Real Estate Pro Articles
   
   

Real estate short sales: a primer



[Valid RSS feed]  Category Rss Feed - http://www.realestateproarticles.com/rss.php?rss=265
By : Karim El Sheikh    99 or more times read
You've heard about making a profit off of buying foreclosure homes from many different people. Buying a foreclosure home on foreclosure terms is not the only way to make money off of a house; you can also explore the avenue of buying a short sale. Anyone new to real estate investing might wonder what exactly a short sale is. A short sale is when a seller can't get the amount of money they need to pay off any loans on the house. In this instance you may be able to get the bank to accept less than is owed as a payment in full.

For example, Ben and June owe 100,000 on their home but they haven't been able to make their mortgage payments for quite a while so the bank is not getting any more money to pay off the loan. Ben and June have put up their house for sale due to foreclosure, but aren't getting any takers. You see the predicament that they are in and are looking to make a profit off of your next house investment. So you talk to Ben and June, find out what is owed, and then make an offer of 55k or 65k for the house. It is quite possible that with all the circumstances regarding Ben and June that the bank might just consider your offer in order to avoid a complete loss on the property. This helps benefit everyone involved, you get some great equity in the house, Ben and June are able to move on with their life, and the bank doesn't have to take a $100,000 hit on the property.

Of course it's a bit more complicated than this, but you as an investor have the potential to make a great profit on a short sale house. When starting the process of buying a home on the basis of a short sale, you need to be prepared to do a fair amount of work. First you need to do your research into the property. The home owner has to be fairly behind on mortgage payments for a short sale to be considered by the lender. You need to make sure that there is not so much debt on the property that what you would need to pay for a short sale doesn't bring it up to normal market value. You can choose to search public records to find any houses that are in foreclosure status and all the information on owner, lenders, and how much is owed. This will also tell you if there is more than one mortgage on the house.

After you have found some viable properties you then need to research ashort sale agent. Yes, research is required on this as well. You want to make sure that the agent has experience with short sales. If they have no experience they might end up ruining the entire deal and costing you a potential investment property in the process. Experience is necessary for this type of investment. They will be aware of what details need to be handled in order to get the transaction going. It will also help the process go smoothly and quickly as possible while protecting you and your interests in the process. It's very valuable to invest in an experienced agent, especially if you are new to this sort of real estate investment.

After you have someone working on your side, you need to approach the seller. Remember that the seller has to be behind on their payments for this type of deal to be accepted. The seller is going to have to prepare and send a hardship letter to the lender. This is basically a letter informing the lender of their dire financial status and inability to make payments on the loan as well as inability to make up any missed payments. This informs the lender that they need to consider other options in regard to the property so they will not lose the amount they have loaned the seller. Do not make any cash deals with the seller in exchange for agreeing to accept your offer; this is a big no-no that has major legal ramifications if performed.

After the hardship letter has been sent, you then need to get the seller to accept your offer. Once they have accepted, the deal is not complete; you then have to send the acceptance to the lender. With the acceptance letter, there are other documents that you need to send the lender in order to convince them that your offer is in their best interests. You need to send information on your earnest money, the loan information you have secured if they accept your offer. You need to attach your preapproval letter and also some existing sales of similar properties that show your offer is acceptable. Include terms to your offer, yes you can do this. You need to make sure there is a certain timeframe that your offer is good for. This way you aren't obligated to sit around and wait for weeks or months for an answer from the lender. You also want to make sure that the lender is expecting your paperwork so they are prepared.

If the lender accepts your offer, you are not free and clear. There still might be negotiations and inspections to be performed before closing the deal. You as the buyer and investor might also want to have your own inspections conducted in order to make sure there are no major structural damages to the property. You can even specify this as a contingency of your offer. Make sure that all the details are taken care of by both you and your agent. If all is done accordingly, you may be able to make quite a deal on a short sale property.
ShortSales.net provides the most up-to-date listings of short sales nationwide. Learn how to profit from one of the most lucrative types of real estate investments.

Related Articles



Actions
Print This Article
Add To Favorites



Sponsors

 

 

© All rights reserved to Real Estate Pro Articles