Is Short Sale A Viable Business Model In Real Estate Investing?

View PDF | Print View
by: simon87
Total views: 18
Word Count: 526
Date: Mon, 10 Jan 2011 Time: 3:31 PM

Negotiating with a mortgage lender to buy a house for less than is owed is called a short sale.   The leander allows you to buy the property for less than the mortgage balance.

 A loan qualifies for a short sale is the home owner is at least two payments behind.

  As a real estate investor, you identify good candidates for short sale and you negotiate with the lender.
 Here are importand factors to consider before doing short sales.

1)    Pre-screen your properties properly
 Not all properties are short sale candidates.   Selecting the wrong properties for short sale will be a waste of your time.

 To qualify for a short sale, the home owner must be at least two payments behind. The mortgage balance is an important factor to consider.   If a property with only one mortgage becomes profitable with only 10-20% discount, it is a good short sale candidate.

 If there are two or more mortgages, negotiating all of them can produce a lot of profits.  It is possible to get 80-90% discount or more on a second mortgage.

 The best short sale properties are the ones with more than one mortgage.

Of course if repairs are needed, you must factor all the costs.

2)     Be prepared to wait
A short sale can take 3-6 months, sometimes more.   If you are new to real estate investing, you must consider this waiting period before adopting short sales.

 You must have enough money to cushion you during the long waiting periods. .  If not, then you should adopt short sales as a part time venture in your real estate investing business.

3)     Be prepared for failure
 Your short sale application can be rejected for any reason.  Even when the deal looks obvious, they can still say no.  Be prepared for rejection.

Obviously, having several short sales at a time helps.    Expect a 60-70% success rate if your candidates are selected well.

4)    Time is of the essence
If a property is about to go into foreclosure auction, you might not have enough time to stop foreclosure. .  Choose properties that will allow you time to negotiate.

5)    Have an acceptable exit strategy
A lender will not accept certain types of transactions for short sale deals.  For example, you cannot wholesale the property with "and or assigns" in the contract.

You must be able to close after the short sale is approved.  Normally the bank will give you a number of days like 30 days to close.

6)     Enjoy some big profits
Some properties will produce big pay days for you.   Once you have them well qualified, you can expect some good pay days for the ones that succeed.

About the Author

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

Comments