When Short Sale Is Important In Real Estate Investing
In a depressed real estate market filled with properties that are in foreclosure or heading to foreclosure, successful real estate investing must involve short sales, or negotiating with mortgage lenders to accept less than the mortgage balance to sell a property.
You should therefore know when to do a short sale to make the deal profitable.
These tips will help you identify when to do a short sale.
Why do a short sale?
Lenders have more than enough properties that have fallen through that they are trying to sell.
They have enough properties, they need to make loans. Each defaulted property in their inventory counts against how much they can lend.
The more properties they have, the less they can lend, and the less profits they stand to gain.
A motivated seller prefers to avoid foreclosure and possibly bankruptcy and walk away from the property.
Both the bank and motivated seller therefore prefer a short sale.
1) Where to get short sale leads
It is best to do a short sale before the property goes into foreclosure. Different states allow different time periods from the time a foreclosure notice is filed in court to foreclosure itself, typically 3 weeks to several months.
You need 2 to 4 weeks to get the bank's attention. If the offer you make looks attractive to them, they can stop foreclosure.
If you get enough time in your state, then you can get leads from foreclosure notices files in the court house.
If you state does not give enough time, then regular motivated sellers may be your best bet. Then you can do a short sale.
2) Which deals should you short sale?
If you can make an offer the bank cannot refuse (such as 80% to 90% of mortgage balance) to create enough equity to make a good profit, a short sale may be the way to go.
Deals with a second mortgage are excellent short sale candidates. A holder of a second mortgage can lose all their investment in foreclosure. They can therefore negotiate as little as 10-20% of mortgage balance.
You can create lots of equity by negotiating both 1st and 2nd mortgage. This is because each loan will be discounted separately and you end up creating huge equity and profits for yourself.
If the property has only one mortgage, make sure the balance is low enough to allow you to create equity with as little as 10-20% discount on the mortgage.
Of course lenders can discount more than this but I like to have a safety net before I can spend time on the deal.
Simon Macharia is a real estate investor in Dallas, Texas. He has done a lot of short sales among other transactions. His business is run and automated by real estate investor website from http://www.realestateinvestorswebsites.net
You should therefore know when to do a short sale to make the deal profitable.
These tips will help you identify when to do a short sale.
Why do a short sale?
Lenders have more than enough properties that have fallen through that they are trying to sell.
They have enough properties, they need to make loans. Each defaulted property in their inventory counts against how much they can lend.
The more properties they have, the less they can lend, and the less profits they stand to gain.
A motivated seller prefers to avoid foreclosure and possibly bankruptcy and walk away from the property.
Both the bank and motivated seller therefore prefer a short sale.
1) Where to get short sale leads
It is best to do a short sale before the property goes into foreclosure. Different states allow different time periods from the time a foreclosure notice is filed in court to foreclosure itself, typically 3 weeks to several months.
You need 2 to 4 weeks to get the bank's attention. If the offer you make looks attractive to them, they can stop foreclosure.
If you get enough time in your state, then you can get leads from foreclosure notices files in the court house.
If you state does not give enough time, then regular motivated sellers may be your best bet. Then you can do a short sale.
2) Which deals should you short sale?
If you can make an offer the bank cannot refuse (such as 80% to 90% of mortgage balance) to create enough equity to make a good profit, a short sale may be the way to go.
Deals with a second mortgage are excellent short sale candidates. A holder of a second mortgage can lose all their investment in foreclosure. They can therefore negotiate as little as 10-20% of mortgage balance.
You can create lots of equity by negotiating both 1st and 2nd mortgage. This is because each loan will be discounted separately and you end up creating huge equity and profits for yourself.
If the property has only one mortgage, make sure the balance is low enough to allow you to create equity with as little as 10-20% discount on the mortgage.
Of course lenders can discount more than this but I like to have a safety net before I can spend time on the deal.
Simon Macharia is a real estate investor in Dallas, Texas. He has done a lot of short sales among other transactions. His business is run and automated by real estate investor website from http://www.realestateinvestorswebsites.net
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