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A lot of investors have started taking advantage of short sales to make a profit. Yet few individuals completely understand what short sales entail. In the real estate short sale the bank sells a property for less than what is owed in order to forgo foreclosure proceedings. This benefits the bank in that they generally lose less money in a short sale and investors acquire a low-cost investment property. So what is entailed in a short sale? When homeowners cannot pay their mortgage, one option they have is to sell the property. If the value of the property has fallen to an amount lower than the amount they owe on their mortgage, a short sale is requested. The buyer and the homeowner must work together to prove to the lender that: The homeowner is in financial distress. The value of the property has declined to a level below what the homeowner owes. It is in the lender's best interest to accept the offer of the buyer as payment in full.
As the real estate investor you will need to make an offer and write up a sales contract. The offer should reflect the fair market value of the home, minus any repairs. When you have an agreement, the seller will call their lender and let them know that they have a purchaser and would like to do a short sale. The lender will request documents from the homeowner, which may include a letter describing the reason why the homeowner cannot afford the mortgage anymore, financial statements, and pay stubs. The lender will also dispatch an appraiser to the property to determine its market value. After receiving all of the homeowner's documents and the current market value of the property, the lender will make a decision. As a real estate investor, the benefit of doing a short sale is great, as you will acquire a home for well below market value. To use a short sale, you will need to find individuals who need to sell their homes due to a possible foreclosure. Among the most significant aspects of a short sale is to recognize the true worth of a home. To achieve this, you will need to know reasonable market values in the area, or hire a reliable assessor. There are numerous websites that offer free home assessments. Many times the lender's evaluation is too high and you may find it difficult for the lender to allow a short sale. So, its important to research the recent home sales in the area. Have the home assessed yourself or browse some of the free home evaluation sites, or county assessor's sale records and contest the bank's assessment if you come up with a different value. From a homeowner's perspective, and an investor's perspective, a short sale is a beneficial transaction and can help you as an investor make a nice profit.
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