For real estate investors, purchasing short sale properties can be a huge opportunity. The apparent benefit of which is that they may buy an investment property for well below the market value, and in the case of a short sale, less than is due on the property. If you are new to buying short sales of preforeclosures, please appreciate that while the process may seem complex, the return on investment may be fantastic.
So how does one invest in or buy a short sale? Initially, to define a short sale in real estate, it is simply buying a property for less than is owed. For an investor the clear benefit of this type of investment property is obvious. Please keep in mind however, that the upside for the institution is low so there are a number of requirements that need to be met in order to complete a short sale. As such, a enormous deal of patience is needed through the buying process
As you get started in purchasing short sale investment homes you must be aware of the role that each participant will play in the transaction. The nearly all apparent player in the transaction is the property owner, though your interaction with them will actually be limited. There are a number of motivations for a property owner to be in this position, but before performing any due diligence in buying a short sale, you must be sure that the owner of your target property is motivated.
The next player in the process is the loss mitigation department of the bank. Because the institution is in business to make cash, you will need to make a compelling case in order for them to agree to a short sale. For home mortgages, this only happens if the cost of foreclosing on the home for non-payment of the mortgage is greater than keeping the existing financing in place, or going through the preforeclosure and foreclosure process. Because that is a guiding principle, you must create a circumstance where the lender sees the short sale as the best option.
Now that you understand these two players, the process of convincing each to short sale the investment property to you is a process of working with both parties to create a request that will satisfy the needs of both the property owner and the bank. Document and photograph all areas of the property that are in disrepair, and get an appraiser to come out and give an appraisal based upon the lowest marketable value of the home.
Now you simply need to agree on a purchase price with the current property owner and submit it along with the package to the bank. Present your purchase proposition along with the short sale package to the bank and gently push it through the approval process. It the proposal is approved, your purchase of the short sale goes through. If not, just modify your request and submit it again.
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