| Negotiating with mortgage lenders to accept less than the mortgage balance for a property can make you lots of money in real estate investing. Not all short sales are potentially profitable, while some can make you lots of money.
This article points out sources of the most profitable short sale deals.
Even though short sales involve negotiating with banks to get a discount on the mortgage, some short sale deals are a waste of your time.
As a real estate investor, you should aim for those deals that will make you more money.
1) Target motivated sellers directly
Motivated sellers are the best source of investment properties.
This is before the property gets foreclosed.
The mortgage payments must be at least 2 months behind for banks to consider a short sale.
You can find motivated sellers by targeting people who own real estate and they are in legal trouble. These include people going through divorce, burned landlords, people with liens, people who have inherited properties, vacant houses, expired listings etc.
These people probably have properties they would like t sell, even though they are not listed on the market.
2) Target properties that allow you enough time
In some states like Texas, when a foreclosure is files by the lender, it is usually foreclosed within 3 weeks. Other states allow several months.
Make sure you have enough time for the short sale before the property can be foreclosed on. It can take weeks to months just to get the bank's attention.
3) Target short sales with more than one mortgage
After foreclosure, the holder of a second mortgage can lose everything. They therefore typically offer bigger discounts.
It is not unusual to get 80-90% discount on the second mortgage. If the first mortgage lender offers 10-20% discount on the first mortgage, you can make a clean profit on the deal.
4) Avoid short sales listed in the MLS
Typically, real estate agents will approach banks and list properties as short sales. They are open to any offer they can get, of course the higher the better for them.
Real estate agents will not tell you the mortgage balance. And of course they will not tell you if there is one or two mortgages.
This means you can only make blind offers. You cannot make good offers as a real estate investor if you do not know the mortgage balance.
Even though you can get good deals from listed short sales, you are most likely to offer more than you normally would if you had the mortgage balance. And of course you will waste too much time because most of your offers will be rejected anyway.
Stick to motivated sellers and you will find short sales deals that will make you some good money.
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