A short sale occurs when a lender agrees to accept less payment than the outstanding balance of the loan. Buyers of these types of properties acquire them at discounted prices to either take possession of the property for long term profits or flip them to obtain short term profits.

The short sales industry has also been clouded by many myths and misconceptions. The passing of this kind of knowledge often leads to wrong decisions or worse, inactivity for which foreclosure becomes inevitable. There’s so much information that needs to be cleared up before any investor is able to truly be able to help the seller. Here are some common myths.

Short Sale Myth #1: Short Sales Can Always Happen as Long as the Bank Doesn’t Have Possession of the Property

One thing investors should be aware of is bankruptcy. The regulations surrounding properties that are in bankruptcy status prohibit collection activity. Short sale negotiations are collection activities and what that means for investors is that short sale negotiations won’t happen because lenders won’t consider any offer. The best way to handle a situation like this is to obtain documentation regarding the bankruptcy. Is the seller really in bankruptcy? Don’t take their word for it because you’ll find that many sellers don’t have a clue about the impact of their financial decisions.

Short Sale Myth #2: Everybody Can Make a Profit from a Short Sale

While it’s true that the best short sale deal profits everyone, the truth is that the seller cannot have any monetary gains from the sale. Lenders will examine your offer through the HUD-1 form that must accompany your short sale offer. The document is then scrutinized to ensure that the seller is indeed in financial hardship and a short sale is the only option available for them.

Short Sale Myth #3: Any Offer is Valid

Even though banks are under the gun to work out a favorable deal prior to going to court, any offer is not valid. There are many factors used in determining whether an offer is accepted or denied however, in general, many banks will consider offers that are 10% below market value especially if the property has considerable equity, is in a stable market, and if the property can be resold for it’s appraisal price. Investors should take heed to factors such as market conditions, conditions of the property, and the ability for a property to fetch the market price before submitting an offer. Submitting frivolous offers will most often be rejected.

Short Sale Myth #4: Banks Will Not Accept a Low Offer

The main point I’m trying to make is that if the property can be resold at market conditions, banks will more than likely not accept a low offer. Why? They can take possession of the property and resell it themselves. On the other hand, banks also understand declining market conditions and will take those situations into account before deciding to accept or deny any offer. After all, time is money and they don’t want to lose any more of it than they have to.

Short Sale Myth #5: The Seller’s Credit Rating is not Affected in a Short Sale

While the seller benefits from avoiding foreclosure, there will still be a notation on their credit report that states that the loan was settled for less than the amount owed. That’s still a ding on their credit history and while it’s still better than FORECLOSURE in big, bold letters, it will be something that comes up should they decide to purchase another property.

I can’t stress how important it is to do your homework before working a short sale deal. Become familiar with the process by reading all you can on short sales. Talk with a mentor and ask questions if you’re unclear about what to do. You’ll not only be able to educate other investors, but also the sellers you’re doing the deal with.

The foreclosure deal is one that requires both careful handling and a penchant for good timing. There are reasons in the control of the buyer and reasons out of the range of control of the buyer. Knowing how to adequately transverse the line between the two is an all-important factor for success in the foreclosure market. The best practice for securing the foreclosure deal involves a buyer and a seller. Shall we?

Brief History of the Foreclosure

The foreclosure has been an instrument of recovery ever since the inception of the term centuries ago. From the very first time a home owner could no longer afford or chose not to pay the rent on the mortgage, there has been the art of foreclosure. This has evolved into one of the most lucrative industries the world has known. The banking industry depends upon the foreclosure as a means of recouping what was previously lost to the sands of time. The real estate market would not be as an attractive if not for the foreclosure. Hated or loved wanted or despised the foreclosure is an instrument that transcends both time and economic barriers.

How to Nail a Foreclosure Deal

The ability to seal the deal in any foreclosure transaction will make a real estate individual into an overnight sensation. Such is the reality for many of the real estate foreclosure realms best and brightest and some of that sales magic can be learned, some is innate. For this review the area that can be learned will be the primary focus. There is little one can do about the innately acquired sales magic as this was created around 10 months before the birth of the foreclosure-star. Do not despise the popularity and the success of the few as the cost that is normally associated with that brilliance in foreclosure bargaining is steep and hard to handle. Be happy that the foreclosure sale is something that can be adequately learned and from that education a very fine living will be manufactured.

Best Practice for Landing the Deal

Everyone desiring to be a success in the foreclosure market needs to understand the best practices of the industry. Since the foreclosure is a depressing and sometimes very frightening reality for an increasing number of Americans every year; the need for professionalism and compassion, with a business twist, is mandated. The wow factor is required in order to raise the bar in the foreclosure market and there are a few techniques that will accentuate and enlighten even the novice real estate entrepreneur to greatness. These are referred to as best practice, best practices, ways, techniques, etc… the goal of the phrasing and terminology is to implant the seriousness and the importance of the foreclosure from first bank notice to sale of property. The world is a very tough place for many millions of individuals and the United States, usually quarantined against such housing atrocities, sits right in the middle or near the end of one of the worst economic debacles we have known, ever. The importance of knowing how to best handle a foreclosure deal is the one that is to be learned and practiced. Profit is the primary motivator for foreclosures and this has to be respected and best practices makes certain that this is achieved and achieved well.

The banks are not in the business of maintaining properties, that is not the role of the average lender. How to best obtain those prized foreclosure properties are on the lists for many of the real estate hunters of the world. This leads to some very interesting and essential routes to take for the attainment of those valuable pieces of information. The goal is to find the best properties in to which the lowest amounts of financial prowess are needed to acquire. Here are some of the sweetest paths to real estate foreclosure heaven that can be taken.

Importance of Background Checking the Background Checkers

The science and to some the art of soliciting the banks that are the best-known and well-heeled ones in the industry, starts with a little background checking. This is the opportunity to check out those institutions and is a little like turnabout is fair play as to the amount of times these lenders pulled a background on the real estate hunter! First of all, the researching of these lenders is very important as this will wean out those that are financially strong and thus have harder lines. The goal is to locate the banks and other lending institutions that have the most to lose, as in cold hard cash, by hanging onto the unsold and unoccupied dwellings. Once these prime targets are located it is time to launch step two, the solicitation of these banks for the most prized properties in distress.

Golden Rule of Location

In order to launch step two of the deal it is important to use the golden rule of location before the calls are made. Say for instance that the lender is located in Chicago and the targeted residential area is Memphis, there is little reason to waste time phoning this lender as the market is not in their territory. This does not mean that the bank could not have a market presence in the metropolis that is Memphis; it is only to say that for this program it is unlikely. Stick to the locational parameters of the region in which the homes are located, this will streamline every conceivable angle. Once the working list of available and viable banks that are geographically inclusive, has been accumulated, it is time to start dialing for dollars.

Balance Sheet Blues for the Banks is Smiles for the Real Estate Foreclosure Hunter!

The most influential banks, that will be readily available to discuss the foreclosed upon properties they possess, are the ones that have the deepest debt to income balance sheets. This information was of course located on the annual prospectus that was pulled up online during the research phase. The telephone call is then ready to be made and this is what to say. Start off with a great salutation and roll right into the solicitation of the foreclosed upon properties available in the area. The voice on the other line will either direct the call to the appropriate department or representative or handle this one their selves. This is all dependent upon a couple of factors. The first being that the employee on the line could be the one that has the keys to the castle, so to speak, and wants nothing better that to speed along the movements of these unsold properties. The second is the employee will know what the call is all about and wish to assist in any way possible. The possibilities are endless!