There is no specific number of payments that must be delinquent. Even one payment is enough at times. Often homeowners will call you when they are not yet in default, but cannot make any more payments. In this case, contact the bank, let them know that the homeowners will not be making anymore payments, and open negotiations for a short sale before the payments are even late.
Reason’s why banks short sale: - The mortgage is in arrears or foreclosure.
- The property is in poor condition.
- The homeowners have hardships and cannot make the payments anymore.
- 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 defaulted loans on the books.
Banks have reports due at the end of each quarter. They are more inclined to accept short sales at the end of a quarter to "clean up their books." The absolute best time to get short sales accepted quickly is the last quarter of the year. I have called banks on December 10th and been told the short sale would be accepted if I’d close by the end of the month! If you are reading this program in January, don’t let that piece of information discourage you. Banks short sale all year, they short sale faster in the last quarter. - Some banks are required to prove a loss each month… let’s help them out.
- Some banks are required to keep a cash reserve of up to six times the retail value for each REO.
It breaks down like this: The bank has a $200,000 property and is required to keep six times that amount as a cash reserve. This means the bank is sitting on $1,200,000 in unlendable money. Imagine if the bank has 2,000 foreclosures across the nation! The homeowners could drag the foreclosure on for two years utilizing the bankruptcy system. Would it be better for the bank to sit on $1,200,000 for two years or accept a short sale today? The answer is obvious. The short sale is a relief.- The area is crime ridden.
- The area is riddled with foreclosures proving a decline in the area.
- Many people don’t realize that banks wholesale money. Banks borrow money from larger banks and lend it to you. These banks must show reports in order to borrow this money.
Think of it like a credit report: Every defaulted loan is like a black mark on the credit report. The more foreclosures a bank is carrying, the riskier it appears. If you were a larger bank lending to a smaller bank, would you lend your money to the bank with more or less defaulted loans? Exactly … less! The bank needs to borrow this money as inexpensively as possible so that it can make money lending it to you.
As you can see, a short sale is often a welcome answer to a big problem. If the bank takes the short sale it can write the loss off and clean up the books before any reports are due.
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