Colin Egbert asked:


In short sale investing, one of the biggest challenges you’ll face are negotiations with the bank. Putting together a short sale deal can be lengthy and involve a lot of preparation. Plus, you’ll need to work with the bank to come to a price you can both agree on.

First Contact on the Phone

You’ll start short sale negotiations with the bank by contacting their loss mitigation department. It can be difficult to make first contact with the bank. You may luck out when you first call, if you get an automated response system. Some of these systems will have you input the homeowner’s account number and the phone tree automatically directs you to the correct department.

If you don’t get lucky, your best bet is to call customer service and ask for someone who is qualified to make sales on pre-foreclosures or just ask for the Loss Mitigation Department. If you draw a blank with the person on the phone, try asking for the ‘foreclosures department’, ‘short sale’ department or ‘loan modification’ department. If all else fails try asking for someone in charge of loans and they might be able to direct you to the right person.

Always, always remain polite and calm on the phone. These are people you’ll be dealing with on a regular basis. Once you get that initial phone call out of the way you’ll have the right phone number and name to call every time from there on out.

After you get the right person on the phone, introduce yourself and explain that you are in short sale investing. Let the bank officer know that you are interested in a particular pre-foreclosure and would like to set up a short sale deal. It’s helpful to put together a check list of points you want to cover in introductions and even a short script that you can read from to introduce yourself. Practice the script so it sounds natural.

The Short Sale Package

At this point the bank officer should let you know what materials they’ll need from you to begin negotiations. These materials are sent back to the bank in a short sale package. This package is a way of providing the bank with all the foreclosure information they’ll need, your first offer on the property and is also a way of culling the serious investors from those just expressing interest.

In short sale negotiation, the short sale package is very important. One of the best foreclosure tips you can get for negotiation is to make sure this package includes all the materials the bank has requested and more. It often includes;

a hardship letter from the homeowners,

estimates for any needed repairs to the property,

your estimate of the property’s market value,

copies of the homeowner’s income tax returns and

most importantly your cover letter with your offer price for the property.

Banks will often set aside incomplete short sale packages when they receive them. You may not even be notified by the bank if your package is missing a certain document. So, be sure to double check that package before sending it.

Down to the Figures

Short sale investing usually involves a bantering about of numbers concerning the pre-foreclosure. When the bank receives your short sale package, they will order an appraisal of the property. This is called a Broker’s Price Opinion (BPO) and gives the bank a price to aim for in negotiations. It is usually completed within 10 days of the bank ordering an appraisal, but if they are backlogged it can take longer.

When the BPO is completed and approved the bank contacts you to negotiate a price on the property. The bank won’t tell you what their estimated BPO is on the property, but they will usually talk in terms of price range when negotiating.

The bank officer in a short sale investing deal will try to get as close to their BPO as possible. This doesn’t mean that they won’t accept a price lower than the BPO, they can usually take a deal that’s at least 83% of the BPO. You can usually tell how willing the bank is to accept your offer by the way they negotiate over the phone, especially if they call you back later to continue negotiations.

Your job in a short sale deal is to provide plenty of written evidence for your low offer and back up that information in negotiations. Real estate investing can be a great way to make a high return on your money, even more so when you get involved in short sale investing. However, you’ve got to convince the bank first.



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Colin Egbert asked:


When you work with the homeowner to put together short sale negotiations with the bank, you’ll also be assembling vital evidence in a short sale package. This package is very important in preforeclosure deals. It provides enough information to (hopefully) convince the bank to accept your short sale offer on the homeowner’s property.

Include everything you can in the short sale package that backs up your request for a short sale. Obviously, you’ll want to leave out extra evidence, (unless the bank specifically requests it), that may hurt your claim.

Common Items in a Short Sale Package:

Standard Purchase and Sales Agreement & Escrow Instruction

This is the standard sales contract between you and the homeowner, since you will actually be purchasing the property from the homeowner with the bank’s approval.

Authorization To Release Information

In order to get the bank to work with you, the homeowner need’s to sign this document stating that they authorize their lender, the bank, to share all vital information concerning their mortgage with you. If you don’t have this the bank won’t talk to you!

Letter Of Agreement and Addendum

This is the cover your butt document stating that you will work with the homeowner and the bank to stop the foreclosure, but you can’t guarantee that the bank will agree to stop the foreclosure during short sale negotiations with you.

Warranty Deed To Trustee

You’ll need to get a notary to authenticate this document. It basically shows who owns the property you are attempting to purchase.

Agreement and Declaration Of Trust

In order to keep your own name off of public records you’ll use this document to declare a land trust on the property, which you’ll have rights too.

Letter That Trustee is Making Payments:

This letter is used when you have an agreement with the homeowner that indicates you’ll be taking the property “subject to” and notifies the lender that payments will be coming from a trustee.

Escrow Letter

You’ll use this letter to tell the bank to apply funds in an escrow account to the loan balance when the loan is paid in full and the short sale deal is complete. Be aware there is no guarantee the bank will comply with the instructions for your real estate investment. They may send the escrow proceeds to the original borrower, which is the homeowner. So, you’ll need to make arrangements with the homeowner just in case this happens.

Special Power of Attorney

You’ll get this signed by the homeowner in front of a notary. It applies only to the property and lets you make decisions concerning the property if something happens to it before the short sale deal closes.

Residential Real Estate Disclosure

This is basically to protect everyone involved. You’ll sign it as the purchaser. It discloses any defects in the property and prevents anyone from claiming after the deal is completed that they weren’t aware of certain defects in the property.

Hardship Letter

This is a very important letter in pre-foreclosure investing. The hardship letter allows the homeowners to explain in detail all of the reasons they were unable to make payments on their mortgage and why they’ll be unable to completely pay off the mortgage. A good hardship letter can really help you seal the deal.

Financial Statement

This is basically the homeowner’s pay stubs, copies of their past income tax returns and other items that show the homeowners really are in financial hardship. The bank will absolutely want to see this proof of hardship before discounting a loan and taking a known loss.

Suggested Extras to Seal the Deal!

There are a few extra pieces of foreclosure information you can include in your short sale package to get the bank’s attention in this preforeclosure deal.

Cover Letter

The cover letter helps your short sale package stand out. It basically states who you are as an investor and that you are requesting a short sale. It also states why the bank should take the short sale. You can also summarize the major points of your package in this cover letter for the bank officer reading it.

Proposed Closing Statement (HUD1)

Eventually you’ll find that a bank requests the HUD1form. It shows all the fees and payments that will be made to the parties involved in the short sale. It helps them know their bottom line on the deal at a glance. Plus, it ensures the seller is not receiving any compensation.

Opinion Of Value

This can be a professional estimate or your own statement. You’ll back it up with a quick list of all the negative points of the property, its needed repairs and the lowest comparable sales in the area.

Estimate Of Repairs

If this property in pre-foreclosure needs repairs make sure you get estimates for all of them and include those estimates in your short sale package to back up your discounted price. Use the highest priced estimates you get.

Notice Of Trustee’s Sale

This is the notice that the homeowner receives telling them that their property is going to the foreclosure sale. By including this document in your short sale package you are letting the bank know that you are aware of the foreclosure process. It also helps put a timeframe on the deal and can light a fire under them, so to speak.

Color Photos

You’ll get extra points with the bank by sending them pictures of the damaged and neglected areas of the house. They provide photographic evidence of the low market value of the property and encourages the bank to accept your discounted offer.

The short sale package usually contains quite a lot of foreclosure information. In fact, it’s an involved process and essential part of debt negotiation with the bank. The bank will want ample evidence to back up your short sale request for their loss mitigation department as can be seen by the bulleted list. This package contains information that the bank requests from you and your own research on the property including; damage estimates and the homeowner’s hardship letter, all of which work to back up your request for a discounted sale price on the property.



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Foreclosure investing is actually quite not quite as difficult when people have finally taken that leap of faith and go for it. This really applies to anything else in life. Remember all those late nights where you'd stay up and watch those "how to make millions in your sleep" tV spots. Or perhaps you remember all those times you went to the book store and purchased tons of real estate investment study guides.

In fact you probably have a huge library and collection of real estate, investment, and how to get rich quick type books by now. Some people may get a feeling of being overwhelmed after wading through those thick books and studying all the complex terminology.

The bottomline is, if you are a naturally goal-oriented and self-disciplined person than you can probably achieve a full-time income in real estate within a year with the right system. So how do you choose the "right" system when everyone and his uncle says they are an expert or guru within the real estate arena?

One thing you might want to consider doing is to align yourself with a friend or relative who is already successful in real estate investment or at least in the type of real estate that you are interested in doing. Don't be shy, definitely get in touch with them.

It may be a friend from high school or college, or perhaps even a former room mate that you knew when you were just getting started with your own life and needed someone to share the rent costs with in order to have your own place, etc. I am sure that if you ruminate for a bit, you may even surprise yourself at how much opportunity there is in your own circle.

That is actually a very good idea- the best way to get into real estate successfully is to have a teacher or at minimum someone that can really show you the ropes and provide feedback in real-time. No matter how well written the courses you're looking at is, nothing really compares to a trusted friend or adviser that can actually walk you through this process step-by-step.

Even if it isn't step by step, it's still great to be able to call someone up and ask for constructive criticism on what you are doing as well as to add some fire in your belly to the process. Folks this relationship is priceless. You can save hundreds of hours of time learning things on your own, and also save thousands upon thousands of dollars in costly mistakes.

Ultimately you will have to walk the path yourself in order to learn and gain from this wonderful industry. But the initial first steps will furnish you with the momentum to be able to zoom on your own two wings.

Everyone has heard about house flipping. There is even a reality show called flip that house. A lot of news headlines and real estate people talk about illegal house flipping. But if this process is illegal, then how is everyone doing it and talking about how to do it?

The fact of the matter is that house flipping is not illegal if it is done properly and ethically. Anyone who has ever bought real estate for a primary home and then sold it for a profit later has successfully flipped a house. That is the basic idea behind house flipping. The real estate investment is purchased, and then resold later for a higher price. The length of ownership time may be months or decades, and that does not matter for this purpose. Sometimes this may involve renovating or repairing the real estate before selling it, to increase the value of the investment.

What everyone has been calling illegal house flipping is actually real estate fraud. These cases generally involve people who have lied or misled about significant facts to wrongly inflate the value of the real estate investment. This includes payments or bribes to get the property appraised at a value higher than what the real estate is actually worth, falsifying down payments or any other information like tax receipts and check stubs to get a loan that is not qualified for, and more. One type of real estate fraud is lying or covering up obvious or serious problems with the house to lenders, as well as to buyers who are not sophisticated. Another fraud type is to back date any documents that are needed for the loan, such as lease agreements, to give the impression of a longer length of time.

Unfortunately, the news media has confused house flipping with the types of fraud mentioned above. Many escrow and title companies refuse to do double closings, and many lenders have something that is called seasoning requirements on the ownership by the seller. This generally means that if you have not owned the real estate investment for at least half a year most lenders will assume there is something funny. This means that these lenders will not loan to a buyer who is trying to buy your house under these circumstances.

Flipping houses is not illegal as long as there are no misleading or fraudulent statements made or signed. If you are investing in real estate, make sure that you read all the paperwork and contracts very closely. The contract is the statement of facts that you are providing to the lender. This contract should not contain any deceptions or false statements. This process only becomes illegal when fraud is committed, usually in the form of deceptive or misleading statements made in the lending contract. As long as you act honestly and ethically, there is nothing illegal about making money by doing honest business.

Copyright © 2007 Joel Teo. All rights reserved. (You may publish this article in its entirety with the following author's information with live links only.)