Well “Flash Funder” you got me there. So less than 1/10 of 1% of the estimated “Five Million” real estate investors in this country use this method.
In a normal short sale transaction the investor finds distressed sell A and says 'I can help you short sale your home and save you from foreclosure".
This is a good thing for distressed seller A and this family says “Thanks”.
So normally we go and prepare a “Hardship Package” highlighting why the family is having a tough time and has fallen behind on thier mortgage payments. This package includes the families bank statements, the fathers layoff pink slip, all of mom’s medical bills, the families asset and expense statement and a hardship letter.
We also have to include our contract offer to purchase the property for x amount in dollars to the “First Trust Deed Lender” and if there is a “Second Trust Deed” we also include what we are willing to pay on the second.
Normally we prepare this and we make a package that includes permission for us (The Investor) to talk to the families lender or lenders and present the package or packages depending on how many recorded trust deeds exist. We initially talk to customer service then we talk to “Loss Mitigation Department”, we talk to the “Collections Department”, and we talk to the
“Foreclosure Filing and Documents Department” and we may even talk to departments like the “Legal Department” and an “Appraisal Department”
Wow, thats a whole lot of departments, and we have to accomplish this in x number of days, although there are some states where foreclosure takes 6 months to a year, here where I am at from the point the property is posted with a “Notice of Default” to the day of the “Trustee Sale” is 105 days.
Now a Mortgage Lender (Bank) will not begin the process of reviewing a short sale offer without a Hardship Package and without a Signed Contract (Offer To Purchase) and a Loan Approval Letter.
Now the realities of a “Short Sale” are this, once the lender recieves the package and you make your first phone call on day one to customer service.
Oh, were sorry your documents have not been scanned into our system yet, it will probable be 3 to 5 days!
Five days later, oh we got your package but we need to have Mr. Smiths signature on these documents also so please re-submit please.
Two Days later, oh we recieved your documents but the new copies have not been scanned into our system yet.
Two days later, oh we got everything scanned and it is currently being reviewed. Please call back in 3 days.
Three days later, yes we have all the documents and the property has been assigned to Mr. Jones in Collections. You call and call and call, and finally get Mr. Jones who politely tells you "Your account has been transfered to Mr. Willson in our Valuation Department, you can reach him at so and so number eastern standard time.
You call and call and call, leaving message after message for Mr. Wilson, finally you get him on the phone and he says "We ordered our site appraisal and we should get some word on this in two to three weeks.
When you call back two weeks later, your told your account was transfered to Mrs. Waiting in Legal, so you call and call and call and finally get ahold of Mrs. Waiting and she says "There’s some trouble verifying some of Mr. Smiths documents, can you please re-submit your contacts sheet with revised verification phone numbers.
Finally you call back looking for Mrs. Waiting again and you are told, your account was transfered to Mr. Adams in our Loss Mitigation Department.
Now if the lender requests the property be listed for sale “They are requesting the Current Owners in Distress Mr. and Mrs. Smith List there property For Sale”
Now there is always the potential they will straight out review your offer, but we are already 6 weeks into the time line with the clock ticking, and since a short sale approval ultimately goes to committee, it will be 30 more days before a approval even if they do not ask for the property to be listed.
They could pop back and say "We need to recieve x number of dollars and request you submit a new contract or an addendum. If you still want the property at this much higher price.
Or after waiting out the 30 days they could request the owners go ahead and list it for sale. This is a sign your offer is way to low!
Now when I read “Flash Funders” input to me above, if I for go preparing a “Hardship Package”, for go preparing a “Contract for Purchase” and I for go “Submitting a Mortgage Approval Letter” and I file an option that was signed by my Distressed Sellers.
How Does My Distressed Sellers Lenders Even Know That Someone Has An Interest In The Property???
If I get my distressed sellers to sign a Option Contract and I file it, what dollar amount is on it considering it will take Two to Three Months just to know where the lenders stands if they knew I was interested in buying the property.
But they can not know I am interested in buying the property unless I present them a Contract For Purchase signed by my Distressed Seller at a minimum!!! With some amount of money for Purchase!!!
Why would I even need an Option on a short sale if I have to present a Contract and a Mortgage Approval in order to get the Short Sale Approval, I am going to have the right to close on the property anyway if my Short Sale is Approved!!!
And in a short sale, the sellers (Family in Default) has no say in the approval of a sale, and unless the lender agrees your not buying this house!
If I find out I have an approved Short Sale Agreement I can move to close, conventional, private money or hard money, and I can start working my connections and lists to come up with a buyer.