Have some knowledge to share, and want easy and effective exposure to our audience? Get your articles or guides featured on Illinois Homes today! Learn more about being an expert contributor.Learn More
Much is being made of the continuing swell in foreclosure properties flooding the market the last few years. A conservative estimate puts the number of these homes available at 15-20% over the historic median number. With no end in sight, at least for Q1 2012 the savvy investor should be prepared to pounce on the bountiful opportunities before us. There are some key points you should know before getting in to the Short Sale business.
Most industry analysts believe this current wave will continue for the time being. What does that mean for the buyer? Well it means most "under water" homeowners are desperate for equity and will often work with you to make a deal since the clock is ticking for them to lose their home altogether. Lenders are becoming more amenable than they were in the past to making a deal for a short sale rather than go for auction because most of the time it is worth even less by that point. That puts the investor in an advantageous negotiating position, capable of making deals if you are equipped and ready to deal.
As is the case many times, homes up for short sale are in need of some love. Many of these homeowners since they haven't been able to keep up their payments, have also not been maintaining the up keep and major repairs. Honestly an owner that knows they are in a no win situation is going to try to keep the basic utilities going and food on the table for their family, as they should. At the same time don't expect that leaky roof to be a quick fix or be surprised with adding some major repair costs to the sale. This is where having a good Inspector and Appraiser on your team counts.
I really want to believe most people are good and honest folks. Tough times are hitting everyone these days. At the same time desperation leads good people to do dumb things like try to dupe people into buying their bad home. Make sure the homeowner you are dealing with is on the up and up by making sure they have all their documents in order. At bare minimum they should show you certified and notarized copies of a) a hardship letter or proof from the borrower that he/she is unable to pay the lender. b) Copies of the borrower's income tax returns. c) A Home Inspection Report with any recommendations. d) Both the tax assessor's valuation of the house and an independent Appraiser's too.
Kindness is not the first thing people think of when it comes to Short Sales. But it can go a long way. The homeowner is stressed because their home is often the realization of their dreams and they are losing it. The lender is going to be potentially difficult because they assume everyone is trying to short change them. Being considerate and classy will earn you the respect needed to pull off a proper negotiation. It's business so don't ever make it or take it personal. Plus you can always consider renting the house you buy to the former owners. This removes a lot of stress from the situation, keeps people in their homes and may help you secure the deal with the lender since you have a built in tenant.
Short Sale opportunities are abundant, but not always obvious. Every metro MLS site lists homes differently and homeowners in distress are not always great a marketing their property. Look for some causal agent or broker speak such as "subject to bank approval", foreclosure notices, Notice of Default, "pre-approved sale by lender" and the popular "headed for auction".