February 11, 2007

Can you Short Sale a Rental Property?

Hi paul,
Can you short sale rental property? Any special requirements?

Rodney

You can short sale any property as long as it is acceptable to the lender.
Generally the property must be behind on payments before the lender will
entertain any short sale propositions. Short sales and foreclosures these
days go hand in hand and lenders are taking back way to many properties.
With this in mind you as an investors should be looking for any properties,
rental or occupied by homeowners, that have potential. The potential is in
any property that is facing foreclosure.

Paul

Posted by greggdavis at 7:10 PM | Comments (0)

October 1, 2006

What's the difference between a short sale and a discount?

Paul, I was at the meeting for SAREIA in San Antonio on May 2, and really enjoyed the information you gave us. I have been buying pre-foreclosure's for about 6 months and have bought 5 properties. I was encouraged to know that most of what I have been doing is right along the lines you talked about. Clearly you’re a foreclosure expert. However, you brought up some interesting ideas that I would like to get further info on.

You talked about how to go about "short selling". I know what Short Sales are but I am confused about the difference between a “short sale” and a “discount”?

Thanks,

Rick Edgerton

Good Question Rick as there is a difference between the Short Sale and a Discount. When a homeowner is going through a foreclosure there is an opportunity for the real estate investor even if the homeowner owes what the house is worth. Lenders will accept less then what is owed(a short sale) on the property if the lender feels that it is in their best financial interest to liquidate the property quickly vs. keeping it, rehabbing it, and reselling it themselves as it sits in their REO(Real Estate Owned) inventory. Generally the only time that lenders accept short sales is when the property is in foreclosure. When a bank accepts a short sale the lender expects to get the proceeds quickly, usually within 30 days, and there will be a change of title into the investors name or entity. The investor then owns that property.

A discount is different then a short sale. When a short sale is completed the title changes and the house is taken over by the investor. When a note is discounted it is generally a 2nd note or note that is junior to the 1st note. An example might be as follows:

House Value: $200,000
1st note $125,000
2nd Note $ 60,000

To understand discounts you need to understand the position of the 2nd lien holder. The only way that the 2nd lender gets all of their money from a house that is in foreclosure is to pay off the 1st completely, take possession of the house, rehab the house, sell the house, and then they will get what is left of the note value. Lenders are in the business of loaning money, not owning single family homes. So instead of having to pay off the 1st and then owning the home the lender that owns the 2nd will sell their interest, the 2nd note, at a DISCOUNT. I have bought 2nd notes for as little as .15 cents on the dollar. The investor then has the 2nd lien on the property of $60,000. This position gives the note holder, the investor, the legal right to protect their position thus giving them the right to buy the first as the foreclosure process proceeds.

Buying discounted notes can be extremely lucrative and is a fantastic strategy to purchase homes that are in foreclosure.

Posted by greggdavis at 2:31 PM | Comments (0)

April 12, 2006

Must have a listing agreement

if a listing agreement is part of the foreclosure package do you try to get out of listing it by telling bank that seller doesn't want to list? if bank insists on listing agreement what should the listing price be? should it be the same as the offer?

If the bank insists on a listing agreement then list it at a fair price. Even a little higher price is not bad. Usually the house is in rough shape and if you have it listed at a price that would reflect good shape it will not sell if it's in rough shape. Make sure you are communicating with the bank that your interested in the property before they take it back. No, it should not be the same as the offer. You want your offer to be lower then the listing price.

Posted by paulwells at 3:32 PM | Comments (0)

February 21, 2006

When do banks entertain a shortsale?

When will a loss mitigator begin entertaining a short sale?

This is a very subjective question with a multitude of possibilities. First the ability to complete a short sale depends on a number of variables.

When a bank begins to initiate the foreclosure process it takes on a huge financial burden. The costs of taking a home from beginning to end in a foreclosure proceding is high and banks want to avoid it as much as possible. However that being said a banks willingness to accept a short sale can de very hard to read.

If the bank has a number of homes in foreclosure, more then their charter would allow, then the bank will be far more willing to look at a short sale then if there were few homes in foreclosure.

So all of this being said basically a bank will entertain a short sale when the loan goes into default and not before. From a banks standpoint why shold they discount a note that is current or just a month or 2 behind. Generally speaking the house must be in default for a bank to entertain a short sale.

Posted by paulwells at 9:12 PM | Comments (0)