Short Sale Magic

Dexter Parrish asked:

Learn About Short Sales

A short sale is a real estate transaction where a potential home buyer negotiates with the lender to accept less than is owed on the note. It is typically easier to get the bank to cooperate if they are in the second position on the home rather than in the first position however, a home with only a first mortgage is still a candidate for a potential short sale. A short sale can also be done on a home with only a first mortgage.

Why would a bank accept less than is owed?

This is a great question and one that can be easily answered. A lender will do almost anything to avoid foreclosure, it looks bad on their books and affects the rate at which they can borrow money. If a homeowner falls behind on their payments and it appears the home will need to be foreclosed on, the second mortgage holder will usually get nothing if the home goes to auction because the home is typically sold for a price that is right at what is owed on the first mortgage. If an investor is offering to save the home from foreclosure and is willing to pay $5,000 for a $50,000 second mortgage, many lenders will accept this offer rather than get nothing if the home goes to auction.

Recent housing crash allows you to create equity out of thin air

You see, this cash cow is only understood by a handful of the most sophisticated real estate investors, so there is virtually no competition. Due to the recent downturn in the housing market most real estate investors are running around like chickens with their heads cut off not knowing what to do. Me? I’m busier than ever legally robbing banks for sums of $30,000, $40,000 and even as high as $80,000.

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