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Foreclosure is a devastating experience for the property owner, but there is light at the end of the real estate "tunnel" that can benefit both the homeowner and potential real estate investor. The alternative for strapped homeowners is to convince their lenders to accept a short sale. A short sale is when a bank agrees to discount a loan balance, due to economic or financial hardship on the part of the homeowner, to avoid having to foreclose. Banks are willing to accept short sales because they do not want to take possession of a non-performing asset; plus the cost to the bank of foreclosing on a property can be very expensive. Banks lose less money when they accept a short sale. The biggest challenge facing real estate investors is finding deals with equity which can be capitalized on to create a profit. Short sales have the potential to create huge profits since investors can negotiate a selling price that is well below the market value of the property. Voila! Instant equity! And by flipping short sale properties, investors can create quick cash for themselves, as well as provide an opportunity to other investors by wholesaling the property. When a homeowner is in pre-foreclosure, investors can contact them about the possibility of negotiating a short sale with their lender. The homeowner must be willing to cooperate on the short sale for the bank to accept the investor's offer. This is because the bank will want proof that the homeowner is facing financing difficulty and will require that the homeowner provide bank statements, tax returns, pay stubs and a hardship letter. If the homeowner is not willing to provide this information to the bank, you will be unsuccessful in your short sale attempt. Homeowners who want to avoid the financial impact of a foreclosure will provide the necessary documentation that is needed to submit a short sale. The first thing you will need to do is contact the bank and request their short sale packet. This packet will contain all the information the bank requires to consider a short sale. You submit all the requested information to the bank and wait for them to accept your offer. If a homeowner owes $100,000 on a house that is now worth only $95,000, it is not unusual for a bank to accept a short sale for $65,000. Now that you have negotiated a successful short sale, how can you profit from your efforts? The best way is to flip this property to another investor for a quick profit. It is not difficult to find investors who are willing to purchase properties well below market value. You can take the property that you negotiated for $65,000 and sell it to another investor for $70,000. This provides you with a quick $5,000 profit. Not bad for a few days work.
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