How to Separate a Good Short Sale Opportunity From the Rest

Not every troubled mortgage makes for a good Short Sale opportunity. There are things Investors must look for with regards to the homeowner, the house and the Lender to determine if a Short Sale is appropriate. Here are a few key factors.

The Home Owner:

Is the homeowner cooperative? It is much easier to get a homeowner who is eager to sell and willing to do anything to get out of a bad situation to actually fill out the Short Sale paperwork.

Watch out for homeowners who are full of pent up rage or are depressed. They might damage the property on their way out the door.

They must have a legitimate hardship. Most people don't stop paying the mortgage unless there is a genuine emergency. Job loss, divorce, health issues, market changes, and diminished retirement income are common hardships that Lenders accept. The homeowner must have exhausted every other option before deciding on a Short Sale in order for the Lender to seriously consider their case.

The House:

There is a balancing act between a property that has repairable problems that will help discount the price and serious issues that make the house a risk for any buyer. The property must have both sufficient curb appeal and low enough repair costs to convince an end-buyer to sign on the dotted line.

Look for properties in need of mostly cosmetic TLC and you'll have a property that can be discounted with the bank, but will look like an attractive bargain for an end-buyer with relatively little work. Typical cosmetic repairs that should cost $1000 or less include carpet and floor cleaning, cleaning counters and cupboards, and painting the inside walls, the front of the house and the front door.

With luxury homes and in particularly competitive markets, a home stager may be a good investment. Stagers bring in rental furniture and accessories to give the home a lived-in look with designer appeal. Staged homes tend to sell faster and at a higher price.

In markets where the prices have not dropped as much, ugly houses make great Short Sale opportunities because the Lenders will not want to spend all the time and money it takes getting a truly ugly house to sell. In more competitive markets, however, it might be harder to sell an ugly house if there is a huge inventory of pretty houses that are already at affordable prices.

The Lender:

Although more and more Lenders are favoring Short Sales to lengthy and expensive foreclosure proceedings, this is not universally the case. With subprime mortgages that have been sliced and diced into packages owned by many investors it may be tough for the loan servicing agent to find all parties necessary to get approval for a Short Sale. Large second mortgages usually make for excellent Short Sale prospects.

Conditions change rapidly in the banking industry, so a Lender who has been stubborn about doing Short Sales one month may be more agreeable the next. Lenders may be more willing to approve a Short Sale if the market for REOs is saturated and prospects are better with a Short Sale. It's all about the expected return for the mortgage company. Your job is to arm yourself or your negotiator with every bit of information you have to convince the bank that a Short Sale is their best option.

For information about the Sarasota real estate market, visit www.PremiumPropertiesSarasota.com.