This article on How Short Sales Work was written by Jarad Severe, an Instructor with a Real Estate Investment networking group I belong to.  I thought I would pass it on as it has some good information in it for "real estate bird dogs" that want to learn more.

Short Sales are one of the most effective techniques for discounting loans in real estate. Short sales create huge investment opportunities and are a must if you want to be competitive in this market.

Getting the Deed
One of the most important steps in the short sales process is getting the deed. Too many times, beginning investors will skip this vital step. Why do we want to get the deed from the homeowner(s)? Because all too often, homeowners change their minds, or want to back out of deals because they are scared, or they want to re-negotiate.

Without the deed, they can back out of the potential short sale even after you have spent hours working on their property. This only has to happen once and I guarantee it will never happen again. I lost $30,000 on one deal because I failed to get the deed. That was a costly mistake. When the homeowner signs the deed over to you, now you control the property and you can go to work by calling the bank.

Calling the Bank
There is a certain process for calling the bank when you're doing short sales. Banks can usually tell if you've never done this before. When you call the bank, you never want to tell them you are an investor. This one of the biggest mistakes rookies make and will almost always result in the lender not accepting short sales.

Therefore, when you call the lender to request the short sales packet, you can either tell them you are the buyer or you represent the homeowner. Sometimes they may ask if you are a real estate attorney. Just restate what you told them before. Then you'll want to request the "short sales packet" or "workout packet." When the packet arrives, it will explain exactly what you need to make this short sales deal successful.

The Hardship Letter
The lender will usually request a hardship letter. A hardship letter explains to the lender why the homeowners are not making their mortgage payments. Sometimes they will request bank statement, pay stubs, income statements, and so on. Be prepared to send them everything they ask for because if you don't it will not be accepted. They will almost always ask for a HUD-1 and a real estate purchase and sales agreement. Do not waste any time! Send everything the lender asks for back ASAP. It usually takes 3 weeks or more to get an answer back from the lender, so you can't afford to wait. If the auction is approaching, you can ask to extend the auction which, in most cases, they will if they know it is a legitimate offer.

Brokers Price Opinion
Next in the short sales process is the BPO. This stands for Brokers Price Opinion. Basically, a real estate agent will come out and give their opinion on what the house is worth. The key to short sales is the BPO. You want to try everything you can to influence the BPO to come in as low as you can. The lower the better. It takes a few times to get good at this but, once you do, I guarantee you will try to get short sales on every real estate foreclosure you encounter. You will also receive larger profits when you invest in a more expensive home. This is because you are able to get bigger discounts from the lender on properties over $500,000. The great thing about this is that it will cost you about the same no matter what the property is worth.

It's OK to be a new "real estate bird dog"... but never an amateur.

What I mean by this is that if you are a new the world of real estate investing, and you have picked "real estate birddogging" as your way to get started, then it is expected that you may not know all of what you are supposed to be doing in any given situation in doing deals.

If you are new, you are expected to learn the ropes and the best way to do this is to learn from successful real estate investors. By needing the advice and guidance of more experienced investors you will progress at a faster pace and learn to avoid some mistakes. For the most part, as long as you are a willing to learn, take advice and in general being an eager student of real estate investing and birddogging, you will become accepted by your peers and in your local real estate investment community.

Being an amateur, in my opinion, is much different. It doesn't matter if you are a new real estate birddog or a more experienced investor, being an amateur means that you do things wrong and really don't care that you do things wrong. You adhere to incorrect ways of doing business and in general don't respect the informal ethics and rules of working with your fellow real estate investors. The bottom line is that amateurs act irresponsibll, are greedy and end up wasting everyone else's time.

Be a professional - Don't be an amateur! If your actions show that you are an amateur, you will get a bad reputation you will be shunned by other investors and kept at arms length.

First of all, an amateur bird dog will call me and tell me how many deals they have done and how many deals they can find for me within the first three minutes of conversation. It is my experience that the big talkers never perform.

Amateurs don't follow the rules! What does this mean? Well, let's say for example you call an investor who is looking for wholesale properties and say that you have one with $150K of equity in it and you will sell them the contract for $15K. If you call someone with an offer, then stick to it. Don't call them back an hour later to say that you just talked to your partner and he decided that you need $25K. You just wasted your trust with that person!

Take your respectable bird dog finders fee (or contract assignment fee) and give a good deal to the investors you are working with. They will be beating a path back to you for more deals.

Investors talk to each other and it's a small community. Work to be at the top of their list.

real estate bird dogs, birddogging, bird dogging

Successful strategies for "Real Estate Bird Dogs" when Dealing with Homeowners in Foreclosure

For home owners facing foreclosure, the future is pretty bleak and their options seem to be few.  The good news though, is that as educated "real estate bird dogs", we know better! We know that there are many good options that are still available to help homeowners in foreclosure, depending on what they need out of it: 

1. If they want to stay in their house:  They can sell it to you (or as a real estate bird dog you can refer it to a real estate investor for a finders fee) and lease-option it back, getting the opportunity to stay in their home and buy it back when they are more financially stable. 
2. If they just want walk/run away from the headaches and stress: You can help them work with their banks to short sell it to you instead. Banks usually move faster with a legitimate offer on the home.
3. If they want to save and even re-build their credit:  They can sell their home to you for more than they owe by using a wrap-around mortgage or land contract agreement.  This means you pay the reinstatement amount to catch them up on the existing mortgage and save them from foreclosure.  Then you make the monthly payments for the wrap-around mortgage through an escrow account (so both parties are safe) and you take control of the property.  You can then rent it out or sell it.  The first mortgage remains in their name until you pay off your agreement (which will be after they pay off their mortgage, since they are selling to you for more than they owe) and the regular, on-time payments can improve their credit over time plus get them out of foreclosure trouble in the meantime.

These are just a few examples of good strategies you can talk to distressed homeowners about. to help them get of their seemingly impossible situations.   You can combine these strategies, or use others still, to put themselves in a better position. The problem is, most homeowners in foreclosure don't know that these options are available and probably aren't very hopeful about the future. 
To Our Success,
Mark


P.S. Infinity100 is tearing up the industry. Pure 1OO% Net payout (REALLY). Nothing can touch it. Infinity 100 Review

In a previous article, we offered a brief discussion of what foreclosure is and our perspective of offering help and hope to home owners in distress by buying their properties. This article discusses Predefault and the implications it holds for home owners and investors alike.

Predefault
That’s when the bank hasn’t yet sent the home owner a notice that it intends to foreclose. The bank is probably sending letters requesting payment but haven’t used the “F word” yet (foreclosure).

In many states, a person can go ninety days before the foreclosure process begins. When the bank sends the notice that it indeed plans to start the foreclosure procedure, that notice is called a Notice of Default (NOD). Default means the home owner didn’t pay up.

The stage of foreclosure we’re examining right now is predefault, so it means that the bank hasn’t sent the Notice of Default yet. The home owner knows he’s behind, and the bank knows he’s behind, but nobody else knows. No other investors know either! I like that, because at this point I’m not competing with ten other investors for the opportunity to help the owner. 

To Our Success,
Mark


P.S. Infinity100 is tearing up the industry. Pure 1OO% Net payout (REALLY). Nothing can touch it. Infinity 100 Review