short sales in real estate
Surveys show that one in every 17 homes in America is currently facing foreclosure. Homeowners are facing a difficult time due to job loss, declining property values and the inability to sell their property. For homeowners facing foreclosure, the silver lining can be to convince their lenders to accept a short sale.
A short sale is when the bank agrees to accept an amount less than the outstanding mortgage balance as payment in full. Â Homeowners must prove they have a financial hardship before the bank will consider a short sale. Banks are willing to accept short sales because they are in a business to make a profit and holding a non-performing asset prevents them from achieving this goal. Â Due to the cost of foreclosing on a property, rehabbing it and trying to sell it, banks realize they lose less money when they accept a short sale than in a foreclose.
With this investment strategy real estate investors can write their own check as to how big a profit they can achieve. By definition short sales are sold below the mortgage balance. Â Investors that can negotiate a very low discount on the property can realize a huge profit when they sale the property!
Banks are required to advertise their intent to foreclose on a property through either a lis Pendens or a notice of default.  Investors can contact the property owner when they read the foreclosure notice in the paper.  The property owner must be willing to cooperate on for the bank to accept your offer since they must provide proof of a financial hardship. The homeowner must provide bank statements, tax returns, pay stubs and a hardship letter. If the homeowner is not willing to provide this information then you will not be successful.Â
Once you negotiate a short sale with the bank, you can make a quick profit by flipping this deal to another investor. Â All real estate investors purchase real estate to make a profit and they are always looking to purchase properties well below market value. Â If you can negotiate a short sale on a $100k property down to $60k, you can flip this deal to another investor for $65k. Â This gives you a quick $5k profit and the new investor buys a property with $35k in equity.
There are many ways to make a fortune investing in real estate. For more information about real estate investing visit my website at InvestInRealEstate101.
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