Every short sale guru has a secret to share, but their secrets to successfully negotiating a short sale approval can get pretty crazy. Their spreadsheets have never been seen before, they’re the only ones who know the magic words to open the approval door, and they know how to work an inside job in the loss mitigation department. It’s mostly a bunch of baloney.
We have been through hundreds of negotiations like this, and we have learned that there are more than a few steps to take before we can finally receive that approval letter. None of those steps suddenly enable you to jump from A to Z right away. You simply have to learn what you’re dealing with so you can know how to manage the process more effectively.
If you want to be successful at negotiating short sales, it’s really all about understanding what lenders are thinking during those negotiations. They’re thinking about which course of action will cost them the least amount of money. If they see any way to collect that debt, they will do it. If they see any need to avoid a long-term bad debt, they will generally move in that direction. Lenders know how much it costs to continue to collect debts and maintain REOs. They know exactly how much money they lose when they have to take possession of a foreclosed property.
So, without offering any wacky secrets, these are my real-life, straightforward tips for successfully negotiating a short sale.
1) Submit a complete short sale package and make sure it gets assigned to a mitigator quickly. If it doesn’t get assigned, the offer will never be seen. Make sure to follow up and see if the lender has received your offer. Lenders lose short sale packages all the time or claim they never received them. Don’t let this happen to you.
2) Be determined to get the information you need, but don’t be demanding. Loss mitigation departments are trying to keep up with a lot of short sale cases at once, and you’ll need to be understanding if yours doesn’t make it to the top of the pile right away. Make time to call every two or three days until someone can tell you what you need to know. You don’t have to leave a message each time. Just hang up and try again later.
3) Ask your loss mitigator who actually owns the homeowner’s mortgage loan. Whether you’re dealing with Fannie Mae, Freddie Mac, FHA, or VA loans, they all have a predetermined percentage of the property value that they will accept in a short sale. Knowing this ahead of time will make your job a lot easier.
4) Summarize your offer for the loss mitigator and ask them to get an interior appraisal or BPO as soon as possible.
5) Conduct an effective BPO.
6) Make sure you know what’s on title by pulling a title report after the BPO has been done. You don’t want to get to closing and find liens you didn’t know about.
7) Don’t be shy about asking the loss mitigator about the BPO number. You might get an answer, and you might not. If you do find out, count on paying 90 percent of that number.
If the lender refuses to disclose the BPO, you need to ask for a counteroffer. (When they make their counteroffer, this is usually equal to the amount of the BPO anyway.)
9) Submit your own counteroffers with additional proof to validate your offer (days on market from the MLS listing, repair estimates, low comps, negative articles on the area or city).
10) Make sure the lender knows you’re a cash buyer and can close quickly.
We’re not selling any magic potions, and we’re not selling any hyped-up baloney. The truth is much more powerful. Lenders don’t normally view short sales as their best option, but short sales aren’t their worst option either. All you have to do is convince the loss mitigator that your solution makes the best financial sense for them. If you’re ready to educate yourself, develop a good attitude, and be persistent, you can successfully negotiate a short sale.
Want to know more about conducting a short sale negotiation? Visit the Strategic Real Estate Coach website and treat yourself to the most current information on loss mitigation in America!
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