Pre-forclosure Short Sales Pt. 1 - What is a Short Sale?

Published by Sean M. Lightfoot on Tagged Real Estate Investing

Are you into Real Estate investing (REI) or thinking about testing the waters? Well, there is a very powerful technique that I will discuss with you called “Short Sales.” This technique is used by the great investors and does not require cash or good credit. Let me type that again “No cash or GOOD credit needed!” It usually involves a property that has little or no equity. Most investors wouldn’t even dream of sitting down and trying to work out a deal with a seller of a low loan to value property.

People pay hundreds of dollars for the information that I am about to give you and I’m giving it to you for FREE! I believe in “Giving to receive.” I give you the knowledge and hopefully you’ll give me your readership. You want to learn and I want to share with you what I know.

The blog post that you are currently reading, will be the beginning of a detailed step-by-step walkthrough on the subject. There is a lot that goes into successfully (and profitably) doing a short sale and I don’t want to cram all of this information into one post. So it will be spread out into installments. My goal will be to post a new installment every two or three days. That way, I wont hit you with too much information at one time.

Ok, for those of you that are not familiar with short sales, let me explain it to you. There are 3 stages of buying Foreclosures: Buying Pre-foreclosures, Buying foreclosures at auction and Buying foreclosures that are Real Estate Owned (REO). Short sales fall into the pre-foreclosure stage. Throughout the life of this blog, I plan on discussing techniques in each of the 3 stages. Where else better to begin than with the 1st stage? Pre-foreclosures.

Unlike most other REI techniques, short sales require more than the two typical parties. The buyer and the seller. Short sales bring the lender into the mix. In actuality, the lender has the final say so.

First, you have to find a motivated seller that not only knows that selling their property is the BEST thing to do, but also knows that trying to hold on to it hoping for a miracle is the WORST thing to do. Don’t get me wrong, leaving your home of however many years can never be an easy thing to do, even when it’s of your free will and you’re making a profit. But you can only do business with someone that knows that life goes on and getting out of their current situation before it gets any worse, is in their best interest.

They obviously have a few late payments on their credit from not paying their mortgage or they wouldn’t be in this predicament. That is nothing compared to the bank taking their home, kicking them out and putting a repossession on their credit. Then they have no home and no chance of getting a mortgage on another one. Sometimes you have to you have to remind them of this…in the nicest way possible!

Hopefully those of you that are into REI or considering it, are in it not only to make as money as you possible can, but to help someone else in the process. I am highly against the investors that take advantage of those that are in desperate situations. I believe that there should ALWAYS be a win-win in every deal, be it real estate or any other transaction. I am a God fearing man and taking advantage of people keeps me from sleeping easy at night. Besides, each person that you help win, is another possible referrer of your business and great services.

Next, once you’ve found your motivated seller, you have to contact the bank that owns the loan on the property. I know I just turned a few of you off of the idea of short sales just by mentioning contacting the bank. Don’t cringe just yet, it’s not as difficult as you think.

Banks do not like having foreclosures on their books. If it is at least possible to avoid a property from going through the 3 stages of foreclosure, they will consider the option. That option, you’ve guessed it, is the short sale.
There are several steps to successfully completing a short sale and each of the following installments will cover a few of them. This was just an introduction to let you know what we are about to get into. Now you can decide if this is an investment technique that you would be interested in learning more about. If so, stay tuned. We have plenty more to come.

See you soon!

July 8th, 2007