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How to work with investor buyers in today’s short sale market

In today’s real estate market, it is not uncommon for investor buyers to become involved in a short sale transaction. It’s important to know exactly how to handle an investor offer when dealing with a short sale. An investor may approach a homeowner, offering to help them stop a foreclosure or assist them in getting out from under their debt by purchasing their property. As an agent, you should be well versed on this topic and be able to answer any questions your client may have.

Working with investors can prove to be very beneficial to your transaction. On the other hand, there are also investor buyers out there that are not experienced and do not have the right intentions. Many investors look to purchase property at low values to maximize their profit. Viewing this principal of practice from a short sale lender perspective, you could see how they can easily clash. The lender wants the most net profit, while the investor wants to pay as little as possible.  Investor offers may be tough to handle, but they aren’t impossible and working with the right investor buyer can actually prove to be very valuable.

Here are a few negative tactics that an investor buyer may want to utilize when attempting to procure a short sale:

  • Signing the deed over– Often, an investor interested in a property will try to have the owner sign the deed over so that the investor can use their time and money to complete the process. However, once this is done, the owner no longer has any rights to the property. Therefore, if the investor is unsuccessful in negotiating, the homeowner has no option but to foreclose.
  • Signing a power of attorney– An investor may request the owner of a property to sign a power of attorney. This essentially works in the same way as signing the deed over. Once the owner has signed the document, the investor can actually make decisions on behalf of the owner, without their consent. This isn’t even necessary. Anyone familiar with the short sale process knows that the investor would only need a third party authorization.
  • Creating unnecessary issues with the property-Since the goal of an investor is to buy the property at the lowest cost to them, some may even go as far as creating issues with the property so the lender will have to give an approval. Regardless of the success rate of this tactic, it is not legal, and this tactic is in no way promoted by this company.
  • Promise of seller cash at closing– An investor may offer the owner cash at closing, outside of escrow to sweeten the deal. This isn’t legal. The seller can’t get funds from the short sale and they cannot receive funds out of escrow. If the funds aren’t disclosed on the HUD-1, it is fraud.

 

Don’t be fooled by the above mentioned tactics, there are also good strategies that investors utilize during the purchase of short sales.

  • Having the investor include an inspection report– Since the report will be done by a 3rd party with no interest in the property; this is a great document to have to help get that coveted approval.
  • Get a repair estimate from the buyer– Having an itemized list of what it will cost to repair the home will be very helpful when it comes to negotiating the approval. Since the investor will want to buy low, if there is damage to the property, the repair estimate can assist the lender in making their decision.
  • Obtain proof of funds from the buyer– This document is a necessity when working with a short sale. Investors will often be working with a cash offer. If this is the case, get a proof of funds to show the lender the buyer indeed has the funds.
  • Trust or Corporation– If the buyer is purchasing under a trust or a corporation, make sure the property documents are on hand for the lender.
  • Ensure the buyer is flexible with price– As mentioned before; lenders will want the highest net possible in exchange for an approval. Make sure that the buyer is willing to come up on the initial offer price if it is needed. This will eliminate the possibility of losing the buyer halfway through negotiations.

It is important to understand that there are many types of investor buyers in today’s market and choosing the right ones to work with the key to success.  In fact, as an agent, an investor can be a wonderful reoccurring client. An inexperienced investor can present issues, but you just need to know what to look for. At Short Sale Experts, we’ve had many experiences with all types of investor buyers. Call us if you have any questions. We are here to help make your short sale experience as smooth as possible!  888-746-7820.

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San Diego, CA 92101

Phone: 1-888-746-7820
info@ShortSaleExpert.com