Is Short Sale A Viable Business Model In Real Estate Investing?

Negotiating for a discount on the mortgage with a lender is called a shrot sale. The leander allows you to buy the property for less than the mortgage balance.

Of course, a home owner must be behind on their mortgage for the loan to qualify for a short sale.

As a real estate investor, you identify good candidates for short sale and you negotiate with the lender.
Here are importand factors to consider before doing short sales.

1) Pre-screen your properties properly
All properties are not short sale candidates. Your efforts are likely to be wasted if you try to do short sales on the wrong properties.

A mortgage must be at least two months behind to qualify for a short sale. You must consider the mortgage balance. If there is only one mortgage, then you need a discount as little as 10-20% for the deal to be profitable.

If there are two or more mortgages, then discounting all the mortgages can produce a lot of equity and profits. It is possible to get 80-90% discount or more on a second mortgage.

The best short sale properties are the ones with more than one mortgage.

Of course if repairs are needed, you must factor all the costs.

2) Be prepared to wait
A short sale can take 3-6 months, sometimes more. If you are new to real estate investing, you must consider this waiting period before adopting short sales.

You must have enough capital to take you through the long waiting periods.. If not, then you should adopt short sales as a part time venture in your real estate investing business.

3) Be prepared for rejection
A short sale can be rejected for no good reason. They can still say no even when it looks like an obvious candidate. Be prepared for rejection.

Having more than one short sale will help you. Expect a 60-70% success rate if your candidates are selected well.

4) Time is of the essence
You might not have enough time to stop foreclosure if a property is about to be foreclosed.. Choose properties that will allow you time to negotiate.

5) Have an exit strategy that is acceptable
A lender will not accept certain types of transactions for short sale deals. For example, you cannot wholesale the property with "and or assigns" in the contract.

You must be able to close after the short sale is approved. Most banks will give you about 30 days.

6) Be prepared for big pay days
Some properties will produce big pay days for you. Once you have them well qualified, you can expect some good pay days for the ones that succeed.

Simon Macharia is a real estate investor in Dallas, Texas. He has done a lot of short sales among other transactions. His business is run and automated by real estate investor website from http://www.realestateinvestorswebsites.net