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Short Sales
If you are involved as an investor in a short sale (and if you’re involved, let’s hope that’s your role!), don’t be surprised if you are the only satisfied party walking away from the deal. Both the bank and the homeowner are facing a difficult scenario, and the investor merely swoops in to capitalize on the situation. From the owner’s perspective, he is losing his home, but mitigating the damage to his credit caused by owning a home and mortgage he can’t afford. The bank minimizes its losses by avoiding foreclosure or continuing to not receive monthly payments, but they are still taking a major loss on the value of the property. While neither party will be happy, both will consent because it is simply the most prudent economic choice.
Enter the investor, who provides the bank with some of the money they need to cover the cost of their defaulted mortgage, and who provides the home-owner with a way out of his sticky and expensive situation. If you can time it right by finding a pre-foreclosed home, you can intervene to purchase the home at an enormous discount (even more than if you waited for the foreclosure auction). The beauty of this is, while foreclosure auctions are highly competitive and therefore relatively expensive, the short sale market remains largely either undiscovered or unsolved. If you can find pre-foreclosures, you will not face an overwhelming amount of competition standing in your way to buy. Not to mention, the selling parties will be very motivated. It all adds up to a huge discount for you, which you can turn into profit by renting, reselling, or whatever other means suits you.
Tell us what you think.
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