Real Estate Short Sales 101: Know Your Three R's!
There is no doubt that success can be found in short sales – buying real estate before the foreclosure auction and getting deep discounts on the purchase price. However, you have to do your homework before becoming involved in a purchase.
I have been investing in real estate for over twenty years now, and since 2000, I have focused almost entirely on short sales. I can attest to the fact that there is money to be made from these houses. Nevertheless, there is work to be done before the deal is closed.
It is no secret that to succeed in any type of business, you must internalize “the basics.” The world of short sales is no exception, and it has its own version of the three R’s: You must Reach out, Research, and be Ready to Negotiate.
A short sale can occur when a homeowner is behind in payments, typically by about three months. He or she then faces the obvious problems of potential foreclosure, the bank taking back the house, and destroyed credit.
In addition, the bank that holds the mortgage is losing money, pouring additional financial resources into lawyers and court fees. As the investor, this is where you come in.
Your first step is to reach out to the homeowner. Contact the seller and present the idea of a short sale to him. Most likely, if he has tried other options such as listing the home with a realtor or FSBO (For Sale By Owner) and it didn’t sell, he will be happy to become involved in such a deal. Especially when he learns there is almost always NO cash out of his pocket.
Aside from making an intelligent investment for yourself, you offer a solution to someone whose problem may seem unsolvable.
Upon gaining permission from the homeowner, you then negotiate with the bank to take less on that mortgage than is actually owed and consider it payment in full. This is where the second “R,” research, comes in.
Of course the first step in your research is to ascertain the remaining mortgage balance, but two other facts are equally important. You need to ask: What is the potential value of the home after any necessary repairs are made?
Deb McMillan, OPHP, CMI, is a real estate investor and writer living in Hamilton, Ohio. She has written a home study course on Short Sale Success Systems, which teaches investors how to get deep discounts from the bank when buying pre-foreclosures. She has been investing in real estate since 1986 and buying, selling, and teaching short sale strategies since 2000. In Deb’s home study course and seminars, you’ll learn how to talk to sellers to get them to do what is necessary to save their credit. In addition, you will become familiar with bank negotiation strategies that will lead you to incredible savings when buying real estate. You will also learn about bankruptcy and what you can and can’t do once a homeowner files. That, and so much more knowledge that will help close your deals awaits you! Log on to http://www.shortsalesqueen.com for more information and a free report.