subject: Is A Short Sale Worth Your Time In Real Estate Investing? [print this page] A short sale is the process of negotiating for a discount on the mortgage with a mortgage lender. The leander allows you to buy the property for less than the mortgage balance.
Of course, a home owner must be behind on their mortgage for the loan to qualify for a short sale.
As a real estate investor, you identify good candidates for short sale and you negotiate with the lender.
The following factors are important in success in short sales.
1)Pre-screen your properties properly
Not all properties qualify for a short sale. Your efforts are likely to be wasted if you try to do short sales on the wrong properties.
A home owner must be behind on their mortgage at least two months. You must consider the mortgage balance. A property with only one mortgage needs to be profitable if you get only 10-20% discount.
If there are two or more mortgages, negotiating all of them can produce a lot of profits. You can get as much as 80-90% discount on a second mortgage.
The best short sale properties are the ones with more than one mortgage.
Of course if repairs are needed, you must factor all the costs.
2) Be prepared to wait
A short sale can take 3-6 months, sometimes more. If you are new to real estate investing, you must consider this waiting period before adopting short sales.
You must have enough money to cushion you during the long waiting periods. . Otherwise adopt short sales as a part-time model in your reale state investing business.
3)Be prepared for rejection
Your short sale application can be rejected for any reason. They can reject it even when it looks good. Be prepared for rejection.
Having more than one short sale will help you. If you have selected your short sale candidates well, expect a 60-70% success rate.
4)Time is of the essence
If a property is about to go into foreclosure auction, you might not have enough time to stop foreclosure. . Choose properties that will allow you time to negotiate.
5) Have an exit strategy that is acceptable
Some transations are not acceptable to lenders for short sales. For instance, lenders will not accept wholesale dels with "and or assigns".
You must be able to close after the short sale is approved. Normally the bank will give you a number of days like 30 days to close.
6)Be prepared for big pay days
Some deals will make you good money. As long as you can qualify them properly it can be a source of big profits for you.
