Short Sale Financing

When you sign a contract with a seller in foreclosure and negotiate a short sale, what is the best way to finance that deal. Do you need to have cash or a line of credit or other financing in place prior to applying for a short sale? How do you guys do it? Also, is there a rule of thumb of how much to offer on a short sale? Thanks.

The best way to finance depends on how much time you have and your exit strategy. How long to you plan to hold it? Usually when the bank agrees to a short sale they want you to close quickly so hard-money or lines of credit, cash are all good. You need to have resources at least in mind before you get to that point and can’t close.

It’s ideal to get a property at (70% LTV - fix-up costs) or less. Depending on your market (80-85% LTV - fix-up) may still be a good deal.

My first advice, search the web on this subject. There is tons of info. You need to read as much as you can. You need to know more about “what is a short sale?” and “how to put one together”.

General rule of thumb, its always better to buy with cash. These deals are time sensitive. Short sales are approved on conditions that have to be met. Like “net to seller” and a confirmed closing date. Financing has a way of screwing things up. But, most short sale approvals will not be based on whether the buyer is financing or going with cash. A majority of my deals are cash due to the “time is of the essence” factor. The condition of the property is another factor to consider when financing a SS.

Industry norm is no more than 82% of the appraised or BPO value of the property. Not what is owed, but the BPO value. The mortgage servicers will generally never take less than this amount. They figure its just as worth it to foreclose and sell it REO.

(When you sign a contract with a seller in foreclosure and negotiate a short sale, what is the best way to finance that deal. Do you need to have cash or a line of credit or other financing in place prior to applying for a short sale? How do you guys do it? Also, is there a rule of thumb of how much to offer on a short sale? Thanks.)

Nice to see you back Robb