and even mortgage brokers can do to make a living. Helping distressed property owners through the short sale process could be just the ticket. Not only are you helping a homeowner out of debt, you can also earn a commission.
I know what you’re thinking. If the property owner has their house upside down, how could they afford to pay a commission? The good news is that the banks and mortgage lenders pay the commissions from their transaction proceeds. Your consent to a short sale allows for the real estate commission to be paid from the funds generated by the sale.
For those unfamiliar with how the short sale process works, here is a brief description. It is a process that a borrower goes through in which the bank or lender agrees to take less than what is owed on the property in order for the property to be sold.
If a homeowner is unable to sell their property in the traditional manner and is in arrears on their mortgage payments, remedies are available through their lenders. Along with deeds in lieu of foreclosures, forbearance agreements, and loan modifications, short selling is becoming the only option for many.
Whether it’s a huge rise in interest rates causing higher monthly payments, job loss, illness, divorce, changing jobs, or any other reason, sometimes bad things happen to good people. As a real estate professional, it is our job to represent our clients and customers to the best of our ability.
Being a national expert in the short selling process involved a lot of trial and error, but the process can be learned as it is actually a gradual process. Once the homeowner or their representative has notified the bank that they are requesting the bank to sell the property short, a package of documentation is either sent to the borrower or the representative is instructed to collect various paperwork on the homeowner’s behalf.
This information pack contains some of the following documents:
- Personal record
- Copies of bank statements worth 2 months
- Copies of the last 2 payslips
- Any W-2 income or proof of other income
- A “hard letter” explaining why you are requesting the short sale
- Listing agreement with a broker
- Signed purchase and sale contract
- Estimated HUD-1 closing statement showing what the lender “net”
- Pre-approval letter from buyer (sometimes)
The above are the basics, some lenders charge a lot less and others charge more. Much depends on the size of the loan balances and whether the mortgage is a first, subordinate, or second mortgage. In fact, almost every lender has different rules for the short sale process.
If you haven’t figured it out by now, you know this real estate mayhem is going to be around for a while, and if you want to stay in the game and keep making a living in a very tough market, I suggest you arm yourself the skills you need to survive. I’ve always felt that if you don’t keep up with changes in your business, you’re falling behind. Help yourself and help others at the same time. Working with short selling can help achieve both goals.
Buying real estate in foreclosures
Buying real estate in foreclosures is probably one of the most popular methods known to real estate investors. Foreclosure occurs after a homeowner defaults on their loan and the bank takes legal action to take possession of the property. The compulsory auction is usually publicly announced in the legal section of your newspaper. Foreclosures can occur in as little as 3 weeks and as long as four months. State laws vary; Therefore, the process will vary from state to state.
Buying at auction is definitely not for new investors with limited funds, as foreclosures expect you to receive a minimum 20% deposit and the rest is due within 24 hours. So if you plan to buy in foreclosures, you’ll need plenty of cash, a working line of credit, or access to cash from a money partner.
Before you get your hopes up, foreclosures rarely result in good deals. In most of these auctions, if the business has equity, you have a large amount that the property will bid on until there is no room for anyone to monetize the business. Often, those with access to plenty of cash will become emotionally involved in the bidding, bidding the real estate price to the point where they will pay almost top dollar for the real estate. So be careful not to get caught up in the bidding war because once you’ve bid it’s too late to back down.
Now, before you head into foreclosure with the intention of buying a property, there are some basic facts that are often overlooked that you should know. First, you should have a clear understanding of what the property is worth in its current state. You can determine this number by comparing the property to other homes in the same area that share similarities. You should have your real estate agent make a list of comparable sales, and then drive by the homes to note the differences between the foreclosed property and the properties previously sold.
If the property is vacant, be sure to get out of the vehicle and look around the entire property, inside if possible. If someone lives there, then of course there is no way to view the property without approaching the owner. If you find that the owner is still there, you should contact the homeowner to see if they would like to sell the property. Not only will this let you know about the deal before it goes into foreclosure, but it also gives you a chance to peek inside.
Next, you should perform a title search to see how many liens are attached to the particular property. Also, before placing a bid, you should know if the foreclosure bank is a first mortgage, second mortgage, or lienholder. I once attended a foreclosure where people were bidding and the bidders didn’t know if the bank asking for the fundraisingscript foreclosure was first or second. If the foreclosure bank is a second lien (eg, second, third mortgage, etc.), you must pay off the first lien before you can sell the property.
Finally, timeliness is important. If you are even two minutes late, the auction could end. So be there a little early if you want to bid. Be sure to call the day before and the day of the sale to make sure the solicitor is still planning to auction the property. Sales are often canceled at the last minute because a seller defaults on payments or files for bankruptcy. Keep in mind that you will very rarely find offers in these foreclosures, but I still encourage you to participate. You can simply meet the other bidders to find buyers to sell your homes to.