Homeowner who is behind in their mortgage significantly usually means foreclosure in the near future. At that point loan repayment and remortgage plans are no longer viable options. If you want to purchase this home as a real estate investor you will have to deal with the mortgage company or bank directly to acquire this investment. It's very likely that the house is worth much less then the outstanding loan on the banks books. You will have to arrange for a "Short Sale" in which the bank agrees to take less then what is owed by the current homeowner.
A short sale is the selling of a house for an amount that is lower than the balance left on the mortgage loan. It is a better alternative to foreclosure for both the lender and the borrower because the lender avoids the exorbitant fees that a foreclosure entails and the borrower lessens the negative impact on his credit score, compared to the effect of foreclosure on credit score.
A short sale is an agreed upon option by both the lender and the borrower but, if the sales proceeds do not cover the total remaining balance of the loan amount, the borrower is still obliged to pay the remaining amount. However, in most cases lenders forgive borrowers of the deficiency amount, providing a huge advantage to the option of a short sale.
Not all debtors are eligible for a short sale of their house. Most lenders approve short sales if 1) the owner of the house has undergone a hardship, such as a divorce, loss of employment or a medical emergency, 2) the loan amount is more than the value of the house, 3) the owner is incapable of paying the current monthly amortization and, 4) the owner is not eligible for a repayment or remortgage plan.
Simply put, a short sale package is a bunch of documentation papers that are required to initiate a short sale including but not limited to an authorization to release form, past 2 years of tax returns, IRS form 4506T, 2 most recent pay stubs, 2 most recent bank statements, a hardship letter, a financial worksheet, lien worksheet, sales contract, listing agreement, pre-approval letter for the buyer, a HUD closing statement, current mortgage statements, the Making Home Affordable Affidavit, etc.
In preparing a Short Sale Package or presentation you may run across Short Sale Terms that you've never heard of before. It's a normal reaction to say this is way to hard, and move on to the next deal.