| The best short cut to completing a short sale is | | | | auction. |
| actually having the lender sell the note to the | | | | The auction offers another opportunity to make |
| property buyer. Yes, often the lender will consider | | | | money on the foreclosed property if there are other |
| selling the note at a discount when it won't do a | | | | bidders because your discounted note is good for the |
| short sale. The difference to the lender is the cost | | | | full face amount as an auction credit. For example, if |
| and time saved in selling the note versus the | | | | you buy a $100,000 note for $80,000, at the auction |
| drawn-out time required to complete a short sale. | | | | you would bid $100 to start which means your first |
| The options to the lender are to: | | | | bid is $100,000 plus $100. The next bidder bids $100 |
| 1.) complete the foreclosure through the court | | | | which is actually a bid of $100,200. If no other bids |
| system, which it will have to do if there are additional | | | | are made the bid for $100,200 is accepted and you |
| liens against the property that must be | | | | will get $100,000 for your $80,000 note! The result is |
| "extinguished", | | | | a clear profit of $20,000 or 25% without ever seeing |
| 2.) complete a short sale to an investor who may or | | | | the property. We use this method when a |
| may not close on the transaction, despite having | | | | homeowner will not take our offering price and says |
| given a deposit and showing proof of funds, or | | | | "I'll let the bank have it first!" Well, in this case you |
| 3.) selling the mortgage note to a buyer in a few | | | | become the bank and you get the property for less |
| days at a discount they would have accepted on the | | | | than the homeowner would have sold it for. |
| short sale, and have no further headaches. | | | | The homeowner can use this same technique by |
| Generally this decision is an easy one in accepting the | | | | having a friend or family member buy the note from |
| best offer that nets the lender the most money in | | | | the lender, allow the homeowner to stay in the |
| the least time. However, some lenders have policies | | | | property and carry the mortgage on the property at |
| about what discounts they will take and often they | | | | the full face amount. |
| have an internal policy of not selling their single | | | | Many investors and homeowners called this an |
| mortgages at a discount to investors. This varies | | | | "advanced" strategy. The only advanced aspect of |
| greatly from lender to lender and I am always | | | | this technique is actually asking the lender, and |
| surprised when I make an offer only to be told that | | | | making a case for why you are doing it. It is very |
| the loss mitigation representative says "I'm not sure". | | | | important, to have your attorney do a complete title |
| If we want to make an offer to the lender to buy a | | | | and lien search - even if you know the homeowner. |
| note, we preface the conversation with "We often | | | | This technique of buying the mortgage loan at a |
| buy the mortgage note (trust deed) at the same | | | | discount is simple, straight forward and benefits the |
| discount we would pay for a short sale and we | | | | lender and the note buyer. Historically, lenders will |
| continue the foreclosure". We go on to explain that | | | | gladly accept 78% - 80% of the balance due and will |
| the lender can be out of the mortgage in seven days | | | | negotiate to as little as 50% if the property is in |
| or less instead of 30 - 60 days or more. The benefit | | | | serious need of repair or has substantial code |
| to us as investors is to get the transaction done and | | | | violations against the property. Caution, if there are |
| know we control the property. You do not have to | | | | additional liens against the property, you may have to |
| have the deed to the property because you can | | | | continue the foreclosure that the lender has already |
| continue the foreclosure and get the property at | | | | paid for in most cases. |