1. Identify potential short salesLocate preforeclosures in your area. You can use an online database, search courthouse listings, legal ads or by using an experienced real estate agent as a buyer's agent. First, try to determine how much is owed on the house in relation to its approximate value. If it seems high, it's a good candidate because it indicates the seller might have trouble selling it for enough to satisfy the loan. Pass on those in which the owner has a lot of equity in the home -- the lender likely will prefer to foreclose and resell closer to the market price.
2. View the propertyGauge its condition and come up with a rough estimate of how much it's going to take to repair or renovate. If it needs work, many "normal" buyers won't consider it, which is good for you.
3. Do your researchWhat is the property worth? What's the profit potential? If you're an investor or even a homeowner planning to live in the home a short time, you'll want to profit from the deal.
4. Find all liens and mortgagesAsk the seller or his agent what liens are on the property, and which lender is the primary lien holder.
5. Figure out the financingThis is critical. You have to know how you're going to pay for the property. If you're a good credit risk, the existing lender may be willing to give you a loan. Since they already have a lot of your information in the short-sale paperwork, they may be able to expedite the loan application process. It's important to understand that in a short sale you have to have the ability to move quickly. Once an agreement is worked out, it is common the lender will require closing in as few as 20 days. This is too late to start shopping for a mortgage.
6. Contact the lenderYou or your agent should speak with the loss mitigation department -- or perhaps the resource recovery department -- rather than the collection or customer service department, which is only interested in recouping past due loan payments. Finding the decision-maker can be one of the biggest initial challenges. You will first need to have the homeowner complete and sign (notarization is usually required) an authorization letter, which gives the lender permission to discuss the mortgage situation with you.
7. Complete the lender's short sale application, if they have oneMany lenders have an application specifically for a short sale request.