Is Short Sale A Viable Business Model In Real Estate Investing?
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Is Short Sale A Viable Business Model In Real Estate Investing?
| Date Added: January 08, 2011 02:28:26 AM |
| Author: shakir@resellerservers.net |
| Category: Real estate & Construction |
| Negotiating with a mortgage lender to buy a house for less than is owed is called a short sale. In other words, the lender accepts less that is owed on the mortgage and lets you buy a property at a discount. Of course, a home owner must be behind on their mortgage for the loan to qualify for a short sale. As a real estate investor, you identify good candidates for short sale and you negotiate with the lender. These factors are important for the success of short sales. 1) Qualify your properties properly Not all properties are short sale candidates. Trying to negotiate for the wrong properties can be a big waste of 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. A property with only one mortgage needs to be profitable if you get only 10-20% discount. If there are two or more mortgages, negotiating all of them can produce a lot of profits. A second mortgage can be discounted by as much as 80% or more. 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. They can reject it even when it looks good. Be prepared for rejection. Having more than one short sale will help you. If you have selected your short sale candidates well, expect a 60-70% success rate. 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 Some transations are not acceptable to lenders for short sales. For example, you cannot wholesale the property with "and or assigns" in the contract. You must close as soon as your short sale is approved. Normally the bank will give you a number of days like 30 days to close. 6) Be prepared for big pay days Some properties will produce big pay days for you. As long as you can qualify them properly it can be a source of big profits for you. 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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