Foreclosure Investing: Buying a Short Sale

Buying an short sale for either an investment property or a residence can try the patience of all parties involved. We know that here in the Bay Area we are presented with plenty of opportunities. How do you buy a Short Sale?

Here's a quick run down of a typical purchase.

Step 1: Assemble your team. Don't go it alone. Your Agent, Loan Officer, Appraiser, Home Inspector, Escrow Officer. Use a real estate agent that knows how to manage a short sale purchase. Don't use your cousin's husband who just got their license. This is not the place for nepotism. Use only true professionals. Your team has to work very well together, very well. One of my favorite quotes is from fellow blogger, Brian Brady, "'If you thought dealing with a professional was expensive, wait until you find out how much dealing with an amateur costs!" If you need help getting the right team together start with just one, either a Loan Officer or Real Estate Agent. Ask them who they recommend. They'll be better at providing the missing professionals.

Step 2: Have all your ducks in a row. Pre-approved, Pre-qualified, ready to go! The same goes for your Mortgage Professional. Additionally, know the property type you are looking for, the price range, the expected rental income for that area, will the proposed property cash flow? Is the property in Notice of Default? When is the Trustee Sale? Will the Lender stop the proceedings? Have you checked for liens against the property? Do your homework now.

Step 3: Make the offer. In a short sale there are two things that are important. The purchase price and the strength of your position. For the Lender to accept the offer they'll want the highest dollar amount they can get, but they also are concerned with a couple of other items. How fast can you close? How strong is your approval? What is the Loan to Value? What do you have in contingencies? All of these factor into the offer being accepted or declined.

Step 4. Take a deep breath and wait. then wait some more, and some more. The loss mitigation and short sale departments of Lenders are swamped as can be expected. Many short sale transactions fall out because the lender took too long to accept. When they finally did the buyer was long gone. In the meantime you might want to keep your eye on other properties or make backup offers on your second and third choices. Better yet, take your Team to lunch!