You’ve found a great property you’d like to invest in, the owner is motivated because he is in financial trouble, he’s ready to deal. Sounds like the perfect situation for you, but what if the seller is stuck on a price that you know is too high for the market, because that is what he owes on the house?
That’s when you need to come armed with knowledge about a short sale, and can clearly explain why a short sale might be to his advantage.
Most home owners that are trying to unload property, because they are behind on payments, or other financial distress, have probably never heard of a short sale. Explain to your homeowner that he has an option, that you can only offer him this much money, but maybe his bank will take the offer and relieve his entire debt, if he applies for a short sale.
Of course this is where the questions will start. How do I request a short sale? Why would my mortgage company agree to that? How does this help me? Why should I sell to you for such a low price?
The first question is going to be slightly different for each mortgage company or bank, but your best advice is to ask him to call his lender and request a short sale packet from their loan mitigation department. If he’s uncomfortable doing this, you may want to offer sitting in with him on the phone call, to make sure he asks for the right thing.
Explain to your home owner that in these financial times, most mortgage companies are overwhelmed with foreclosure property they cannot sell fast enough, and that they are willing to work with the home owner to keep the home out of foreclosure, which also saves them the cost of legal fees and paperwork involved in a foreclosure. Make sure the home owner understands this is not a guarantee that they will agree, but it may be his best option, and may be his lenders best option. Offer to assist him with any paperwork, he’ll probably be relieved to have some help.
The home owner needs to understand that by agreeing to a short sale, he may be able to have the balance of his mortgage forgiven, and he will be free of the burden of the mortgage payments, and not have to endure the foreclosure process. Most people really want to pay off their debts, and if he is like most people this will make him feel much better than foreclosure. Don’t hide the fact that this could have detrimental affects on his credit score.
Why should he sell to you for such a low price? You know this one. That is all the house is currently worth on the market. If he’s not convinced, you may need to get a broker’s price opinion to share with him, or show him prices of recent sales in his neighborhood.
While a short sale may not be for every distressed home owner, if you educate them, they will be more accepting of trying a short sale.