Question : How does shorting on a foreclosure work?
Can you explain the process of shorting on a foreclosure? How do the negotiations work with the lien holders? What would be a normal offer for a foreclosure property (as a percent of retail value)? Thanks, first best answer gets my ten points.
- asked by Christopher B
All Answers:
Answer #1
Are you talking about a short sale? and are youthe buyer? If you are the buyer, it has nothingto do with you. A short sale means the lender isselling the house for what is owed on themortgage, not what the house might appraise for. Usually it'd be under market value.
- answered by sunshine_today
Answer #2
First I do not know whether you are looking tosell or buy.I have assisted with many short sales.From the buyers perspective you must asses thevalue and make an offer to the lending institutionprior to the process of foreclosure.You need toknow that the home-owner is struggling before theygo into foreclosure.You then negotiate the pricewith the lender and the seller. getting the lenderto take less than the seller owes.Most generallythis is only accomplished if the seller owes morethan the property is worth.You will need cash or averified line of credit as the lender will notlikely loan on the same property again.I havelinked to an article below that is prettycomplete.Single family is harder as it is asmaller portion of the total assets of the lender.Large multi-family and commercial is easierbecause the lender is out so much money and theyare restricted in how much they can loan based onthe amount of bad loans they have. Federal lawrestricts lending institutions from lending morethan a certain percentage of good assets.Often inlarger acquisitions you can expect to purchase foras much as 20% less than owed.Occasionally moredepending on the properties condition and otherfacts.
- answered by oldfatcowboy
Answer #3
Short sales are not negotiated, as far as price,although other fees are open. The bank doesn'twant to pass offers back and forth, and theyreally do not care how long they sit on aproperty.As far as the "normal offer", again it isasking price, but that is either at mortgagedvalue (not retail value) or even below.
- answered by Janet
Answer #4
The term "shorting or short sale" refers to thefact that the lender is in a position of having totake as a sales price LESS than the current loanamount.The current loan being what the Seller oweson their loan balance. The Seller is motivated todo this because it is either this or aforeclosure. They are out of options.The bank ismotivated to do this because they have loaned morethan the property is currently worth. Aforeclosure is coming soon, unless an agreementcan be reached with a new buyer.It is not reallypossible to give you a percent as each property isdifferent.The listing broker is aware of what thecurrent "bottom line" for the bank is. They areoften authorized to tell the prospective Buyerwhat that figure is. This dollar amount is whatthe bank "says" they'll take. They usually don'ttake a lot less than what they are indicating.That figure may drop over some months so it isgood to know how long this has been hanging inthis limbo. Because during this time the bank isnot receiving payments, usually. So they getpretty motivated over time.But here's the catchwith a short sale...sometimes the property is notonly NOT worth what the current owner owes to thebank. It isn't worth any where near that amounteither. So just because it is touted as a shortsale doesn't automatically make it a good buy. Asalways, you need a good licensed agent to work onyour behalf to help you determine what thatproperty is really worth to YOU. And what it'strue fair market value is. Best of luck! Shop longand hard before you buy that is the surest way toget a good deal on any real estate.
- answered by hunter2
Answer #5
I think you are speaking of a short sale. If youplan to do the short sale yourself, I suggest thatyou purchase a book on short sales. It will giveyou some idea as to how a short sale is performedand under what conditions a lender will entertaina short sale.The lender does not permit too manymistakes either on the phone or in the completionof filling out the short sale package they willsend you.Most lenders will want someone that knowswhat they are doing. You need to find out thename, address and telephone number of the lender.Once you have obtained that call them. Ask for theLoss Mitigations Department. You are doing this onbehalf of the borrower so make sure you tell themthis. Since you are doing this on behalf of theborrower you will need their authorizationform.Once you have the Loss Mitigation Departmentask them to send you a Short Sale Package. Youwill need to fax them the borrower's authorizationform to the lender in most cases.Once you have theloss mitigation package follow the instructionsand complete everything required of thepackage.You will have to give the lender a pricefor the property that you think it will or shouldbe sold for. You have back this up with photos andother documentation. How you determine the offeron this short sale will have to do with how muchrepairs need to be done, the cost of hiringsomeone to do these repairs and other factors. Howmuch are other houses being sold for in the area.These things will determine the offer you make tothe lender.The lender will have a realtor dosomething called an appriaiser, but it will bedone by an a real estate agent the lender hassigned up to do this type thing.Once you havecompleted the package send it back to the lenderwith all the pictures you have to support yourprice.I hope this has been of some use to you,good luck."FIGHT ON"
- answered by Skip
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