How to win in multiple short sale/reo contract situations

Art Grace’s ways to win multiple contracts:

  • Write a perfect contract – it reflects your professionalism.  Put in all details for listing agent on page 10 of contract, dot the i’s and cross the T’s.

  • Be aware of appraisal train wreck ahead

  • Don’t write in “As-is” contract – home inspection for informational purposes only.

  • Read the bank addendum and see if the addendum says you have the right to inspect, or does it allow you to have a home inspection opportunity?

  • Reasonable price is paramount to the bank – don’t make ridiculously high offers – especially with FHA loans or a price you know won’t appraise

  • Submit comparables that will help your offer and appraisal through when you come in high

  • Ask for a repair credit and any balance will be returned to the seller prior to closing – not all banks will approve

  • Fannie Mae will not allow any repairs prior to closing and you cannot obtainFHA financing unless it’s a 203K loan program

  • Have a licensed contractor or home inspector preview property prior to submitting offer – relieves obligation of home inspection contingency

  • Human element of buyers does not impact the sale as much as it does with arms length transactions

  • Don’t make multiple contacts to listing agent – don’t be threatening or confrontational or overbearing.  Listing agent doesn’t hound their asset manager so don’t hassle them.

  • Email is typically the best way to communicate with listing agents

  • Scratch through paragraph 13 on contract removing the right to change financing.

  • Highest and best is still critical – Competence of agent, title, mortgage company in addition to big deposit, quick closing, waving inspections, etc.

  • Write on bank addendums or refer to your client’s addendum on their addendum unless it’s Fannie Mae – they don’t allow you to alter their addendum

  • Watch out for anti-flipping rules in Freddie/Fannie addendum

Short sales

  • Problem #1 – there are too many processes – virtually a process for every agent

  • Ask the listing agent how they are going to handle the process

  • Don’t avoid them – they are everywhere and you can make a lot of money doing them

  • Write into the contract that the seller will only ratify and send one offer to the bank for approval

  • Get written evidence of rejection if seller is truly denied

  • It is not possible for the seller to provide a release of recordable lien in recordable from at the time of settlement-lender always has 90 days – not a “real” clause so strike the sentence in the addendum

Seller side:

  • Get seller in touch with attorney to discuss short sale versus foreclosure and ramifications of bankruptcy

  • Avoid tax consequences by utilizing tax relief act that is in effect until 2012 if it is your principal residence – insolvency exemption as well to relieve tax obligation due to debt relief.  Always have seller consult with tax advisor and attorney first – insolvency exemption can allow investors to sell under a short sale situation

  • Most success in short sales comes when sellers deals with lender directly – agents second – short sale negotiator 3rd (fees can be too high)

All in all, maintain your professionalism and communication with all parties involved in order to ensure a fair shot for your clients.  

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