I have heard a lot of things from the short sale gurus, but some of the wildest stuff came from those who share their secrets to negotiating short sale approvals with loss mitigation specialists. There are secret spreadsheets, special language to use for effortless approval, inside bank contacts, and on and on. It’s almost all garbage.
Hundreds of successful short sale deals later, we’re pretty confident that success has nothing to do with secret tricks and sudden approval. It has a lot more to do with targeting your efforts to overcome the challenges of short sale negotiation.
You see, the best way to get through the process successfully is to understand the lender’s goals and how they view the whole process. They know that they’re going to lose money if the house goes into foreclosure. They’re going to spend thousands of dollars on attorney fees just to try to collect the debt. Add the lost interest income, negative escrow, appraisal fees, and realtor fees once the property becomes bank owned, and you can see how this can add up. And that doesn’t even include the property maintenance that they’re obligated to pay for until the REO is resold.
So, without offering any wacky secrets, these are my real-life, straightforward tips for successfully negotiating a short sale.
1) Call the loss mitigation department after you submit each complete short sale package, make sure they got it, and ask for the name of the loss mitigator it was assigned to. They don’t like to admit it, but lenders do lose things once in a while. And if that package doesn’t get assigned to a specific person, your offer won’t be considered.
2) Don’t give up. With all the foreclosures being processed lately, the loss mitigation departments are swamped. Pleasant persistence is the only way to get past this roadblock. If you don’t find the information you need, call them back once every two or three days until you do. You don’t have to be a pest and leave a message every time you call. Just say “thank you” and call them again another day.
3) When you find out who is handling your short sale package, ask them who owns the loan. I guarantee this will make your negotiations go more smoothly. Once you know whether the loan is a VA, FHA, Fannie, or Freddie loan, you can know exactly what their negotiation limits are.
4) Summarize your offer for the loss mitigator and ask them to get an interior appraisal or BPO as soon as possible.
5) Conduct an effective BPO.
6) Pull a title report after the BPO is done so you can resolve any outstanding issues before the closing.
7) Ask the loss mitigator what value the BPO appraiser submitted. They may not tell you, but then again they might. Expect to pay around 90 percent of the appraised value.
If the lender refuses to disclose the BPO, you need to ask for a counteroffer. (When they make their counteroffer, this is usually equal to the amount of the BPO anyway.)
9) When you submit your counteroffer, include additional documentation to back up the amount you’re offering. You can use repair estimates, low comps, negative news reports about the neighborhood, and even the MLS listing itself, which shows how many days the house has been on the market.
10) Make sure the loss mitigator remembers that you’re able to bring cash to the table and close quickly.
You don’t need special tricks, and you don’t need a buddy in every loss mitigation department. You just need to realize that you can use the leverage from the fact that a short sale is generally better than a foreclosure in the eyes of a mortgage lender. Your job is to make them a sensible offer that will help them unload a problem property with the least amount of expense. Focus on what they need, and you’re on your way to getting what you need.
Want to know more about negotiating short sales? Check out the Strategic Real Estate Coach website and treat yourself to the latest information on loss mitigation in America!
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