Savvy Real Estate Investing: Short Sales
One aspect of investing in real estate is trying to take advantage of a short sale. Being unfamiliar with what a short sale is, I thought I’d do some research.
A short sale involves buying a house for less than the amount the seller owes the lender, pure and simple. A more sophisticated way of making real estate purchases, short sales probably require more tact and patience than buying a foreclosure, as it involves knowing more about a persons situation than you might let on.
A short sale usually occurs when a seller can’t make his loan payments because of death, divorce, job loss or other hardship. When homes are rising in value, owners can sell the house and pay back the lender. But when home values are dropping, like they are in many places today, and the owner hasn’t built up much equity, that’s not an option.
So some lenders will accept less than the amount owed to avoid the hassle and expense of auctioning the house, providing the owner proves that he doesn’t have other assets to make up what he owes.
As with many foreclosure listings, you’ll be buying the property as-is, so you’d have to include opportunities to back out of the deal (i.e. via home inspections) if things are not as they appear on the surface.
Searching for short sales is probably more work than I have time for at this moment, although I hear they are becoming more prolific as adjustable mortgage rates reset…
Does anyone have any experience with short sales?
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Yes, I do and they are a PIA! They require a lot of work and usually the banks don’t want to deal with you. The last short sale I did fell through because the bank decided to foreclose on the property (it was right before the peak) and sell it at auction.