Real Estate Investing Short Sale Tips
I get a ton of questions from the blog from investors that have a lead that looks something like this:
Seller owes $230K, and the property is only worth around what’s owed or less. The property is facing foreclosure. Homeowner just wants out from under the debt. And the investor wants to know how to make a deal out of it.
Enter the Short Sale
First off, let me explain what a short sale is. A short sale is when a bank accepts less than what’s owed as payment in full. You may be asking, “Why would a bank accept an offer like that?”
For a bunch of reasons! Banks are in the business of lending money and collecting their interest payments. They are not in the house collecting business. Banks do not want to foreclosure on properties and add them to their inventory. For every house a bank takes back, it limits the amount of the money the bank can lend back out. Which is where the bank makes its money!
Your ability to negotiate well with sellers will determine the ultimate profitability of every deal that you do. The better negotiator you are, the better (and more) deals you’re going to get.
Sending targeted direct mail to sellers has been one of our primary marketing strategies to find great deals over the years. We have a three step foreclosure mailer that we send once a lis pendens has been filed on a property. We have an out of state mailer we do. And one of our more successful seller lead generators was mailing to owners of properties where the sale price was $100 or less. These are transfer properties. . . could be from divorce or inheritance among other reasons.
As 2008 came to a close, I begin to think about why most people aren’t where they want to be as real estate investors. I had to ask myself, “What is it that’s holding them back?”
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