Short Sales – A Great Way to Make Money in Real Estate Investing Or a Fast Path to Short Profits?
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Short sales are a hot topic these days in real estate investing. How can they not be? You see signs and listings for short sales everywhere, so naturally you might think this must be a great way to make money in real estate investing. But is it?
For those of you who don’t know, a short sale is when a property is sold for less than the value of the mortgages on it with the bank’s approval. And that’s where the problem lies, you can’t just say that I’ll pay $250K for this property even though the mortgages are $300K and mortgage holders, you’re good to go with that, right? If the lenders are going to even consider being out $50K on a short sale, they are going to make everyone jump through a lot of hoops.
Under a short sale, the sellers are put under heavy scrutiny to determine that they truly have experienced unexpected financial hardship. Plus the bank will take its sweet time analyzing all the numbers, and often only be willing to agree to a much higher figure than the buyer had in mind. A short sale can take up to six months to close which frustrates buyers, real estate agents and sellers who can’t necessarily afford to hold onto a property they are behind on for that long.
You would think that banks would jump at the chance to not get stuck having to take the property back as a foreclosure. Not so, real estate professionals estimate only 20-30% of all properties that are sold under short sale transactions actually close.
So should you pursue short sales as a real estate investor or foreclosure investor? Generally, the best advice is to not spend a lot of time on them, and use an experienced real estate professional who regularly packages up and negotiates short sales. Since 70-80% of the time you will not be successful in closing a short sale deal, you won’t experience a high degree of success with this method, although if you can manage your time well, that occasional win could be sweet indeed.
Overall, it’s much better to concentrate on other pre-foreclosure methods.
Copyright 2008 SunLover Publishing LLC
