Using Short Sales to Buy Foreclosed Property

Finding great deals is one of the biggest issues real estate investors face. There are thousands of deals available if you know where to find them and how to secure them. In today’s economy, most homeowners actually owe more on the property than what it is worth causing some investors to walk away from these deals because they do not know about Short Sales.
The Short Sale concept is simple: convince the bank to sell for less than what is owed as payment in full. In other words, buy at a discount, re-sell the property, and make money, but how? The key to finding investment-worthy properties is to act quickly and do your research. Don’t wait for some subscription service to send you a list. Go to your local courthouse if that is where notices are filed and be the first one there. Check with local title companies or bankruptcy attorneys to see if they offer these services if you don’t have a company that publishes notices of default.
Once you have discovered a property, mail your first letter of approach to the homeowner immediately. By placing ads in your local papers in the real estate or credit section of the classifieds will help generate leads by finding homeowners who want to avoid costly credit penalties involved with foreclosures.
Be careful not to get caught up in the excitement of a prospective short sale profit. You must remember that this is a very stressful time for the homeowner and you can’t get anywhere without their cooperation, trust, and confidence. Work with the homeowner and help them realize that this is the right option for them by emphasizing the benefits of working with you. Help them to understand that once your contract is signed and the bank accepts it, they will be free to move on with their life.
Once the homeowner has signed your contract it’s time to contact the Loss Mitigation Department of the bank where the foreclosed property is held. By explaining that you are trying to help the homeowner with his foreclosure and are willing to buy the property from him, but due to the condition of the property, declining values, etc., you are only willing to pay X amount, the negotiations begin. Try to be firm but polite so they will see you as someone who is minimizing the damage-and hassle-of the bad debt. Larger banks are easier to deal with when working with Short Sales and foreclosures because they have more resources, experience, and loans.
Great deals in real estate are out there and you don’t have to be a pro to make money on Short Sales. By remembering to do your research, market your services, and treat both the homeowners and lenders with respect, you can make a win-win situation for everyone.