Negotiate Short Sales and Great Deals With Lenders Like a Pro Buyer
December 5, 2020
Foreclosures offer great opportunities to make a good deal. And what makes or breaks a good deal from foreclosure mostly depends on the lender and their relationship with the buyer.
Sometimes properties are pledged for almost the same money as their worth and sometimes more than their worth. When the property owner is unable to make the due payments on time, the lender can call for a foreclosure.
Foreclosures are not a pleasant experience for anyone involved. As for bankers, more foreclosures reflect a higher rate of nonperforming loans which is bad for their business. As for owners, they may not be able to make a profit when a property is sold by foreclosures.
When you can offer a good deal that satisfies all the parties involved, lenders will be more than happy to help you with the foreclosure sales even for prices short of the actual loan balance. So, here is how you get excellent at negotiating with lenders like a true professional.
Keep Yourself In The Shoes Of The
Banker
Foreclosure sales work on a simple principle. You help the banker get back what they are owed, they help you get a good deal. Most often, banks lose money on foreclosures. There is no guarantee they will get back the money they are owed.
The foreclosure costs, maintenance costs, holding costs might eat up to 20% of the amount of loan value. Some costs a banker will have to deal with are
- Commission costs
- cost for repairs
- Legal fees and court costs
- Costs for holding, taxes, insurance, and ongoing maintenance.
Put yourself in the shoes of a banker. What would you want? A costly foreclosure that may not bring back the money they are owed or a discounted sale that can pay off the loans. Of course, it would be the second choice. If you can make a deal with the lender before the foreclosure, it would be helpful to both you and the lender. The owner may not get much equity but can still be saved from the trauma of foreclosures.
Talk With The Right People
When you do business with a person, you talk to the person. When you do business with an organization, you have to talk with the right people who are capable of making decisions that favor you. You need to get the attention of the person in charge.
And the person in charge is usually the bank officer who would be getting hundreds of calls from other realtors and investors. Getting them to make a deal with you needs a professional sales strategy where you sell yourself first and then your deal.
Focus on developing a good relationship with the bankers as it helps foster easy business relationships in the long term. Your subsequent dealings ought to get easier when you have a good rapport with bankers.
Start with getting acquainted with the loan officers in charge of the loan. You can find their details on the original loan documents or the mortgage deed. Loan officers are particularly interested in the smooth closing of a loan. They can help you get closer to meet the actual decision-maker and present your sales pitch.
Large regional banks have specialized loss mitigation officers whom you can contact through the information given in bank notices.
Do try to impress the bankers by showing your experience and drive to help them make better deals and save loans from foreclosure sales.
Be Cooperative With The Banking
Process
The standard procedure for foreclosure will be usually handled by specialists in the bank. These special officers will be assigned loans that are due and may not be the same people who processed the loans in the first place. These specialists have some authority to negotiate with the owners and make new deals.
Most buyers tend to refinance the loan and may not negotiate for better terms. And this is usually encouraged by the banks as it is good for them. You will have to qualify for the loan and pay closing costs when applying for new loans. Instead, try to negotiate to get some things good on your side as well.
Ask whether you can take over the existing loan with some modifications to terms.
Ask for paying off the existing loan at a discount. This is termed as a short sale as you end up buying the property at a price lesser than the original loan balance.
Give Your Bank A Deed Instead Of Foreclosure
To deed a property instead of making loan payments is another alternative you can try. The lender has to agree to this arrangement and the deed title should be free from other mortgages.
This process is usually done without the need for public notice and hence very few people will know of the transaction. You can try to use this method if you are willing to buy the property. You can choose to buy it from the bank, finance it using the same bank, or use any other source of funds.
What the bank wants is money or a performing loan. If you can get them to agree to a deal this way, you can get the property at a bargain price.
Banks are motivated to sell the property soon as holding costs accumulate for each day they hold the property. Nonperforming loans are hence sold by the originating lender to another lender or large financial service companies. When these loans default, a financial buyer can buy them as a package. For instance, the Veteran Administration loans originated by the federal government are insured for banks through the FHA (Federal Housing Administration). You can find these details on the relevant government sites and make use of them to find good deals.
Develop Close Terms With Bankers To
Convince
Bankers need to be able to trust to make deals with you. And trust comes with consistent performance and delivery of promises. If you make a good impression on a banker and can strike up a deal, make sure everything on your end goes as per your terms and agreements. Foster relationships with each deal to get repeat business via the same bankers.
Lenders are highly motivated to solve their problems and get back their money. If you can assure to help them effectively, they will make quicker decisions and close a deal much faster than regular clients.
Suggestions On Dealing
With Lenders.
Purchase Money Mortgages
Some sellers will finance a sale and the term is called ‘ purchase money mortgages’. These mortgages are usually poorly documented and have vague terms. If such a seller does not receive his payments properly, it could cause a huge strain on their financial security and peace of mind. They wouldn’t normally want the house back and might be okay with a short sale.
Family Members As Lenders
When family members become lenders, people tend to take advantage and not pay back their loans properly. When you, as a nonrelated investor gets involved with the property, the lender might feel more optimistic and willing to deal with you. If a property is co-owned or financed by the owner’s relative, you can deal with them directly and negotiate the terms to your advantage.
Estate Loans
Estate loans which are passed down to heirs will become a collective responsibility that all heirs need to take care of. You can look for such situations and make an offer that works for both you and the estate executor.
Retirement Plans Lenders
People with retirement plans are keen on getting their investment safe and wouldn’t want it to go through a foreclosure process. These plans do not deduct losses either. You can negotiate a deal to take advantage of this. Like Repaying a loan that will be hard for the plan to collect otherwise.
Retirement plan lenders need to be dealt with depending on the term length of their plans. Younger investors will be more flexible and ready to wait on their payments as retirement is still a long way to go. You can negotiate for more affordable loan terms and get even more money as well.
Conclusion
The important step to making a good real estate deal is to find motivated sellers. And who else could be more motivated than bankers and owners awaiting a property foreclosure? A foreclosure presents an unfortunate circumstance that everyone involved would want to avoid.
If you can come up with good deals that help people avoid the hassles of a foreclosure, you can ensure yourself of a good cash inflow. And the key to dealing with lenders is to present them with easy ways to avoid additional expenses and get back their money in some way. Understand the banking processes and work towards fostering trusted relationships with lenders to make the best deals out a foreclosure situation.