Foreclosure Investing: The Long and Short of Short Sales

by Donald Hanz on Real Estate Investing

Seasoned real estate investors have always explored ways to earn considerable profit off bank foreclosure properties. Aside from buying foreclosed homes at pre-foreclosure stage, from auctions or from banks (real estate owned), they can also own one under a short sale agreement.

If you are new to foreclosure investing, you might not have heard of this. A short sale is basically buying a distressed property, not from the owners, but from the lender. Another important thing to remember is that the property will be bought at a price that is much lower than the existing mortgage debt. For example, if the existing mortgage amounts to $300,000, you can offer the lender $220,000 in cash as full payment for the property. There are several reasons why short sales work for both buyers and lenders.

Buyers will certainly benefit from such arrangement since they will be enjoying a considerable discount and a faster transaction. Lenders, on the other hand, accept such offers because they would be able to save much money on foreclosure costs, which can be considerable. In addition, they would have to spend more money while the property is in their possession. They have to pay insurances, maintenance costs and taxes, all of which are part of the holding costs.

The best time to offer a short sale is during the pre-foreclosure stage, when the notice of default has been issued and the owner is left with very little time to cure mortgage default. Lenders will usually entertain such offers during this time because they do not want to proceed with the foreclosure filing as well. If you make an offer too early, you might not enjoy great discounts.

Learn more about short sales and foreclosure investing from foreclosure experts like Bank Foreclosures Sale.