Purchasing Short Sales

In today’s market, those investors who can successfully buy short sale properties stand to make a lot of capital. Clearly, there is a huge upside to being able to buy a property for less than the actual mortgage value. If you are new to purchasing short sales of preforeclosures, please appreciate that while the process may seem complex, the return on investment be able to be fantastic.

What steps are required to buy a short sale? Initially, to define a short sale in real estate, it is just buying a property for less than is owed. Obviously, there will be parties that benefit from a short sale and those that will actually lose money. However, you will be dealing with a institution that is trying to reduce their loss so there will be a lot of paperwork that will need to be completed. Because of this, there may be many requirements and restrictions that the lender will require as part of the process

Before trying to buy a short sale, you must be aware of the roles that each participant will play in the process as well as their motivation. The most evident participant in the short sale process is the owner of the property who is willing to walk away from the property for less than is payable on the loan. There are a number of motivations for a property owner to be in this position, but before performing any due diligence in purchasing a short sale, you must be sure that the owner of your target property is motivated.

If you have a willing property owner, get to also know the loss mitigation department of the mortgaging bank. Because the lender is in business to make cash, you will need to make a compelling instance in order for them to agree to a short sale. Most lenders will only agree to short sales if the property is facing foreclosure or non-payment of the loan. With that in mind, the onus is on you to demonstrate that the deal is in the lender’s best interest.

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 proposal that will satisfy the needs of both the property owner and the institution. Develop a short sale proposal with the help of the property owner. Include a letter from them explaining their lack of ability to continue to pay on the mortgage as well all additional substantiation. Locate any and all areas of disrepair on the property and take pictures of them, and get an appraiser to come out and give an appraisal based upon the lowest marketable value of the home.

The next step is simply offering to purchase the property at a given price and submitting it to the bank for approval. Present your purchase proposition along with the short sale package to the institution and gently push it through the approval process. It the request is approved, your purchase of the short sale goes through. If not, just modify your request and submit it again.

To learn more about the process of buying a short sale property, visit Freetrainer.com. Freetrainer.com provides real estate investment software and investment resources to help investors succeed in real estate.