Short sales can get complicated and frustrating. From convincing a home owner that a short sale may be the best way to go to collecting paperwork and endless phone calls, the process can become tiresome.
When there are junior liens like a second mortgage, it becomes even more complicated. So how do you handle these junior liens in a short sale?
This article shows you how to tap into junior liens to make lots of money in short sales.
As a real estate investor, you probably come across houses where the owner owes more than the value of the property. In the current real estate market, they seem to be the majority of homes for sale.
If the owner has more than one mortgage, it is possible to negotiate a short sale for both liens separately. You can create huge income opportunities by negotiating these junior liens.
In foreclosure, the holder of a junior lien can walk away with nothing. They are therefore more than willing to accept a small fraction of their mortgage balance in a short sale negotiation.
Do not be surprised if you pay $5000 for a $50,000 lien.
In the meantime, the holder of the first mortgage can negotiate as much as 15% to 20% of the mortgage balance.
At the end of the day, you end up creating lots of equity where none existed.
What challenges do you face in these negotiations?
1) Motivated sellers
You have to convince a motivated seller that a short sale may be the best option. Even though every lender lets defaulting home owners know about foreclosure options, home owners may not have any idea how to do a short sale.
Short sales can take a lot of time, and home owners must be willing to wait this long.
They must work with you to complete all the required paperwork for each lender.
They also need to understand that if short sale is not approved, their home could still go into foreclosure.
2) Banks
You must be ready to submit two complete short sale packets. Make sure all lenders have received the application packets.
Be ready hours of phone calls and to stay on top of the process at all times. If the property was already in foreclosure, you must make sure the lender will stop foreclosure process as you negotiate the short sale. It is not uncommon to have a foreclosure happen in the middle of a short sale negotiation.
Remember if only one short sale is approved, the deal might not work.
3) Closing
Lenders usually give some time to allow for closing. They must see proof of funds before approving a short sale. A pre-qualification letter from a lender may be enough.
You must have the money to close within the time allowed by the lenders or the property goes back into foreclosure.
Negotiating junior liens can turn out to be a profitable venture as a real estate investor.
When there are junior liens like a second mortgage, it becomes even more complicated. So how do you handle these junior liens in a short sale?
This article shows you how to tap into junior liens to make lots of money in short sales.
As a real estate investor, you probably come across houses where the owner owes more than the value of the property. In the current real estate market, they seem to be the majority of homes for sale.
If the owner has more than one mortgage, it is possible to negotiate a short sale for both liens separately. You can create huge income opportunities by negotiating these junior liens.
In foreclosure, the holder of a junior lien can walk away with nothing. They are therefore more than willing to accept a small fraction of their mortgage balance in a short sale negotiation.
Do not be surprised if you pay $5000 for a $50,000 lien.
In the meantime, the holder of the first mortgage can negotiate as much as 15% to 20% of the mortgage balance.
At the end of the day, you end up creating lots of equity where none existed.
What challenges do you face in these negotiations?
1) Motivated sellers
You have to convince a motivated seller that a short sale may be the best option. Even though every lender lets defaulting home owners know about foreclosure options, home owners may not have any idea how to do a short sale.
Short sales can take a lot of time, and home owners must be willing to wait this long.
They must work with you to complete all the required paperwork for each lender.
They also need to understand that if short sale is not approved, their home could still go into foreclosure.
2) Banks
You must be ready to submit two complete short sale packets. Make sure all lenders have received the application packets.
Be ready hours of phone calls and to stay on top of the process at all times. If the property was already in foreclosure, you must make sure the lender will stop foreclosure process as you negotiate the short sale. It is not uncommon to have a foreclosure happen in the middle of a short sale negotiation.
Remember if only one short sale is approved, the deal might not work.
3) Closing
Lenders usually give some time to allow for closing. They must see proof of funds before approving a short sale. A pre-qualification letter from a lender may be enough.
You must have the money to close within the time allowed by the lenders or the property goes back into foreclosure.
Negotiating junior liens can turn out to be a profitable venture as a real estate investor.
