It used to be that there was nothing short about a short sale, other than that sometimes you could shortcut or circumvent a foreclosure. As you probably know, short sales are transactions between a real estate investor (or other third party) and a lender on behalf of a homeowner who is going to lose the home. Basically, the third party’s job is to convince the lender to take a dramatically cut-down purchase price on the property, give the deed of the property to the third party, and let the homeowner go without foreclosure. The end result is that the homeowner can walk away, the third party gets a great deal on the property, and the lender gets something for a property that they believe will cost them more to sell than they can get for it on the open market. Of course, every transaction is slightly different, and the details vary slightly, but this is a short, sweet summary of what happens. And the negotiations can take months and months, (not to mention selling the house on the open market, which can also take months and months) which is why these deals did not used to be considered short term investments. However, now times have changed. Short sale experts around the country have figured out how to streamline the process, and the massive influx of foreclosures and preforeclosures on the real estate market has forced lenders to start making this option more easily available to buyers. The result? Short sales can now be flipped in many cases in a way much similar to the way contracts and rehab properties are flipped. This is not to say that you can do a short sale in a day. Only in very rare instances will this be an option. However, you very likely can complete the deal in a few weeks or a month or two, and during that time you do not actually have to own the property. What short sale experts are doing right now is targeting homes in preforeclosure, and then negotiating with the banks on a purchase price. While they are doing this, they are simultaneously advertising the property as a short sale to buyers. The end result is that about the time the short sale is completed, the third party (usually a real estate investor) has a buyer lined up to do the deal, possibly with the aid of some creative financing, or maybe through a traditional bank loan. Either way, the investor does not have to hold the property and wait for it to sell, and the homeowner still gets the benefits of getting out from under a mortgage that they no longer can handle †without a foreclosure on their credit. If you have been avoiding short sales because you have heard how tedious and difficult they are, it may be time to rethink this attitude. While it would definitely be a stretch to say that you could do a short sale blindfolded, the market and the lenders have adapted, and short sales are one of the most significant burgeoning short term real estate investing opportunities on the market today. Peter Vekselman has been successfully investing in real estate since 1996. He has completed over 1200 real estate deals, owned a construction company, been a private lender, and owned a property management company. Peter currently works with clients all over the US helping them achieve riches in real estate investing. For more information please visit www.CoachingByPeter.com.
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