Short sale real estate investing is defined as purchasing a property from a lender for less than the balance owed on the mortgage. Many books and courses have been written about it, but can short sale real estate investing be simplified? It can!
There really are only two types of short sale real estate investing. First, when you purchase a property that a lender has foreclosed on and listed with a Realtor, you can offer less than the balance that was due on the foreclosure. This type of short sale real estate investing requires that you have a good relationship with the right Realtor, one who works with Short Sale listings and buyers.
When you find that agent, you’ll want to impress upon them you intend to follow through on all your offers. Then, do exactly what you say you will. That’s your ticket to the short sale real estate investing gravy train!
The second type of short sale real estate investing involves you negotiating directly with a motivated seller’s lender. Your agent needs to be determined in negotiating, first of all to reach the right person at the lender’s REO (Real Estate Owned) department, and then to get the price you want.
When housing prices in many parts of the country were booming a couple of years ago, there wasn’t much national attention given to short sales. But with the current sub-prime debacle and increasing mortgage delinquencies, many people are wondering if the short sale process is a way to avoid foreclosure.
Basically, the definition of the short sale process is when the lender of a property allows the property to be sold for less than the amount due on the mortgage loan.
The obvious benefit to the short sale process is it allows the seller to avoid the severe credit report damage associated with a foreclosure. A foreclosure can stay on your credit report for up to 10 years and can take an emotional and financial toll.
But the pitfalls of the short sale process should be considered as well. The I.R.S. may consider any debt forgiveness as taxable income, thus resulting in a tax liability. In addition, lenders can often pursue a borrower for the deficiency balance (the difference between the amount owed and the amount paid).
In some cases you may be able to avoid taxation if you can prove you are insolvent. But if insolvency is unsuccessful, and you are faced with a tax liability resulting from the deficiency amount, it may make more financial sense for you to let the lender foreclose.
The Short Sale Process
The short sale process can vary, but it will generally work as follows:
1) The lender is contacted to discuss the possibility of a short sale and to determine the lender’s process for completing the sale.
2) The seller issues a letter authorizing the release of personal information about the loan and the property to the buyer or escrow agency.
3) The lender will review a settlement statement, which will indicate the proposed selling price, remaining loan balances and itemize all expenses, including real estate commissions and other fees and expenses associated with the closing.
4) The seller will complete a "hardship letter," which will detail and explain all financial difficulties. Lenders will usually want to validate the seller’s financial situation by looking at bank statements, investment accounts, along with examining paystubs and other financial records.
5) The lender will then look to the broker to provide a price opinion by examining the condition of the house and the market value of comparable properties.
6) The lender will then want to scrutinize the purchase agreement to determine if all amounts are reasonable and the real estate commission is acceptable.
Because of the documentation required, the short sale process can be lengthy. But if done correctly, it can work well for all parties involved. The lender avoids the uncertainty of the foreclosure process, the seller avoids a foreclosure on his or her credit report (along with potential bankruptcy), and the buyer hopefully got a good deal on a property.
Investing in Short Sales
It's no secret the foreclosure market is at an all time high. It seems as though more and more properties continue to face home foreclosure. Because of this increased volume, opportunities for real estate investing in short sales are tremendous.
Short sales are becoming more and more popular when buying a foreclosure just because of the huge discounts they offer. Real estate investing has been taken to a new level as more and more investment opportunities pop up everywhere. Therefore, it's important to have the right knowledge when these real estate investment opportunities present themselves. That's where we come in. We have created a special foreclosure process to attract distressed sellers who must act fast!
The Foreclosure Investing Process
The foreclosure process contains 3 stages: Pre-foreclosure, foreclosure auction, and bank owned properties REO. Each stage in the foreclosure process can become very profitable when you understand each of the different stages and use creative real estate investing techniques. Our current inventory of over 300 homes with a short sale possibility makes your decision process easy.
Pre-Foreclosures with Short Sales
Investing in pre-foreclosures with short sales has never been better. With our marketing campaign focused toward the distressed homeowner, these Short Sale opportunities come to you. Short sales allow the real estate investor to discount the loan from the lender. You must know this technique if you want to be competitive in today's market.
Monday, December 10, 2007
Wednesday, November 07, 2007
Southern Nevada Market Conditions--November 2007
SELLER CONTRIBUTIONS: This measure returns the propensity of the buyer to request—and the seller to provide—buyer points to expedite transaction closing.
November 2007
Single Family Residence--
% Sellers Contributing = 55%
Average Contribution = $9,155
Condo/Townhome--
% Sellers Contributing = 56%
Average Contribution = $7,799
October 2007
Single Family Residence--
% Sellers Contributing = 55%
Average Contribution = $10,322
Condo/Townhome--
% Sellers Contributing = 55%
Average Contribution = $5,542
The propensity for sellers to provide buyer support increased from October to November—but only slightly. The average contribution declined for SFR but increased for CONDO.
As a generalization, a good estimate of the seller’s expected contribution is
between 3.00 and 3.50% of the transaction value.
THIS YEAR VERSUS LAST YEAR--
Relative to last year in terms of transactions, the market is -38.6% behind YTD.
Given the market is entering the winter/holiday cycle, it would not be unreasonable to assume
the market will finish the year about -38% to -42% in back of 2006.
Closed Last Year = 27,749
Closed This Year = 17,039
Change = (10,710)
%Change = -38.6%
MARKET OVERVIEW—CHANGE FROM PREVIOUS MONTH
Based on the changes from the previous month, the market should be judged as continuing to move toward the buyer. The rate of movement toward the buyer is slowing but both Percent Selling (market efficiency) and ABSORB RATE (market speed) are still declining from month to month. This implies that price erosion will continue. Sellers who are motivated (willing to meet market price) should make every effort to identify and move to market price as soon as possible to maximize seller equity. This opinion is a virtual duplicate of the September and October opinions.
Supply (listed), which has been climbing at a steady and consistent pace, appears to have peaked and is now in a slow decline. Market peak, in terms of supply, peaked at about 29,300 units on or about September 14, 2007.
The market is moving toward the fall/winter cycle. This cycle usually manifests a reduced transactions count. The change in the direction of supply will most likely not influence the intensity of the negative nature of prices in the short run. It would not be unreasonable to assume the decline in the supply curve is most likely attributable to fall/winter cycle, as opposed to a change in trend. If this notion is true, the supply will return to market at the conclusion of the cycle.
SOUTHERN NEVADA MARKET BUY/SELL INDICATORS--
SUPPLY = Supply has peaked and is declining slowly (Slight tilt to Seller)
DEMAND = Continuing in moderate decline‐‐however stabilization is near (Strong Buyer)
FAILURES = SFR significant increase, CONDO steady (Strong Buyer)
PERCENT SELLING = Declined significantly for both types (Strong Buyer)
MONTHS SUPPLY = Significant increase for both types (Strong Buyer)
60 DAY ABSORB = Declining (market slowing) at about 1‐2 points per month (Extremely Strong Buyer)
PRICES = All price indicators off significantly‐‐SFR close below $290K (Extremely Strong Buyer)
SPECIAL COMMENT As an estimate, about 5‐7% of all closings are short sales
SPECIAL COMMENT1 Expect price declines to slow in the short run‐especially for CONDO
The reader should note the DISTRIBUTION SUPPLY/DEMAND table. The current ratio is 12.6 to 1—down from 13 to 1 in the previous month. However, higher-end properties face ratios of 46 to 1 (46 competitors for each property in escrow). This implies an exceptionally competitive high end market.
The reader should expect a continuation of the negative price trend with SFR moving slowly toward 280K. Expect CONDO to demonstrate more price stability and resiliency although fluctuations will occur on a month to month basis.
The strongest sub-market is South SFR. The weakest is South CONDO. As a general rule, the relative strength of markets can be deduced by the 60 DAY ABSORB RATE.
November 2007
Single Family Residence--
% Sellers Contributing = 55%
Average Contribution = $9,155
Condo/Townhome--
% Sellers Contributing = 56%
Average Contribution = $7,799
October 2007
Single Family Residence--
% Sellers Contributing = 55%
Average Contribution = $10,322
Condo/Townhome--
% Sellers Contributing = 55%
Average Contribution = $5,542
The propensity for sellers to provide buyer support increased from October to November—but only slightly. The average contribution declined for SFR but increased for CONDO.
As a generalization, a good estimate of the seller’s expected contribution is
between 3.00 and 3.50% of the transaction value.
THIS YEAR VERSUS LAST YEAR--
Relative to last year in terms of transactions, the market is -38.6% behind YTD.
Given the market is entering the winter/holiday cycle, it would not be unreasonable to assume
the market will finish the year about -38% to -42% in back of 2006.
Closed Last Year = 27,749
Closed This Year = 17,039
Change = (10,710)
%Change = -38.6%
MARKET OVERVIEW—CHANGE FROM PREVIOUS MONTH
Based on the changes from the previous month, the market should be judged as continuing to move toward the buyer. The rate of movement toward the buyer is slowing but both Percent Selling (market efficiency) and ABSORB RATE (market speed) are still declining from month to month. This implies that price erosion will continue. Sellers who are motivated (willing to meet market price) should make every effort to identify and move to market price as soon as possible to maximize seller equity. This opinion is a virtual duplicate of the September and October opinions.
Supply (listed), which has been climbing at a steady and consistent pace, appears to have peaked and is now in a slow decline. Market peak, in terms of supply, peaked at about 29,300 units on or about September 14, 2007.
The market is moving toward the fall/winter cycle. This cycle usually manifests a reduced transactions count. The change in the direction of supply will most likely not influence the intensity of the negative nature of prices in the short run. It would not be unreasonable to assume the decline in the supply curve is most likely attributable to fall/winter cycle, as opposed to a change in trend. If this notion is true, the supply will return to market at the conclusion of the cycle.
SOUTHERN NEVADA MARKET BUY/SELL INDICATORS--
SUPPLY = Supply has peaked and is declining slowly (Slight tilt to Seller)
DEMAND = Continuing in moderate decline‐‐however stabilization is near (Strong Buyer)
FAILURES = SFR significant increase, CONDO steady (Strong Buyer)
PERCENT SELLING = Declined significantly for both types (Strong Buyer)
MONTHS SUPPLY = Significant increase for both types (Strong Buyer)
60 DAY ABSORB = Declining (market slowing) at about 1‐2 points per month (Extremely Strong Buyer)
PRICES = All price indicators off significantly‐‐SFR close below $290K (Extremely Strong Buyer)
SPECIAL COMMENT As an estimate, about 5‐7% of all closings are short sales
SPECIAL COMMENT1 Expect price declines to slow in the short run‐especially for CONDO
The reader should note the DISTRIBUTION SUPPLY/DEMAND table. The current ratio is 12.6 to 1—down from 13 to 1 in the previous month. However, higher-end properties face ratios of 46 to 1 (46 competitors for each property in escrow). This implies an exceptionally competitive high end market.
The reader should expect a continuation of the negative price trend with SFR moving slowly toward 280K. Expect CONDO to demonstrate more price stability and resiliency although fluctuations will occur on a month to month basis.
The strongest sub-market is South SFR. The weakest is South CONDO. As a general rule, the relative strength of markets can be deduced by the 60 DAY ABSORB RATE.
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