Good morning, everyone! Today, I have the pleasure of introducing Melody Medley, also known as the queen of short sales. Melody has handled numerous short sale transactions with us, and I believe anyone using Propelio should also be familiar with Melody.
What is a Short Sale?
A short sale occurs when a homeowner is upside down on their mortgage, meaning they owe more than the property’s current value. As an investor, you might refer to this as negative equity. In these cases, the sellers are usually too far behind on payments to consider traditional solutions. The last step before foreclosure is often a short sale. Melody negotiates with the seller’s lender for a shorter payoff on the mortgage, effectively helping to avoid foreclosure.
How to Bring a Short Sale Lead
If you find a homeowner who owes more than their home is worth, you should consider bringing the short sale lead to Melody. First, make sure the lead is genuinely upside down and that there are no other viable solutions. If it’s a true short sale situation, inform the seller that Melody or her partner, David, will be in touch. Email Melody the details, including mortgage payoff amounts and any foreclosure dates, if available.
Once contacted, Melody will walk the homeowner through the short sale process. After the seller agrees, she will ask you, the investor, for an offer to start the short sale. Melody aims to secure the property for you through the short sale process, especially if the property needs significant repairs.
Expectations and Success Rates
Expectations are crucial when dealing with short sales. If you send 15 to 20 leads, you might purchase one through a short sale. This isn’t a reflection of Melody’s negotiation skills but the reality of how banks operate. Banks are less likely to discount properties in excellent condition below retail value.
Lender Types and Their Impact
The success rate of acquiring a property through a short sale can depend on the lender and the type of loan. Conventional loans serviced by lenders like Ocwen, SPS, and Chase are often easier to negotiate than FHA loans, which have stricter guidelines and less flexibility.
Why Conventional Loans Are Easier
Conventional loans are usually backed by private investors who might be more reasonable when it comes to taking a loss. On the other hand, FHA loans must follow HUD guidelines, making the process more complex and challenging.
The Role of Appraisals and BPOs
Both conventional and FHA lenders will order appraisals to determine the current “as-is” value of the property. It’s essential to meet the appraiser or broker’s price opinion (BPO) agent at the property with repair bids and other relevant information, like crime charts or neighborhood data. This approach offers a detailed view of the property’s condition, making it easier to negotiate a fair price.
Handling the Paperwork and Process
Behind the scenes, Melody is in constant communication with the lenders, submitting financials and following up to keep the process moving. This can take several months, and the outcome depends on various lender-specific factors. In some cases, value disputes can further delay the process.
Working with Different Liens
Short sales often involve negotiating junior liens, such as second mortgages, HOA fees, or city liens. These must be cleared before closing. For example, second lien holders will often accept a much lower payoff than the original amount owed, considering the risk of getting wiped out in foreclosure.
Real-Life Short Sale Successes
Melody has numerous success stories. One notable case involved a property in Dallas initially valued at $425,000. Through savvy negotiation and value disputes, Melody managed to bring the price down to $325,000, resulting in a win-win for both the investor and the seller.
Conclusion
Short sales can be a complex yet rewarding process when handled by an expert like Melody Medley. Her vast experience and proven track record make her an invaluable asset to Propelio users. By understanding the intricacies of short sales and leveraging Melody’s expertise, investors can navigate these challenging transactions successfully.
Remember, patience and clear communication are key. Reach out to Melody with your leads, and she will guide you and the homeowners through the short sale process, maximizing the chances of a successful outcome.
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