| 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.
You should therefore know when to do a short sale to make the deal profitable.
These tips will help you identify when to do a short sale.
Why do a short sale?
Lenders are trying to get rid of properties in their inventory that they cannot sell.
They do not need properties, they need to make loans. 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
The best time to do a short sale is before a 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.
In general, it takes 2 to 4 weeks to get the attention of the bank. If the offer you make looks attractive to them, 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 you can do a short sale.
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 excellent short sale candidates. A holder of a second mortgage can lose all their investment in foreclosure. They can therefore settle for as little as 10-20% of mortgage balance.
Negotiating both first and second mortgage can create a lot of equity for you. Each loan is discounted separately, creating a lot of equity for you.
If there is only one mortgage, the mortgage balance must be low enough to give you a profit if they discount 10-20% of the mortgage balance.
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 |
