Short Sale Investing

Because of current economic conditions in the housing market there is a great deal of investor interest in the technique of purchasing investment property with Short Sales. So–what is a Short Sale? A Real Estate Short Sale happens when a seller’s bank allows a property to be sold for, and accepts a payment of, less than the amount owed to that bank.

A rough example would be if a home owner currently owed $170,000.00 on a mortgage and the bank holding that mortgage agreed to allow the home owner to sell the home and payoff that mortgage for $150,000.00.

An overview of a short sale technique might work like this… You the investor would start by doing a marketing campaign or sign up for program to find prospects. Having found a few names you would contact the prospects and get one of them to agree to proceed with the short sale. When you have reached an agreement with that prospect, ask for a copy of their last bank communication to verify that what they have told you is accurate.

Before going any further you must search the public records in order to uncover any additional liens that may exist. This is important so that you can decide weather to stop the process or try to work with these creditors to get the liens removed. If you choose to continue, have the seller contact their bank or mortgage companies’ short sale department and ask for a third party contact authorization and a Short Sell forms package.

After the bank’s short sale kit arrives–have the seller fill out all the forms and paper work and return it to the bank. They should also give you the third party authorization information. Now you should contact the bank using third party authorization and talk with the person assigned to the case.

The bank should give you instructions for submitting your offer. When you submit your offer be sure to reserve the right to do a full inspection of the property should your offer be accepted. When the bank replies to your offer you should be prepared and negotiate if necessary. If your offer is approved you will need to monitor and promote the project periodically.

If that sounds like a lot of work to you—you understand the program! But there a few advantages to the short sale technique. They include:

• Instant equity
• Lots of prospects
• It’s so complicated and time consuming that only a few competitors persevere
• It is a good fit for systemized process
• The seller could avoid foreclosure
• There is a lot written on subject

There are also some disadvantages and some of those are:

• You will be dealing mostly with unmotivated and unhappy sellers
• You will also have to deal with banks
• The seller may owe taxes on the unpaid balance
• This technique take longer than many other ways of finding deals
• Seller may still owe the bank the difference
• You cannot pay the seller any money if you want to stay out of jail
• There may be other liens on the property

Considering the disadvantages to the seller–why on Earth would a seller ever agree to sell you their home this way? There are three main reasons. The sellers that agree to work with you do not want to have a foreclosure on their credit record, they do not want their credit to suffer more that necessary and they have become tired of dealing with, and want to be rid of, the debt.

Why would a bank agree to take less than the full amount owed? The bank or mortgage company may be more motivated than you think for a number of reasons. The value of property may have dropped since the loan was made. The buyer is behind on their payments and they want to avoid having another bad debt on books. There are federal penalties and restrictions for banks with bad debts on their books. And the bank may just want to avoid the hassle of having to foreclose, take over the property, get it fixed up and market it just to try to break even. And break even is all a bank is allowed to do.

There are several ways to find short sale opportunities but the quickest and easiest is to sign up for one of the many short sale programs on the market. Just use any internet search engine and to locate one that meets your needs and budget. Many of these programs offer lead generation and scripts for what to say to prospects. They also provide advice on filling out the numerous forms required. If you are determined to reinvent the wheel, you can buy a list and send out letters to attract potential short sellers. Or–you could just run a campaign of ads that could include advertising:

• In newspapers & tabloids
• With flyers
• Passing out cards
• Using Birddogs

As you can see the short sale technique is not a quick and easy way to start on the road to real estate investing wealth but by devoting a good deal of study, hard work and time, it can become a profitable technique to use in your quest for investing success.

I hope this article has helped you in your quest to build wealth through real estate investor training.

This article originally apeared as:

Real Estate Investor Training—Short Sales
by Dennis Henson

In wholesaling (short term flip without rehab), you want the type of house that your buyers will want, the ones that, for them, sell the fastest, and, of course, ones they can make a profit on. Following are some tips on what you should be looking for.

In general, especially if you are just starting out, avoid houses in the high end of the market. Yes, they can look beautiful,and clean up real nice, but most retail buyers will not be able to afford to live in them. And as rentals, they are murder when investors are trying to cover the mortgage payments.

You want to work mainly with houses in working class neighborhoods. Investors will be interested in these types of homes for rental purposes. And a majority of reliable renters will want to live in these neighborhoods.

Look for houses in need of repair. Look for peeling paint, broken windows, unmowed grass, general disrepair.

Especially in the beginning of your career, deal mainly with houses that do not need structural repairs, like foundation work. You will receive your fees quicker because any needed repair work can be done relatively quickly.

In the neighborhood you are working in, you want houses that are most affordable for first-time buyers. Those are the houses your buyer will want to rent out.

Put another way, you want houses in the median price range for your area.

The ideal house investor will want to buy will have 3 bedrooms and 2 baths, although you can get away with 1 baths. This is the bread and butter rental house for your buyers. If your area has only 2 bedrooms and 1 bath, you may have to go with that. Or, go farther afield to do your hunting.

What about war zone houses? Generally, you will do better in working class neighborhoods. However, if you have buyers on your buyer’s list who want war zone types of homes, go for it.

Avoid houses with weird floor plans. For example, houses where one is required to go through a bedroom to get to a kitchen, etc. They will be harder for your buyer to rent or retail.

Avoid houses that are too small. Medium size houses are what you are after. Medium for your area, that is.

The more equity a house has in it, the better your chances of making a deal with your buyer. More equity means there is plenty of room for your buyer’s profit, not to mention your fee.

You, of course, want to be dealing with motivated sellers who are willing (or forced) to take a discount from their asking price.

You are always looking for bargain properties where there is plenty of room for profit.