Negotiating with a mortgage lender to buy a house for less than is owed is called a short sale. The leander allows you to buy the property for less than the mortgage balance. A loan qualifies for a short sale is the home owner is at least two payments behind. You as the real estate investor identifies motivated sellers who qualify for a short sale and you negotiate with lenders. These factors are important for the success of short sales. 1)Pre-screen your properties properly Not all properties are short sale candidates. Selecting the wrong properties for short sale will be a waste of your time. To qualify for a short sale, the home owner must be at least two payments behind. You must consider the mortgage balance. If a property with only one mortgage becomes profitable with only 10-20% discount, it is a good short sale candidate. If there are two or more mortgages, then discounting all the mortgages can produce a lot of equity and profits. It is possible to get 80-90% discount or more 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)Short sales take time A short sale can take 3-6 months, sometimes more. If you are a new real estate investor, you must take into account this time factor before adopting short sales as a full-time business model. You must have some good capital that will sustain you through months of not making a profit. . If not, then you should adopt short sales as a part time venture in your real estate investing business. 3) Be prepared for failure A lender can reject your short sale application for a reason that does not make sense to you. Even when the deal looks obvious, they can still say no. Be prepared for rejection. Having many short sales at once is therefore helpful. 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. . Select properties that allow you time to negotiate with a lender. 5) Have an exit strategy that is acceptable A lender will not accept certain types of transactions for short sale deals. For example, you cannot wholesale the property with "and or assigns" in the contract. You must be able to close after the short sale is approved. Most banks will give you about 30 days. 6)Be prepared for big pay days Some properties will produce big pay days for you. Once you have them well qualified, you can expect some good pay days for the ones that succeed.
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