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Short Sale Investing Tips

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By : Jamie Mathwig    99 or more times read
For many investors, particularly those whose game is real estate, today's market is bursting with potential. If people with disposable income are in a position to purchase property, the timing is perfect. In every city across America, there are deals available like never before.

One possible pot of gold for investors in this changing real estate world is the short sale. Usually this exchange is a win-win-win-win scenario as the investor gets a great deal, the lender can avoid the paperwork and cost of proceeding in a foreclosure on the property, the realtor gets a commission, and homeowners can avoid the stigma of having a foreclosure on their record.

The basic definition of buying a short sale home is purchasing the property for a significantly lower amount than is owed to the lender. Buyers must be diligent at doing their homework before investing to be sure that the real estate market in their chosen area has stabilized. If not, they may lose money on their investment in the short run.

If the time is right to invest in a home for residential use or for future sales and profit, here are some suggestions to help buyers reach their goal:

  1. Engage the services of a licensed realtor who is well versed in short sale procedures. This may take a little from the profit margin, but the time saving and avoidance of some red tape will be more than worth the effort. The bank will pay the seller's agent's commission, but realtors who source short sale deals will expect a fee for their work as well, which will ultimately come out of the buyer's pocket.

  2. Research local listings of homes that are listed for short sale. This is not to be mistaken with a foreclosure or REO (bank owned) home.

  3. Determine the current appraised value of the home. A realtor should be able to help with this.

  4. If there is more than one lender on the property title, such as a second mortgage, all involved would have to agree to the short sale arrangements.

  5. Sellers may have outstanding debts associated with the home that need to be cleared, such as taxes, utility bills, contractor services or fines.

  6. Ensure all documentation required by the lender have been received from the seller in a short sale transaction. If that is done, you may then make an offer to the lender (or lenders if that is the case).

  7. Buyers should secure a pre-approval letter from their own lender to verify that their offer is legitimate and they will be able to close the deal if accepted.

  8. It is recommended that a final offer be based on the results of an inspection. This will be another out-of-pocket cost for the buyer, but may save a lot of money in the end.

  9. Ask the lender if there is a period in which the seller can reclaim the property. This has happened on several occasions when owners are able to come up with more money to pay their debt.

  10. As short sales can take a long time to process, buyers should have their agent provide the seller's lender a time limit for responding. If they do not respond within that time frame, buyers may be able to cancel their offer and reclaim their earnest deposit.

  11. Buyers should never pay anything directly to the seller.
Visit for a range of properties and information about homes in West Calhoun. Our tailored market search can find you the greatest Minneapolis homes for sale.

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