How can I ask a homeowner if they would consider a short sale??

[turion65x]

Hello, 

I'm currently renting and interested in buying a house in my current neighborhood, but nothing seems to be forsale, based on my researched I currently see over 5 homes with pending foreclosures. I was curious to find out what would be an appropriate way to approach the homeowner and ask if they would consider a short sale, Thanks 

[StartingOver10]

The best thing to do is get a Realtor to represent your interests. Make sure the Realtor you get has lots of experience with short sales and works with an attorney for the short sale process.

Have the Realtor get in touch with the homeowner's in foreclosure. Don't approach the homeowner directly as they tend to be emotional - some are even angry at the bank and take it out on others. Let the Realtor do the contacts with the homeowners. It is also likely that the Realtor knows of other short sales not yet on the market.

Just so you know: you don't pay a fee (unless you sign a contract saying you will). The seller's bank pays the Realtor fees plus the other normal costs of sale in a short sale.

But it is not as easy as just offering a contract. The seller has to provide a bunch of information to the lender (tax returns, bank statements, w-2's, paystubs, and more) in order to have the short sale approved.   Some sellers are not willing to provide this information and without it, the contract won't get approved.

[Peter1142]

I can not recommend a short sale! If you are really tight on funds, I would strongly advise not trying to buy a short sale or foreclosure as a solution.Whatever you gain in purchase price will be gone and then some in the repairs you will likely be making, and the process is enough to make you want to jump out a window several times, and that is with a preapproved seller.

[edcb]

What Peter said!

Just closed on my house 12/3 after being under contract since 8/13- because no one told us it was going to need a short sale on the second mortgage (that we didn't know they had) or that it was in foreclosure on the first mortgage.

I had a flare of my neurological problems and literally started having partial seizures as a result.  It was insane.  If you are a Type A control freak do NOT do it.  We closed ONE DAY before foreclosure auction.

[turion65x]

Thank you guys for all your input!

[DallasLoanGuy]

what startingover said:

[ezdriver]

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@Peter1142 wrote:

I can not recommend a short sale! If you are really tight on funds, I would strongly advise not trying to buy a short sale or foreclosure as a solution.Whatever you gain in purchase price will be gone and then some in the repairs you will likely be making, and the process is enough to make you want to jump out a window several times, and that is with a preapproved seller.

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I agree 100%.

[coterotie]

What DLG said  

Also to the others that voted no, why wouldn't you want to get a bargain if possible?  To the guy who didn't know about the second, how is this possible?  Before I make an offer or even get interested in the house I go to the tax records, find the owner, look at previous sales, look at the legal, pull it up on the tax assessor's map to check out the boundaries.  Then pull the records from the recording office to see what they owe on the property and also see if they have other credit issues, liens, ucc filings etc.  Finally do a google search of the owner's, especially if the house looks vacant or like an old person lived there.  Once you have an idea of what the seller's have to get out of the house to pay all the costs and fees of sale, then you know exactly where to make your first offer.

Here is an example:  A house is listed at $315,000.

The owner's bought the house 15 years ago for 225,000. They borrowed 185,000.   The tax records show 8 years ago the assessed value was 365,000.  7 years ago they took out a new first mortgage for 250,000 and they have a HELOC for 25,000.   They don't show any other debt, judgments or liens.   It is currently listed for 325,000.  Assume they owe 240,000 on the first and 25,000 on the second.  So they need to clear at least $265,000.  Google shows them working at a company that has just announced a major layoff or is leaving town. You have done your research and the comparables in the neighborhood show a range of 275 to 325. You feel this house falls squarely in the middle of that range.   My first offer would be 291,500.  Based on 265 * 110%.  This number guarantees they walk with something in their pocket.

You do the same with the houses in your neighborhood.  Pick one out, run all the background stuff on it see who holds the mortgage and ask your realtor's opinion of how easy that particular lender is to deal with.   If they say tough, move on.  Getting a deal requires some effort.  But to me saving 20 or 30K is worth some effort.  YMMV.

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@DallasLoanGuy wrote:

what startingover said:

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[Peter1142]

Like I said, I saved no money in buying a short sale. I did not save any money even on the purchase price. The bank wants what the bank wants and they will not negotiate. They determine what they think they can get for it and that's what they are willing to sell it for.  Stuff that came up in the home inspection, and the walkthrough - frozen pipes that were now leaking - it was take it or walk away. In addition, there was a ton of work rehabilitating the uncared for home and property, and I have spent $15,000 in repairs that were not even on the list of repairs I thought I had to make.

Luckily, I think my home was definitely worth it, even with all the repairs and hard work, but I cannot recommend a short sale, it's a horrible process that is not for the faint of heart and there is no benefit in it for you.

[frugalQ]

Coterotie,

Can anyone find out all of this info just by looking online? How do you start this type of research?