Short Sales Offer Opportunities For Savvy Real Estate Investors

With millions of homeowners defaulting on their mortgages

, more real estate investors have discovered that preforeclosed homes for sale are an extremely profitable way to invest in real estate.

While many real estate gurus tout the value of foreclosed homes, preforeclosed homes in the form of short sales offer even greater savings. Short sale properties are properties that are sold for less than the amount the homeowner owes.

Often, due to the extreme decrease in value since the homeowner obtained their mortgage, they owe more than what the home is even worth in today's recessed market, this also due to refinancings and poorly structured mortgages.

By investing in a property that has been properly negotiated for a short sale, you can save as much as 70 percent on the home's current market value.

And with the increase of mortgages going into default, the pool of available properties is constantly rising.

How The Short Sale Process Works

The process is rather simple:

A homeowner defaults on their mortgage. The homeowner puts their house up for sale in an effort to find a buyer before the home is sold at a foreclosure auction.

An investor/or buyer makes an offer to buy their home at a significantly discounted price.

The investor/or buyer negotiates with the bank an acceptable price for both. The bank will be reducing its losses and not have to incur holding cost on the property.

The homeowner is free from the stress of the defaulted mortgage. The investor/or buyer gets the property for below market value.

Accordingly, a short sale offers a key advantage to the seller in distress, because they're able to salvage their credit. Typically, foreclosures on a persons credit prevent a homeowner from buying again for five years whereas short sales they may be restricted for 24 months.

Selling a home via short sale was not a common practice. But that has changed as banks have lost millions on bad mortgages.

Why Short Sales Benefit Banks, Sellers And Investors

Banks are in the business of selling loans, not maintaining foreclosed homes. Now, banks have a financial incentive to unload these homes in order to recoup lost profits on mortgages gone bad. That's where you as a real estate investor come in.

Until you buy the property, the bank isn't receiving any money at all on its investment. Preforeclosed homes offer advantages for all parties involved: The seller walks away from their home; the bank cuts their losses; and the investor gets a home cheaper.

A short sale offers many advantages for real estate investors.

by: Danny Thompson

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