When A Short Sale Is Profitable In Real Estate Investing
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When A Short Sale Is Profitable In Real Estate Investing
| Date Added: December 21, 2010 07:45:33 PM |
| Author: shakir@resellerservers.net |
| Category: Real estate & Construction |
| In the current real estate market where properties are getting in default, negotiating with banks to accept less than the mortgage payment is necessary for business success. It is therefore important to know when a short sale is necessary to make the deal profitable. This article walks you through when you should consider doing a short sale. Why do a short sale? Lenders are trying to get rid of properties in their inventory that they cannot sell. They need to make loans, not acquire more properties. 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. On the other hand, a motivated seller would be better off avoiding foreclosure and bankruptcy by doing a short sale and walk away from the property. Both the bank and motivated seller therefore prefer a short sale. 1) Where to get short sale leads A short sale is best done 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. With most banks, allow 2 to 4 weeks to get their attention. If you make a good offer 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 your state does not give enough time for this, then you are better off pursuing regular motivated sellers who may turn out to be behind on their mortgage payments. Then a short sale may be the way to go. 2) Which are the best deals for 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 very attractive. A holder of a second mortgage may lose 100% of their investment in the event of foreclosure. They are therefore more than willing to negotiate and can take as little as 10-20% of the 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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