Short Sales - The Good News and the Bad

Short sales where just not the norm in days past. Usually the biggest real estate discounts where found in pre-foreclosure and foreclosure. The high profit potential in short sales were just not there. The idea behind both foreclosure and short sale is to recover as much as possible from the unpaid loan.

A lender will occur a much deeper price cut if it agrees to a short sale. The homeowner will walk away with absolutely nothing and the bank will recoup as much as possible from its loss. Now this might seem like a lose-lose situation for both parties but it does have its advantages.

Although short sales were very rare, this is no longer the case because of the subprime-lending crisis. This crisis has turned real estate up side down. Lenders now see short sales as a viable option to rid themselves of properties. This is excellent news for real estate investors.

This by far is not a banks preferred method of removing property from the books but it is an effective way of preventing substantial loss because of a potential foreclosed property.

The bank will receive a deed to the property in a short sale because the bank is willing to accept less money than is owed by the original buyer. The reason the bank accepts these terms includes:

o To remove bad debts from their books

o To recover as much of their loss in a timely fashion than they would by foreclosure

o To circumvent the expense and hassle of the foreclosure proceedings

Short sales provide a way for lenders to eliminate most losses on their books. The main reason for this is because of a lagging economy so it is becoming more accepted and widely used by many lending institutions.

There used to be an unordinary amount of work required for investors to take advantage of short sales. The biggest obstacle was finding properties in foreclosure proceedings. The second biggest problem was trying to contact the banks particular loss mitigation department to begin the process of buying the distressed property. Just about all of short sale offers were turned downed because banks knew that if they waited they would recover most of their losses or more at the pre-foreclosure sale or auction.

Today times are tough and banks do not have the luxury of turning down legit offers. This is bad news for banks but good news for investors. The state of the economy has forced banks to be more agreeable to short sales. There are some banks offering short sales to their clients as a way to avoid foreclosure. When this happens banks will list properties directly with real estate agents. These listings can save a buyer a lot of trouble and aggravation while netting them a sweet deal.

The bottom line is that finding short sales takes much less work than it did in the past. The process is somewhat tricky but if a bank has allowed the listing than it can flow smoothly as any other purchase or almost as smoothly. Investors are you listening?

Short Sales - The Good News and the Bad