Justin lee foreclosure course: September 2008

Monday, September 22, 2008

Closing and Funding Short Sale Deals With Transactional Funding

If you’re a preforeclosure investor, with the tightening credit markets, you have no doubt noticed how much more difficult it is these days to close short sale deals. Short Sale Formula is a comprehensive course that will provide you everything you need to put together a short sale packet, outsource your short sale negotiations and then use a back-to-back closing to close your shortsale.

In the past, plenty of hard money options, along with double closings and simultaneous closings made closing short sales a breeze. However, with the credit crunch, mortgage fraud, and tighter restrictions with lenders and title companies, closing shortsale isn’t as easy as it used to be.

However, there is still one very simple and easy way to close your shortsale transactions without using double closings, hard money, simultaneous closings, or even the over complex land trusts.

That method is using back-to-back closings to get all of your short sale deals closed and funded on time. Short Sale Formula will teach you how to conduct back-to-back closings once a short sale has been negotiated. Back to back closings take a short sale deal and turn it into two separate and distinct transactions. The first transaction is the homeowner facing foreclosure selling to the preforeclosure investor. The second transaction is the real estate investor then selling the property to the end retail buyer. However, even if you are using a back to back closing, and your end retails buyer has secured their funds, what makes this work is that you need to secure your own funding, as the real estate investor.

So where do you get this funding of your deals? This is often called transactional funding, and today, there are many lenders making these types of loans. Lenders love transactional funding, because they are only lending for a period of a few hours.

With the end buyer’s loan already approved and in place, two separate and distinct transactions take place on the closing day. The first is the investor purchasing the short sale deal from the distressed homeowner. This is funded by the transactional funding company. Immediately after this transaction has closed, the investor is then turning around and immediately selling the property to the end buyer.

The end buyer is using funds obtained by him through a traditional loan, or cash. Most conventional lenders today won’t have any issue funding these loans. The only such exception are FHA loans, which at the time of writing this article, have a 90 day seasoning requirement. However, as the real estate market changes, and the housing market remains volatile, it is very possible that the FHA might change its guidelines.

Transactional funding is the perfect way for preforeclosure investors to fund their short sale deals in today’s foreclosure ridden market. There are plenty of choices for funding companies, all willing to fund these simple, easy shortsale transactions. Short Sale Formula provides a short sale training that shows you exactly how to put together a short sale packet for successful negotiation as well as how to close and fund a deal once the successful negotiation is complete.

Closing Short Sale Deals With Back To Back Closings and Option Agreements

If you’re a preforeclosure investor, with the tightening credit markets, you have no doubt noticed how much more difficult it is these days to close short sale deals.

In the past, plenty of hard money options, along with double closings and simultaneous closings made closing short sales a breeze. However, with the credit crunch, mortgage fraud, and tighter restrictions with lenders and title companies, closing short sales isn’t as easy as it used to be.

However, there is still one very simple and easy way to close your short sale transactions without using double closings, hard money, simultaneous closings, or even the over complex land trusts.

That method is using back-to-back closings to get all of your short sale deals closed and funded on time. Back to back closings take a short sale deal and turn it into two separate and distinct transactions. The first transaction is the homeowner facing foreclosure selling to the preforeclosure investor. The second transaction is the real estate investor then selling the property to the end retail buyer.

The easy, legal way for the real estate investor to do this type of transaction is through the use of an option contract. The option contract gives the real estate investor a vested legal interest in the property through an Option Agreement. The option is subject to the approval of the short sale.

Once the short sale is approved, then preforeclosure investor must complete the second transaction. That transaction involves the investor selling the property to an end retail buyer. The preforeclosure investor can legally sell the property, because he has executed an Option Agreement. This Option Agreement, which should be recorded at the local county courthouse for where the subject property is located, gives the investor the legal right to sell and market the property.

Before attempting to use a back to back closing, the preforeclosure investor should make sure that they have all of the necessary forms and documentation to remain in compliance. Without the correct forms, addendums, and notarized signatures, the preforeclosure investor risks the transaction not closing on time, or even worse, not at all.

Short sales do not have to be a complex transaction if the investor arms himself with the proper tools and techniques. Back to back closings are the simplest and easiest way to close short sale deals in today’s ever changing and volatile real estate market. They are widely accepted by lenders, title companies, and title insurance companies throughout the United States.

Outsourcing Your Short Sale Deals For Preforeclosure Investors

If you’ve been investing in real estate, and more specifically preforeclosures, then there’s no doubt that you’ve come across a short sale deal. A short sale is when the lender agrees to accept less than what is owed against the property in exchange for full acceptance of payment of the loan. In other words, if the loan balance is $400,000 but the bank accepts $300,000 as full payoff, then a short sale has occurred.

Many investors find short sales different to negotiate and complete. The reason is that lenders are constantly changing their rules and practices, and short sales by nature are complex and time consuming. This is a reason that many smart preforeclosure investors today choose to outsource their short sales.

Outsourcing your short sales is simple. You would still meet with the homeowner and get all of the necessary paperwork to ensure a complete short sale packet. But after that, the ease and simplicity of outsourcing takes over. The investor simply sends the complete short sale packet to their outsourcing company, and they are the ones that then do all of the work on behalf of the investor.

The investor’s time is freed up considerably, as they no longer have to sit on hold, fax paperwork, or do other mundane tasks associated with negotiating a short sale. The outsourced short sale company takes care of all of this work for the investor.

Outsourcing your short sales makes perfect sense as a real estate investor. Since the outsourcing company is working on many files for many different investors, they are building more relationships faster at a wide variety of lenders. They have a larger rolodex of contacts at more banks, and have a proven track record of closing deals with many lenders, thereby making their files and their deals more desirable for the lender to look at.

In today’s world of outsourcing, it’s no longer necessary for a real estate investor to negotiates his own short sales. In fact, it’s not a good use of their time. Preforeclosure investors should be focused on buying and selling properties, not negotiating short sales or faxing documents to lenders trying to get a short sale deal closed.

Outsourcing short sales allows real estate investors to work on more deals at once, and have a virtual team of experts on his staff, without the overhead. The best outsourced short sale companies are paid on performance, after they have negotiated the short sale deal to the price that the investor has set. This makes outsourcing a no risk proposition for the smart preforeclosure investor.

Submitting A Complete Short Sale Packet

If you’re going to be working on a short sale as a real estate investor, a realtor, or even a homeowner, one of the most important things that you need to do is put together a complete short sale packet. Without a complete short sale packet, your file will not even be opened, let alone reviewed. In other words, you can forget about getting your short sale approved if you can’t even put together a proper package.

So how do you ensure putting together a proper and complete short sale package? Well the first step is realize that every single lender in America has different requirements. So what does that mean to you? Well, that means that the first step is to contact that specific lender. I would recommend asking for the loss mitigation department, or the workout department, or the short sale department. Every single lender has different terminology.

Remember that many lenders won’t even send you a generic package unless you have a signed Letter of Authorization from your borrower. However once you have this letter signed and dated by your borrower, including their loan number and Social Security Number, you can easily obtain the short sale packet from the lender.

Once you have the packet back from the lender, make sure you review it carefully. Different lenders have different requirements. However, all lenders have some basic requirements that you’ll need to get your short sale packet complete.

Next is a hardship letter, which is written by the borrower and should indicate exactly why they fell behind on their mortgage payments, and why they can’t afford the property anymore. It should be typed and then signed by each borrower on the loan.

A purchase and sale agreement also needs to be included in the packet, showing that the homeowner does indeed want to sell the home.

A borrower’s financial information form is also needed. This shows the lender a snapshot of the borrower’s finances. The borrower has to indicate exactly how much money he is making, each month, after taxes. He is then comparing that to his monthly expenses. Monthly expenses not only include his mortgage and taxes, but all of his bills, utilities, transport costs, groceries and anything else that he spends his monthly income on.

The homeowner is also going to have to compile 2 months of bank statements and pay stubs, along with his last two years of tax returns.

Investors should also include other supporting documentation to strengthen their argument about the value of the property. This can include comparable sales, otherwise known as “comps”, along with contractor repairs for estimates.

Finally, a HUD1 or a “net sheet” is something that every lender is going to want to see included in your short sale packets.

Remember that every lender is different, and will have different guidelines, but if you follow the outline of this article, and combine that with the specific short sale packet from the lender that you’re working with, you should quickly, easily and accurately be able to complete a short sale packet, and have the lender review your file.

Monday, September 8, 2008