Short sales have the tendency to be complicated and frustrating. The process can be tedious, from convincing home owners to do a short sale, endless paperwork and phone calls.
When there are junior liens like a second mortgage, it becomes even more complicated. So how do you deal with junior liens in a short sale?
This article shows you how you can make lots of money negotiating junior liens.
You must have come across properties where the mortgage balance is higher than the value of the property. Actually these properties seem to have become more so common in the current real estate market they seem to be the majority of homes for sale.
If there are more than one lien, you can negotiate each lien separately. Negotiating these junior liens can create huge income opportunities.
The holder of a junior lien can stand to lose everything in foreclosure. They are therefore more than willing to accept a small fraction of their mortgage balance in a short sale negotiation.
Do not be surprised if you pay $5000 for a $50,000 lien.
The holder of the senior lien can settle for as much as 15-20% of the mortgage balance.
You end up creating a lot of equity by negotiating these two liens, creating an opportunity where none seemed to exist.
What challenges do you face in these negotiations?
1) Motivated sellers
You must face the challenge of convincing the motivated seller to take short sale as an option. Even though they may be aware of it, they might not know how to go about a short sale.
Short sales can take a lot of time, and home owners must be willing to wait this long.
They must be patient and work with you through the tedious paper work.
Of course, they also need to know that the short sale may not get approved, and their home could go to foreclosure if negotiations fail.
2) Banks
Be ready to complete two short sale application packets. Make sure the paperwork is received by all lenders.
Be ready hours of phone calls and to stay on top of the process at all times. If the property was already in foreclosure, you must make sure the lender will stop foreclosure process as you negotiate the short sale. It is not uncommon to have a foreclosure happen in the middle of a short sale negotiation.
Remember the deal might not work if only one short sale is approved.
3) Closing
Lenders will give you reasonable time to allow for closing. They must see proof of funds before approving a short sale. A simple pre-qualification letter from a lender be be all they need.
You must close within the time allowed or it goes into foreclosure.
Negotiating junior liens can turn out to be a profitable venture as a real estate investor.
Simon Macharia invests in real estate in Dallas Texas. He has seen a lot of creative techniques for buying and selling houses and uses an automated website for real estate investing to run his business. These websites attract leads through effective search engine optimization pre-screen and pre-negotiate with these leads and reduce the daily workload enabling him to do more deals using less time, money and effort.
How To Handle Second Mortgages When Doing Short Sales
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