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Answer

·What is a foreclosure?

A foreclosure is when a bank has not received payment on the mortgage and starts legal proceedings against the mortgagor (the people who owe money). These legal proceedings can take up to a year into moving the property up to an auction date where it is sold at the court house to the highest bidder.

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·What is a short sale?

A short sale is when a bank will sell the property to a third party normally during the foreclosure process. This saves the Bank time and money instead of dragging the property out to the auction date.

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·Why do the banks Short Sale?

The mortgage is in arrears or foreclosure.
The property is in poor condition.
The homeowner has hardships and cannot afford the payments.
New homes in the area are being chosen over existing homes.
The area or neighborhood has depreciated in value.
The bank’s shareholders are concerned when there are too many defaulting loans on the books.
Some banks are required to prove a loss each month… let’s help them out.
Some banks are required to have an amount equal to or up to six times the retail value of each REO “on hand” – ouch, that hurts.
An REO is a liability, not asset. Too many liabilities will cause any business to go under if not dealt with quickly.

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·Can I Short Sale a nice property?

Absolutely! As you can see, banks short sale for many reasons other than the poor condition of the property.

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·What steps do I take to complete a successful short sale?

Find a property owner in distress.
Put a deal together with the homeowner.
Have the homeowner sign an authorization to release form.
Fill out a sales contract for the amount you want to offer the bank and have the homeowner sign it.
Call the Loss Mitigation department at the bank.
Fax them your offer along with the following:
Your cover letter explaining why you can’t offer full price.
The sales contract.
Justifying comps of the area.
Pictures, if you have them.
A net sheet or closing statement (a sheet that shows the bank exactly how much they will net after closing costs, taxes, etc. are paid).
A hardship letter from the homeowner that mentions the dreaded word…. bankruptcy.
Estimated list and cost of repairs, using retail repair prices that the normal homeowner would pay for these items.

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·What happens to the homeowners credit?

When you negotiate a successful short sale, keep in mind that the agreed upon price is payment in full. However, the homeowners may still owe the difference between the mortgage balance and the discounted amount via a “deficiency judgment.” If granted, this judgment will affect the homeowners and their credit report just as any other judgment. You must get the bank to agree to accept “payment in full without pursuit of any deficiency judgment.” In addition, you need to explain to the homeowners that the discounted amount (the difference between the mortgage balance and the short sale) may be declared as income on their income tax return by means of a “1099.” The homeowners can speak with their accountant for advice. Since the homeowners have been in such duress and probably haven’t made much income, a 1099 may not adversely affect them. We hope this sheds some light on short sales. As you know, nine out of ten deals have no equity. To be successful in this business, trends call for you to be a short sale expert.

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·What is the foreclosure process of my state?

State Security
Instrument Foreclosure
Type Initial
Step Number of
Months Redemption Deficiency

Alabama Mortgage Non-Judicial Publication 1 12 months Allowed

Alaska Trust Deed Non-Judicial Notice of Default 3 None Allowed

Arizona Trust Deed Non-Judicial Notice of Sale 3 None Allowed

Arkansas Mortgage Judicial Complaint 4 None Allowed

California Trust Deed Non-Judicial Notice of Default 4 None Prohibited

Colorado Trust Deed Non-Judicial Notice of Default 2 75 Days Allowed

Connecticut Mortgage Strict Complaint 5 None Allowed

Delaware Mortgage Judicial Complaint 3 None Allowed

District of Columbia Trust Deed Non-Judicial Notice of Default 2 None Allowed

Florida Mortgage Judicial Complaint 5 None Allowed

Georgia Security Deed Non-Judicial Publication 2 None Allowed

Hawaii Mortgage Non-Judicial Publication 3 None Allowed

Idaho Trust Deed Non-Judicial Notice of Default 5 None Allowed

Illinois Mortgage Judicial Complaint 7 None Allowed

Indiana Mortgage Judicial Complaint 5 3 months Allowed

Iowa Mortgage Judicial Petition 5 6 months Allowed

Kansas Mortgage Judicial Complaint 4 6-12 months Allowed

Kentucky Mortgage Judicial Complaint 6 None Allowed

Louisiana Mortgage Exec.Process Petition 2 None Allowed

Maine Mortgage Judicial Complaint 6 None Allowed

Maryland Trust Deed Non-Judicial Notice 2 None Allowed

Massachusetts Mortgage Judicial Complaint 3 None Allowed

Michigan Mortgage Non-Judicial Publication 2 6 months Allowed

Minnesota Mortgage Non-Judicial Publication 2 6 months Prohibited

Mississippi Trust Deed Non-Judicial Publication 2 None Prohibited

Missouri Trust Deed Non-Judicial Publication 2 None Allowed

Montana Trust Deed Non-Judicial Notice 5 None Prohibited

Nebraska Mortgage Judicial Petition 5 None Allowed

Nevada Trust Deed Non-Judicial Notice of Default 4 None Allowed

New Hampshire Mortgage Non-Judicial Notice of Sale 2 None Allowed

New Jersey Mortgage Judicial Complaint 3 10 Days Allowed

New Mexico Mortgage Judicial Complaint 4 None Allowed

New York Mortgage Judicial Complaint 4 None Allowed

North Carolina Trust Deed Non-Judicial Notice Hearing 2 None Allowed

North Dakota Mortgage Judicial Complaint 3 60 days Prohibited

Ohio Mortgage Judicial Complaint 5 None Allowed

Oklahoma Mortgage Judicial Complaint 4 None Allowed

Oregon Trust Deed Non-Judicial Notice of Default 5 None Allowed

Pennsylvania Mortgage Judicial Complaint 3 None Allowed

Rhode Island Mortgage Non-Judicial Publication 2 None Allowed

South Carolina Mortgage Judicial Complaint 6 None Allowed

South Dakota Mortgage Judicial Complaint 3 180 days Allowed

Tennessee Trust Deed Non-Judicial Publication 2 None Allowed

Texas Trust Deed Non-Judicial Publication 2 None Allowed

Utah Trust Deed Non-Judicial Notice of Default 4 None Allowed

Vermont Mortgage Judicial Complaint 7 None Allowed

Virginia Trust Deed Non-Judicial Publication 2 None Allowed

Washington Trust Deed Non-Judicial Notice of Default 4 None Allowed

West Virginia Trust Deed Non-Judicial Publication 2 None Prohibited

Wisconsin Mortgage Judicial Complaint 2-3 None Allowed

Wyoming Mortgage Non-Judicial Publication 2 3 months Allowed

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·What is a foreclosure?

·What is a short sale?

·Why do the banks Short Sale?

·Can I Short Sale a nice property?

·What steps do I take to complete a successful short sale?

·What happens to the homeowners credit?

·What is the foreclosure process of my state?

The #1
Real Estate Investing
Community