Short sales of real estate can be a profitable way of investing, particularly in the current housing market. However, they may not be straightforward, and it can help if you know some short sale secrets.
Firstly, you need to find properties that might be eligible for a short sale. This can involve looking at court records, and other investigative work. There are also some services that will assist you in finding suitable houses. The requirements include that the mortgage is greater than the house is now worth, and that the homeowner is in default with his payments, and likely to suffer foreclosure.
When you have a likely prospect, then you can begin negotiating. For a short sale to be successful, you need to deal with both the homeowner and their lender. While the homeowner needs to understand the value of cooperating in the short sale procedure, it is essential that the mortgage lender agrees to the deal, as he is losing some money and his assent is needed to satisfy the lien on the property.
For his part, the homeowner needs to complete paperwork that allows you to negotiate on his behalf, and that includes giving you a legal right to discuss his mortgage at the bank. In return, the homeowner will be able to move out and not have a foreclosure on his credit record. While the short sale will be recorded, it is not so detrimental and does not have such ramifications as a foreclosure does.
The lender, on the other side of the equation, has to be convinced that a short sale is in his best interest. You need to present evidence of the current value, and this can include recent sales of comparable properties in the area, and other factors. The offer that you make for a house must be carefully scrutinized by various groups at the lender, as the money from a short sale represents a loss to the lender. If all goes well, you will get approval of the amount you have bid, which means the sale can go ahead.
Once both the owner and the lender have agreed to the short sale, then most of the hard work is done. All that remains is to complete the paperwork and take ownership of the house.
Til nextime,
David Oswald