Rule #6 - Prime Your Pump
Link back to Part VNothing is more frustrating to potential distressed property buyers then to find the absol
ute perfect deal and not be able to move quickly enough to purchase it. Because of this, prospective investors need to prepare now for the property they will find tomorrow.
Loan Pre-Qualification - Getting ready means many things, the first of which is to figure out finances. Short sale buyers who do not have enough cash to purchase the entire property need to talk with a reputable real estate lender to not only find out how much they are able to borrow, but also what kind of loan product they would like. There are a variety of products available and going into the details is beyond the scope of this article, but it is important to become familiar with the options before finding that deal of a lifetime.
FICO Scores - FICO Scores are a huge determining factor in whether a buyer will be able to obtain a loan. Read this quick article on FICO scores to learn more about this relatively mysterious topic that will be key in helping buyers obtain short sale property.
Down Payment & Closing Cost Money - Home buyers will need to figure out if they will be making a down payment to purchase the property. In addition to a down 
payment, they will also usually need money for closing costs. Real estate transactions take a lot of work from numerous people in order to consummate legally and safely. Each of these people will need to be paid at the close of escrow by the buyer and sellers of the property.
Some examples of parties who may be receiving closing cost money will be the escrow company, mortgage company, tax collector, county recorder, and title insurance companies. Please note that real estate agents are not paid by closing costs and are usually not paid by the buyers of the real estate. The seller (or the bank for short sales) will be the one paying the Realtors.
Also note that in some cases it may be possible for the seller to pay all or some of the closing costs. Regardless of whether they actually end up using it, prospective foreclosure buyers need to communicate with their agent and loan officer the amount of money they have available for down payment and closing costs. The only way to communicate it effectively is to provide bank statements or some other proof of funds for the money they intend on using for purchase. Lenders are not asking to pry into a buyers entire net worth, just for proof of these real estate related funds.
Choice of Lender - There truly are so many choices with regards to mortgage companies that the decision is often overwhelming. Experience has shown that almost everybody promises the world, but few ever deliver. In an effort to save some people future headaches, we've put together a list of preferred vendors for orange county home loans. We strongly urge consumers to use these vendors as they have saved many loans for our clients who had originally elected to get a loan elsewhere only to have the companies claims prove to be empty promises.
With a little legwork up front, short sale home buyers will go a long way in making sure that they don't miss a rare opportunity. Once they are ready to pounce, they will find our premium Orange County real estate finder to be priceless in finding that perfect property. Proactive consumers will also find that our interactive Orange County homes for sale map is as helpful as it is exciting. Those who wish to learn more about the area, should see our Orange County real estate guide for insider information and local neighborhood reviews. Happy Hunting!
Rule #5 - If You've Got The Right Agent, Show Them Your Commitment
Link back to Part IVMost people are aware that it will be a good idea to work with a real estate agent that is well versed and experienced in the short sale market, but many people do not realize the commitment they in turn need to show to their real estate agent if they really want to deal effectively wit
h short sale properties.
To understand this, it helps home buyers to see the world from a Realtors perspective. To a real estate agent, a short sale does not necessarily equal a paycheck. Agents do many things for free within the industry, and as much as they understand that the #1 job is to help people buy and sell real estate, they also have bills to pay.
Buyers looking for foreclosure real estate need to understand that many times short sale properties do not pay as well as normal real estate. Many times the difference is very significant, to the tune of a 30-50% reduction in pay! This alone makes pre-foreclosure real estate less attractive to your Realtor.
In addition to being less profitable (for your agent), short sale properties can also be more time consuming. The extra time it takes to research the properties, negotiate with the bank, and write purchase contracts make them even less appealing from an agents perspective. The silver lining is that Realtors, for the most part, do like to help people and will sometimes accept a pay cut if it can greatly help a wide range of people. In the case of a short sale, it helps the buyers find a deal, the seller salvage their credit, and the bank avoid foreclosure. With that being said, pre-foreclosure home buyers need to do a few things to show their agent that they are serious, qualified, and loyal.
To show that they are serious, prospective home buyers need to first be honest with themselves about their goals. Then they need to share these goals with their agent as it will help both parties to determine if the expectations are ones that can realistically be met.
Being qualified is the next hurdle that a prospective home buyer will need to navigate if they want to work with a top short sale professional. This will mean talking with a lender about financing options, credit history, down payment, closing costs, and 
employment. Once again, much of this info needs to be shared with the Realtor, not only to prove buyer is qualified, but to make sure the buyer is getting a reasonably good deal.
The last step of entering into a buyers agreement will show your real estate professional that you have chosen to work with them, and solely them, in finding a pre-foreclosure home. There is no real advantage to working with multiple agents if a buyer is already working with one of the best. A written buyers agreement will go a long way in solidify this relationship all the way up until the date of the agreements termination.
With the nature of short sale real estate, it is not uncommon to employ a strategy where a prospective buyer will make multiple low ball offers on a wide variety of property in an attempt to find a willing seller. Without getting into the effectiveness of this strategy, we can say that this approach will create a substantial amount of extra work for the real estate agent. In addition to the above steps, prospective short sale buyers looking to use a canvas type approach should expect to provide additional compensation to their agent on a "per offer" or "time" basis out of their own pocket. It may be realistic to have some or all of this compensation refunded to the buyer after the close of escrow on a property sold through the subject agent.
A final note on trust and loyalty deals with the pricing on real estate. Assuming one has followed our steps for hiring the right Realtor, it is a great idea to listen to your agents advice about pricing for the subject home. All too often, home buyers hear their agents price opinion but don't really listen when it comes time to make offers. It should be understood that home buyers are not negotiating against their agent! Real estate is a team sport and it is wise for consumers to take their teammates experts advice very seriously.
While this 5th rule was mostly about protecting the agents time and resources, prospective buyers need to also understand how these acts will benefit them. The principle of reciprosity is in full effect as an agent who knows they have loyal, serious, qualified buyers will be in a much better position to find property and will actually be more likely to bring the good deals to these buyers first. This fact alone can pay big dividends to short sale home buyers.Link to Part VI
Rule #4 - Find The Right Real Estate Agent
Link Back To Part IIIIt should come as no suprise that working with an agent who is qualified to work short sale transactions will be one of an Orange County home buyers biggest asset
s in finding good properties. But what can a home buyer look for to make sure they are working with the right Realtor.
Proven Track Record - There simply is no substitute for perfection in practice when dealing in real estate transactions. As Vince Lombardi would say, "Practice doesn't make perfect, perfect practice only makes perfect." A good Realtor will have experience at succcessfully conducting transactions from both the buyer and seller sides of short pay sales. They will know what the likelyhood of a sale actually taking place will be and can pass this time saving information onto their clients. Some short sales just will not happen for a variety of reasons (property too encumbered with debt, uncooperative seller, uncooperative lender, etc) so real estate buyers should take the advice to heart when their agent tells them their time will be best spent somewhere else.
Knowledge Of The Market Your Interested In - Local insider knowledge can be all the difference between detecting a good real estate deal and completely missing a
n opportunity. Short sale home buyers really should concentrate on a geographic area in order focus their efforts and be able to quickly and more effectively evaluate the opportunities. We can't stress this market knowledge enough as it has helped more than a handful of our clients to flag down a deal that others were just missing!
Inventory - Whether an Orange County foreclosure buyer ends up buying one of their agents , or a listing through them listed by somebody else, they really should be working with a Realtor who consistently holds a good share of home listings. If they have numerous listings, chances are they have some pre-foreclosure listings as well as past experience selling them. Because of this, successful listing agents will also have a steady pipeline of prospective home sellers who may be looking to unload a property that a buyer will be interested in purchasing. Listing new inventory is the single hardest part of a real estate salespersons job and will be a definate signal as to the success of your real estate agent. The more listings they have, usually the more successful they have become.
Negotiation Skills - Real estate negotiations may share some similarities but are uniquely different than any other type of negotiation. The 9th rule in our Orange County Realtor information article makes some great points in regards to real estate negotiations. The bottom line being that if the agent can't negotiate for themselves, 
how can you expect them to negotiate for you?
So now every prospective pre-foreclosure buyer in the room has the same idea. They're thinking, "I've got it! I'll just contact every agent I can, introduce myself as a real estate investor, and ask them if they have any good properties for me!" Well, they can do that and most likely will get some response out of the inexperienced or unsuccessful agents around town, but this scenario just will not cut it with the true professionals in the business who actually have the ability to help. This next section will explain this in detail as well as give them some better ideas to achieve real estate success.Link to Part V
Rule #3 - You Will Need To Be Patient
Link back to Part IIThe absolute hardest part about a short pay sale is the amount of time that goes on without any sort of response or answers from the lender. Even the best offers may not be attended do in an expedient manner simply because the lenders have so many other transactions they are trying to juggle and they just aren't all that excited about taking a loss on any of the properties. Many times they would be better served by moving quickly but unfortunately we aren't the ones who get to make that decision.
This, however, doesn't mean the squeaky wheel won't get the grease! Good real estate agents will need to be proactive in making sure that the bank knows there is a legitimate offer on the table and that the buyer is serious, qualified, and ready to consummate a transaction. We say "legitimate offer" and realize it is a subjective term. 
Orange County pre-foreclosure home buyers need to understand that the strength of the offer will have a direct relationship on the banks urgency in getting back to you. Do not be surprised if you never see a counter offer even if the offer you made is completely legitimate. Many lenders have been instructed not to make any counter offers and to either take a deal or leave it! This leads us directly into our next point of interest.Link to Part IV
Rule #2- Understand That Sellers May Need To Pay The Difference
Link back to Part I
Many short sale transactions go along smoothly and then come to a screeching halt a few days before the scheduled close of escrow. One of the most common problems is that the seller refuses to sign a promisary note to pay back all or some of the debt at some point in the future. Without this note, the bank does not approve the sale and instead decides to continue with foreclosure proceedings leaving the buyer with nothing more than a blank stare.
Why would the seller not sign this note? There are a few reasons but the most common is that they just don't care enough about their credit rating to try and salvage it from the devastation that foreclosure will cause. It is a shame, but in some instances the seller may just be better off walking away from the property. This is one of the areas where a competent real estate agent can help you put together a realistic expectation for the likely success of the subject transaction based on the mind
set and financials of the seller.
Can you do anything to get them to sign it? Other than attempt to convince them that it really is in their best interest, the real answer is "No." Of course it would be best to negotiate a deal ahead of time where a promisary note is not necessary for sale but this will not only affect the sales price, but will also be impossible in many instances.
Pre-Foreclosure home buyers need to understand that the success of closing on their new home may rely on some factors beyond their control. For this reason, they need to be careful when negotiating the transaction and exercise a degree of patience and flexibility throughout the process.Link to Part III
Real estate in Orange County, California can sometimes be eerily repetitive. If we had a nickel for every client, or potential client, who stated that they were interested in foreclosures...well we might not need to be selling Orange County real estate. In all seriousness, distress sale properties (whether bank owned, short sale, or auction) can be excellent opportunities for prospective real estate buyers to acquire property at very good prices if a reasonable approach is taken. Dealing with pre-foreclosure short sale properties specifically, there are some things a prudent Orange County home buyer must understand.
Before we get into these rules, an Orange County foreclosure buyer needs a basic understanding of what a short pay sale means. Basically, the owner of a home owes more money on the house than it is worth, and is attempting to sell it quick in order to avoid foreclosure proceedings. With that basic definition, here are some rules to follow:
Rule #1 - List Price May Not Be The Price You Have To Pay
Ever had somebody tell you a product is one price only to raise the price AFTER you agreed to pay it? Sound like false advertising? Sound frustrating? Well, it is and this is close to what often happens in a short sale. 
Why does this happen? It's easy, the price is usually set by the agent and seller who might not care what the house sells for since their won't be any profit to the seller anyway. Therefore, a price is set on the home that is very low in order to attract buyers, but the offers to purchase will have to be approved by the bank. Keep in mind, that in most cases, the bank has not stipulated what will be an acceptable price for the home, and this is ultimately who the buyer will need approval from. In a nutshell, the decision maker has not agreed to the list price, in fact, they may not even be aware what the price is at that particular moment!
We personally think this does a disservice to everybody involved, but the biggest collateral damage is that prospective Orange County home buyers generate misconceptions about property pricing, thinking that homes are selling for much less than they are in reality. This is not a good scenario for anybody involved, including the home buyers!
One solution, from an industry standpoint, is to not allow any listing to specify a price unless there is authorization from the owner, or loan holder on a short sale property. In theory, this would eliminate some of the distance between buyer and seller, but one of the problems with this lies in the fact that during most short sale markets, the lenders do not have time to help price the properties.
While we don't see an immediate solution, the bottom line to Orange County short sale buyers is that they need to be aware that the price you see may not necessarily be the price you get. In fact, you may not be able to get the home for any price! Short sale buyers should be prepared to wait longer periods of time in order to hear on the status of their offers, and not be surprised when it seems as if the bank is not being very cooperative.Link to Part II
ute perfect deal and not be able to move quickly enough to purchase it. Because of this, prospective investors need to prepare now for the property they will find tomorrow.
payment, they will also usually need money for closing costs. Real estate transactions take a lot of work from numerous people in order to consummate legally and safely. Each of these people will need to be paid at the close of escrow by the buyer and sellers of the property.
