Short sale training will teach an investor about the short sale as seen by financial institutions. As long as a homeowner is actually paying on the loan, the bank sees this as what's called a performing asset - that means the asset is generating the predicted principle and interest payments from the homeowner. But when a homeowner gets in too deep and quits paying (because they lost their job, divorce, someone in their household getting ill, disability, etc.) the asset becomes what we call "non-performing."
Banks loathe non-performing assets, because recall, performing assets are the top way banks make money.
Through short sale training, you can come to believe this super crucial point: banks are not in the real estate business - they are in the paper business. When you buy a house and give the bank a mortgage in exchange for a loan, you are allowing the bank to develop paper that has monetary value. The mortgage and promissory note the homeowner signs are important items to the bank. They correspond to future principle payback and sizable interest profits to them, if the homeowner keeps paying on it.
Short sale training will show you that once a homeowner stops paying and the document becomes non-performing, two things happen. Here's the important thing to know: the total of monetary reserves the bank must set apart is often the equivalent of 3 to 8 times the amount of the defaulting loan.
The lender is required by federal law to set aside an amount between $300K and $800K as a cash reserve until that defaulted loan is taken care of. This means these amounts get held and won't be loaned. The heart of the bank is completely tied up! Think about mortgagers with hundreds, even thousands of loans in default at the same time, and how much money is tied up in those cash reserves.
Banks hate the defaulted mortgages and will do just about anything to get them removed from the records quickly. Can you now see why banks are so eager to resolve a negligent debt as soon as possible, even at a considerable negative value? Short sale training will show that the anticipated interest possibilities on performing mortgages far dominates the short-term negatives the mortgager will deal with by selling for .50 or less on the dollar.
Federal regulators see it, bank examiners see it, and yes, the investors themselves see it. No one likes this case. Bad loans are bad news for the mortgager. Not to mention that it also affects the bank's capacity to expand and loan out even more money.
Short sale training shows the upshot of all this. Write this down:
Short sale investors view a loan in default as an opportunity.
Understand this simple idea and you can make a killing in short sales.
