Short Sale Real Estate Investing

 

Cash In on Profits from the Banks Losses!

The Short Sale House Flipping Strategy creates equity and cash by getting lenders to accept reduced payoffs on pre-foreclosure properties. You take control of the property to rent or flip to another investor.  You’ll have great cash flow or immediate fast cash profits.

What is a Short Sale?

A Short Sale is when a mortgage lender agrees to accept less money than the amount owed on a property as full satisfaction for the mortgage loan. Banks are motivated to accept less than the total amount owed on a property loan in foreclosure. Lenders usually accept Short Sales for first mortgages on properties with little to no equity, or on a physically distressed property to eliminate their liability due to its poor condition. Mortgage holders in a 2nd  or lower position typically accept a much deeper discount offers regardless of property condition or relative equity.

How does a Short Sale Work?

The mechanics of a Short Sale are not as complicated as it sounds. Basically, after you and the property owner agree to work together, you negotiate directly with the lender for a reduction in the mortgage loan payoff. You, the lender and the seller work together until a satisfactory agreement is reached. If all parties are in agreement, a short sale can be closed. The result is that the seller avoids foreclosure, the lender gets rid of a non-performing asset and the investor gets a great buy.

How to Profit from a Short Sale

There are several ways you can profit with short sale real estate investing. That is because you can do a short sale on so many different property types, which means there are lots of exit strategies that apply. Some investors focus on wholesaling short sales, others focus on flipping short sales, and some will keep a property they acquire in a short sale and hold it for a long term rental income.

Flipping Short Sales

Flipping short sales can be very profitable, but there are a few things you need to be aware of. First off, many lenders today will put a restriction on your ability to sale the property right away. That could mean you are not allowed to sell the property for anywhere from 60 days to 6 months after you close on your purchase. Of course the lender who is accepting the short sale will have to disclose that to you, so you will have time to work that into your exit strategy plan.

If your plan is to rehab and flip the deal, then a restriction that wont allow you to sell for 90 days is completely acceptable.  If you plan to wholesale it then you will need to get a little more creative.

Wholesaling Short Sales

There are some people who will tell you that you cant wholesale a short sale. I say let them believe that because that just means more deals for you. However, before you can make money wholesaling short sales you need to be ready to get a little creative.

Whenever you make a short sale offer you should always put the name of the buyer as a land trust or a company that you own.  That way even if the lender that is negotiating to accept the short sale places a restriction that prohibits you from selling, you can still transfer the ownership by selling either the land trust or the company.

When you make a deal to sell the land trust, or the company that is buying or has purchased the short sale property, you wont actually be transferring the property ownership.  That allows you to stay in compliance with the lenders restriction, while still allowing you to collect your profits from wholesaling short sale.  Of course this is a bit of an advanced strategy, so make sure you have some good guidance the first time you do this.

Short Sale Pitfalls

Short sales can take a little longer than a normal real estate transaction to complete, but they can be well worth it. Short sales require little to no upfront money, making them low-risk (financially), but they tend to be one of the more complex of the profit models due to your having to negotiate with the bank. But don’t let that stop you.  If your not pursuing Short Sales, your missing a lot of opportunities out there. Short Sales can be a great way to make money in real estate, but the only way to get started is by just jumping in and writing some offers.

Of course, if you not comfortable with the idea of negotiating with the bank, then you may want to join forces with a Realtor or Short Sale Negotiator who is an experienced negotiator. Today it is fairly easy to find an experienced negotiator, and by working with them you will get more deals closed.  Another added bonus is that the bank will typically agree to pay that negotiators fee for you, helping you to make even more money in the end.

Short Sales are very popular these days.  This is the time to get deep discounts from the banks, to buy and hold properties long term. Right now is the time to acquire, hold and rent for cash flow and other traditional benefits of real estate if you can manage to get financing. Short Sales are also popular with investors because a deal can be negotiated for a Landlord or Property Dealer as a contract assignment.