In my last article, I started to address various questions I have been receiving lately at our real estate investing Association regarding how investors can purchase various types of including
Columbus investment property, Columbus foreclosure properties (also known as short sales),
Columbus HUD Homes,, REO, tax foreclosures and other types of real estate. In this second article in this 3 part series, I would like to continue addressing these most commonly asked questions.
3. Can the homeowner of the foreclosed property profit from a short sale?
Absolutely not. In a short sale the banks are agreeing to take a loss on the note to get it off of their books. As part of the short sale approval process, the banks will review the HUD and will not allow the homeowner to profit from this transaction.
4. What happens to the seller's credit rating when they allow an investor to short sell their property?
Usually, the way it will show on it the sellers credit report is that the loan is "paid" or “settled”; however, there will be a notation that says "settled for less than originally owed" or something along these lines. Be careful regarding the expectation you set with the seller here! Each lender and reporting agency will say it a little different and the sellers credit most likely will still be adversely affected even if a short sale is accepted, approved, and closed because of all the previous late payments.
5. Can you do a short sale is the homeowner is in bankruptcy?
The banks will not approve a short sale if the homeowner is in bankruptcy. Why? Because approving a short sale payoff is considered a collection activity. Collection activities are prohibited in bankruptcy. If and when the bankruptcy is dismissed, foreclosure activities pick back up where they started allowing the investor to work the short sale.
6. What documents do I have need to include in the short sale package?
Documents depend on the lender. Each lender has different requirements. It is typical to require authorization to release information, hardship letter, financial statement, purchase and sales contract, settlement statement (HUD 1), pay stubs, bank statements and tax returns. Additional documents are needed on FHA loans. Remember the banks may ask for more docs so be prepared to do what it takes to support the business case for your investment property.
7. Do mortgage companies always send someone out to do an appraisal / brokers price opinion on a possible short sale?
All lenders require a BPO (Brokers Price Opinion) or full appraisal of the possible
Columbus investment property, before making their final decision to accept or reject the short sale offer. This is their only way of assessing the value of the property and making a good decision on the banks end.
8. How late in the pre-foreclosure process can you start a short sale?
A lot of this will depend on the lender and how fast they are willing to move. I usually allow for a 30 day window for a lender to approve a short sale. If the property is going to auction within a week or two, deals can be done, but it will require some persistence to marshal it quickly through the process.
