Is Short Sale A Viable Business Model In Real Estate Investing?

Negotiating with a mortgage lender to buy a house for less than is owed is called a short sale. The leander allows you to buy the property for less than the mortgage balance.

A home owner must be at least two payments behind to qualify for a short sale.

As a real estate investor, you identify good candidates for short sale and you negotiate with the lender.
These factors are important for the success of short sales.

1) Qualify your properties properly
Not all properties are short sale candidates. Your efforts are likely to be wasted if you try to do short sales on the wrong properties.

A home owner must be behind on their mortgage at least two months. The mortgage balance is an important factor to consider. A property with only one mortgage needs to be profitable if you get only 10-20% discount.

If there are two or more mortgages, then discounting all the mortgages can produce a lot of equity and profits. It is possible to get 80-90% discount or more on a second mortgage.

Properties with more than one mortgage are likely to be your best candidates for short sale.

Of course you must consider all the costs such as repairs.

2) Be prepared to wait
A short sale can take 3-6 months, sometimes more. If you are new to real estate investing, you must consider this waiting period before adopting short sales.

You must have some good capital that will sustain you through months of not making a profit. . If not, then you should adopt short sales as a part time venture in your real estate investing business.

3) Be prepared for rejection
Your short sale application can be rejected for any reason. Even when the deal looks obvious, they can still say no. Be prepared for rejection.

Having many short sales at once is therefore helpful. If you have selected your short sale candidates well, expect a 60-70% success rate.

4) Time is of the essence
If a property is about to go into foreclosure auction, you might not have enough time to stop foreclosure. . Select properties that allow you time to negotiate with a lender.

5) Have an acceptable exit strategy
A lender will not accept certain types of transactions for short sale deals. For example, you cannot wholesale the property with "and or assigns" in the contract.

You must be able to close after the short sale is approved. Normally the bank will give you a number of days like 30 days to close.

6) Be prepared for big pay days
Some deals will make you good money. Once you have them well qualified, you can expect some good pay days for the ones that succeed.


Simon Macharia is a real estate investor in Dallas, Texas. He has done a lot of short sales among other transactions. His business is run and automated by real estate investor website from http://www.realestateinvestorswebsites.net