Negotiating with banks to buy properties for less than the mortgage balance can make you big profits in real estate investing. Not all short sales are potentially profitable, which some can make you lots of money.
This article walks you through the best sources of profitable short sales.
Even though short sales involve negotiating with banks to get a discount on the mortgage, some short sale deals are a waste of your time.
As a real estate investor, you should aim for those deals that will make you more money
1) Target motivated sellers directly
The best source of houses for sale is buying houses directly from motivated sellers. This is before the property gets foreclosed.
The motivated seller must be at leat 2 months behind on their mortgage payments to qualify for a short sale.
You can target these motivated sellers by targeting people in legal trouble who own real estate. These include people going through divorce, burned landlords, people with liens, people whi have inherited properties, vacant houses, expired listings etc.
In other words, you target people who own properties they most likely want to sell, even though these properties may not be listed on the market.
2) Make sure you have enough time
In some states like Texas, when a foreclosure is files by the lender, it is usually foreclosed within 3 weeks. In other states you may have several months before foreclosure happens.
Make sure you have enough time to get the bank’s attention before they have to foreclose on the property. It can take weeks to months just to get the bank’s attention.
3) Target short sales with more than one mortgage
The holder of a second mortgage can lose 100% of their investment in foreclosure. They are therefore more willing to negotiate than the holder of the first mortgage.
This means you can get 80-90% discount on the second mortgage. If you also negotiate the first mortgage and get 10-20% discount on the first mortgage, you can make a clean profit from such short sale deals.
4) Avoid short sales listed in the MLS
Typically, real estate agents will approach banks and list properties as short sales. They are open to any offer they can get, of course the higher the better for them.
Usually no real estate agent will tell you the mortgage balance. And of course you will never know if there is one or two mortgages.
This means you can only make blind offers. As a real estate investor, it is in your best interest to get the mortgage balance before you can make any offer to buy a property.
Even though you can get good deals from listed short sales, you are most likely to offer more than you normally would if you had the mortgage balance. And of course you will waste too much time because most of your offers will be rejected anyway.
Stick to motivated sellers and you will find short sales deals that will make you some good money.
In order to be a successful real estate investor, you must attract motivated sellers, convince them to sell you their houses, make offers that are acceptable and close deals that make you money. Learn how you can achieve this with a real estate investor web site for buying houses.
Tags: motivated seller, real estate investing, real estate investing website, real estate investor website, short sale REO