Who is the Actual "Seller" in a Short Sale?

I have never kept a running count of how many homeowners that I have spoken with, but I guess it could be around a thousand. Imagine that, having conversations with a thousand homeowners in foreclosure.

One of the weirdest things for the average homeowner, who is looking to sell as a short sale, is the fact that the foreclosing lender actually becomes the seller. It is this lender or lenders that decide how much the house is worth, how much they'll allow for closing costs, how much they'll allow for seller paid concessions, and finally how much they will accept as a net.

I understand the home owner's confusion on this topic, because often I'll get a statement from the homeowner like: "Send me an offer and I'll think about it," or "How much will you pay for it?" Of course, neither statement is all that relative. Who knows what the bottom line short sale net the lender will actually take (without going through the process)?

Even if the lender has previously determined a short sale net that they will take, it doesn't mean that the lender would not take a lesser amount from a different offer. For example, with the average short sale requiring about 90 days or so, I've seen lenders accept a short sale offer and then the buyer "walks" before the closing. Then as time creeps on, I've seen these same lenders accept a lesser amount than what was originally crafted. The lenders do this because they believe this offer is still better that what figure is predicted as their net in an REO sale.

If there is a bottom line here, it's the lender that is the "seller" and even they can change their minds as to exactly what net they will take. So the key to all this is to have a program, whereby the input variables and parameters can be modified such that offers are not based on hard set numbers.
The fix and flip market is still profitable today, even though we make less money than a few years ago. The key point is to understand that we have to be ever more diligent on calculating the offer. Note, formulas used to calculate offers on long-term hold real estate are not at all related to fix and flip formulas, and these deals are normally disastrous for the unsuspecting investor.

We talk much more about this in our REI mentoring program. After years of doing these calculations by hand, my partner and I have developed an online real estate software to make our lives much easier. We can now crank out offers and determine the exit strategy in seconds.

To Your Success,

Tom & Svein