Proven strategies for short sale investing
Short sale investing is a good way to make money, but you must walk into this kind of investment strategy knowing what to expect and how to cope with issues that come along with any short sale.
HAVE MONEY READY
The first step in short sale investing is deciding how much you can spend.
Once you set that amount, stick to it.
If you can invest $25,000, stay with that. It may mean you won’t be able to buy a $30,000 home. It may mean you get to buy two small homes for $10,000 each.
Be certain you do have this money. If you’re borrowing the money, get pre-approved for the loan. If you make an offer on a home, you have to be able to back it up with the money.
Don’t rush. Evaluate the property.
Look at the property in person if you can. If the homeowner will let you, walk through the home and take pictures. Even better is to get a certified home inspector to examine the house.
Make a note of any needed repairs and include this in the amount you will spend. Present this information to the bank with your offer as well. If the home requires really extensive repairs, then a low cash offer may be acceptable.
You should also consider the neighborhood. If you will flip the home, talk to a real estate agent to get a realistic opinion of how long it will take to sell the house for a profit.
If you plan to live in the home, do you want to live in that neighborhood?
If you want to rent the house, what are average rents in the neighborhood and what can you reasonably expect to get. Short sale investing is about making a profit after all.
DON’T LOW BALL
If you are serious about short sale investing, then be serious with an offer for the property.
If the fair market value on a property is $100,000 and the mortgage is $150,000, then make a reasonable offer.
Offering $50,000 means you will be ignored. Offer $90,000 and your offer will be reviewed.
Whether it’s accepted or not depends on a lot of factors. Offer $100,000 and you stand an even greater chance of getting the property. Just remember to figure in repair costs if needed.
Short sales take longer to process than regular home sales. The bank is going to take its time evaluating your offer and comparing it to other offers.
Banks are in the business to make money by turning a profit on transactions. When a lender is looking at losing money, it’s going to move very slowly.
“It can take weeks or months for the lender to approve a short sale, and many buyers who submit an offer end up canceling because the short sale process is just taking too long. Buyers have to be ready to wait for the bank’s short sale approval,” Jean Folger writes in Investopedia.
MAKE SHORT SALE INVESTING CONTACTS
Call banks and real estate agents and tell them you are interested in short sale investing. When properties come up, you’re already on the list to be contacted.
Short sale investing is a way to make money in real estate, but be aware that the process can be slow. You’ll want to already have the money or a pre-approved loan available when you approach the bank.
Be sure to inspect the property and make a note of any repairs needed. Then make your offer, but keep in mind that an offer that’s too low is unlikely to be accepted.
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