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7 Insider Secrets of Foreclosure Investing
First, what exactly is a short sale? A short sale is nothing more than getting the lenders to accept less than what is owed instead of having to carry out the foreclosure. Foreclosures are expensive for the banks and can sometimes take a long time. The lenders are open to short sales because by doing so they can avoid the delay and cost associated with carrying out foreclosures.
Anyway, let's get started …
INSIDER SECRET #1: “Just order the package already!”
A common mistake with new and experienced investors alike is to ask the lender IF they will accept a short sale on a property. When you make contact with the short sale department for the first time, all you need to do is order the package. And when you order it you should ask them to FAX it to you. Don't ask them to mail it to you, as you can't afford any delays.
The Short Sale package is one of the most crucial parts of the entire process, and your package should show the lender that YOU mean business.
Now, let's start putting this package together …
INSIDER SECRET #2 – “Information Overload”
Every short sale pro knows that you should always give the bank more information in the short sale package than they ask for. The more information you give them, the faster the lender will be able to give you an answer. It is a little known fact that when a lender tells you they never received your package that the truth is that they DID receive your package but found it incomplete in some way and just passed on it. These folks get paid on performance and they don’t ave time to waste chasing you for the information they need. Either get it right or don’t send it at all … that’s the loss mitigator’s attitude.
Even if the lender doesn't ask for these items, the successful foreclosure investor knows to include (among other things):
1. Paycheck stubs, tax returns, and recent bank account statements (if they support your case)
2. A handwritten hardship letter detailing why the homeowner got behind on their mortgage payments
3. A Purchase and Sales agreement with few (or no) contingencies
4. An estimated net sheet, a.k.a. HUD-1 (could this be a shameless plug for EasyHUD.com?)
The estimated net sheet (HUD-1) that you will submit is one of the first things that the lender will pull from the package. They will begin looking for instantly recognizable RED FLAGS. Do you know how to make your HUD-1 "Short Sale ready"? Visit EasyHUD.com to learn how!
Is your Short Sale package ready to go? Well, if you want to maximize your profits it should already be in the lender's hands!
INSIDER SECRET #3 – “On your mark, get set, GO!”
As soon as you get your short sale package requirements from the lender, get it completed and back to the lender within 24 hours. Don't forget to include the items we discussed in the Insider's Secret # 2.
Remember that you are working with a very tight timeline and the sooner you get the package in the lender's hands, the sooner they can start reviewing your offer. In some states you may only have 21 days from the time the bank starts the foreclosure until the house is sold at auction!
Once the lender starts reviewing your package, the pressure gets turned up! You are about to start the negotiating process, which is where the REAL money is made.
INSIDER SECRET #4 – “What's your number?”
One of the hardest battles you will fight when doing your Short Sales is trying to get the right person on the phone.
Super-successful foreclosure investors will all agree that trying to contact your Loss Mitigation specialist on the phone is like shooting the dice. Unless foreclosure filings slow down soon (which ain't happening!), you may have a difficult time actually getting the lender on the phone.
When you do make contact with the loss mitigation specialist who will be handling your offer, make sure you get the following information:
1. The Loss Mitigation specialist's direct extension
2. Their email address (always try and get their personal email address as a backup)
3. Their fax number, and whether or not you should include a cover sheet each time you transmit
4. Their mailing address in case you need to send pictures, a Thank You note (hint, hint), or other documents.
INSIDER SECRET #5 – “How low can you go?”
So now, when your voicemails don't get returned, you will be ready to start your communication blitz and increase your chances of making contact.
Every investor wants to know the "magic formula" for making offers that will always get accepted the first time. If it were only that easy …
The discount you will get can vary wildly from lender to lender. The final discounts they will accept can depend on the type of loan you are trying to discount (FHA, VA, Conventional, etc), how far behind it is or what their quota is for the month.
When making your offers, a rule of thumb I have used with great success is to offer 50% of the writ amount on first mortgages and 10% of the second. If you are lucky enough to have a third mortgage to discount, they can kiss their hopes of getting more than 1% - 10% goodbye!
Don't be afraid that these offers are too low because all the bank can do is tell you to raise your offer. They won't laugh at your offer or hang up on you, so don't worry.
When you decide to get serious about the business of foreclosure investing, you will need to access to the same tools that the "gurus" use. You will need EasyHUD.com!
INSIDER SECRET #6 – “The squeaky wheel gets the grease”
As we discussed in Insider Secret #4, every lender in the country is being overwhelmed with loans going into default, which will ultimately result in foreclosure. I have spoken to Loss Mitigation specialists who have told me that they have literally hundreds of files they are working, so it is excruciatingly important that you keep open channels of communication with the Loss Mitigation specialist that has been assigned to handle your offer.
Now that the lender has your package and you know how to track them down you MUST follow up, follow up, FOLLOW UP! It will show the bank you are serious, and you will know about any potential snags with your deal as soon as they pop up. If you wait on the lender to take the initiative to call you, you may be in for a long wait. With all of the files the banks have in their short sale departments, they actually appreciate your diligence.
INSIDER SECRET #7 – “What do you mean NO???”
The key to being successful in Real Estate investing is to take care of today's cash flow needs today. If you have had the misfortune of putting all of your cash flow needs the outcome of one deal then you know how miserable it can be when one thing goes wrong and the fuel (cash!) for your business doesn't materialize.
Although most lenders nowadays are giving discounts, just because you ask for it doesn't guarantee you will get it. That is why you should always have at least a couple of deals cooking just in case.
Nothing is worse than getting all excited about a huge discount that never happens.
The better you get at handling simultaneous deals, the sooner you will start carving out your slice of the big money being made on Short Sales.
I hope you have enjoyed "The Insiders' 7 Secrets You Must Know When Making a Short Sale Offer". As you've heard me say time and time again, these 7 secrets are just "scratching the scratch on the surface" of the information you will find in the online coaching section of www.EasyHUD.com.
About the Author: Chris Daigle, the author of this article, is an expert at foreclosure investing and has invested in foreclosure properties all across the country. He has created multiple online resources to help foreclosure investors, including his main website EasyHUD.com.