Purchasing Short Sales

For real estate investors, buying short sale properties may be a enormous opportunity. Clearly, there is a huge upside to being able to buy a property for less than the actual mortgage value. For investors looking to get into buying short sales, the return can be phenomenal.

So how does one invest in or buy a short sale? First, you must realize that a short sale in real estate is when you purchase a property for less than is payable on the mortgage. As an investor, you stand to gain significantly when buying a property in this process. Please keep in mind however, that the upside for the lender is low so there are a number of requirements that need to be met in order to complete a short sale. As such, there may be many requirements and restrictions that the lender will require as part of the process

As you get started in buying short sale investment properties you must be aware of the role that each participant will play in the transaction. Obviously the property owner is a big factor in the transaction and may be going through some financial turmoil which is leading to the need for a short sale. There are a number of motivations for a property owner to be in this position, but before performing any due diligence in purchasing a short sale, you must be sure that the owner of your target property is motivated.

The next player in the process is the loss mitigation department of the bank. Because the institution is in business to make money, you will need to make a compelling case in order for them to agree to a short sale. For home mortgages, this only happens if the cost of foreclosing on the home for non-payment of the mortgage is greater than keeping the existing financing in place, or going through the pre-foreclosure and foreclosure process. With that in mind, the onus is on you to demonstrate that the deal is in the institution’s best interest.

Now that you comprehend the motivations of the two players, buying a short sale is only a matter of satisfying their two unique needs. Develop a short sale offer with the help of the property owner. Include a letter from them explaining their inability to continue to pay on the mortgage as well all additional substantiation. Find and photograph and areas of the property that need repair, and get an appraiser to come out and give an appraisal based upon the lowest marketable value of the home.

The next step is only offering to purchase the property at a given price and submitting it to the bank for approval. Present your purchase offer along with the short sale package to the lender and gently push it through the approval process. It the offer is approved, your purchase of the short sale goes through. If not, simply modify your proposition and submit it again.

Visit Freetrainer.com to get more information on how to buy a short sale property. Freetrainer.com helps real estate investors succeed by providing education and resources including a complimentary copy of our award winning real estate investment software.

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