The Benefits of Real Estate Short Sales Why Is It So Profitable?

A real estate short sale is a type of sales tactic used in the real estate world where the sale value often falls short of the balance owed on the property’s mortgage. In plain English, when a seller owes more than their property is worth and can no longer make the payments, that’s when it’s time for a short sale. Usual occurrence cases are when a debtor does not have the means to pay back the mortgage loan on full on their property and the lender believes that selling the property is the lesser of two evils. In the USA where short sales are growing exponentially, there are simply too many people who are having issues dealing with their mortgage payment on their property.

Short sales carry a number of benefits both for the debtor and the lender. There are also key factors why investors find real estate short sales so profitable.

How the Investor Benefits

Firstly, the investor is capable of turning hefty profits, especially if the property in question is 100% financed and strictly a financial liability. That is to say the property can’t be sold because the financing is more

than the real estate is worth rather than some physical defect(s) with the property.

Not only that, but the entire real estate business possesses considerably lower liability when coupled with the short sale method. After all, you’re virtually assured to get a “deal”, which is rule #1 one of real estate investing.

Here’s a breakdown of the advantage created for all 3 parties involved:

Investor’s Advantage:

Buyers (or investors) obviously benefit the most from a foreclosure or a property short sale. A lot of people are forced to give up their properties since they are not able to sustain their inflated payments often combined with the loss of career/jobs. Sometimes banks have no choice but to sell their property at a lesser value which is great advantage for the investor as they can negotiate with the lender for a serious deal. However, building a superb winning case is essential in an investor’s success. There is certainly persuasion involved as covered in this how to short sale real estate course. After that has been completed, the same property can be sold for a

much larger profit gain usually within a few short months. This is the main principle that the Real Estate Short Sale Strategy is based on. Real estate up for sale for mortgage related qualms are typically extreme bargains that are not likely to show up ever again. This market is virtual unprecedented and that’s great news for investors.

Investors can cash in huge amounts just by being aware of these facts. Since the lenders are usually weighed down by the rising number of foreclosures these days which have impacted their lending ability clogging the system and they want to get rid of properties as fast as possible. The banks actually lose significant funds in a foreclosure. If they wait even longer, they lose more money. This is again an advantage point for an investor. He or she can quickly take these properties off their hands at a considerably lower price than the retail value and then sell the property later at a much larger profit, closer to that retail value.

Borrower’s advantage:

If we were to imagine a case where a debtor is no longer able to pay back his or her mortgage on a property in full for whatever reason, short sales can actually be a good turnaround for the borrower. Many lenders will not pursue the additional loan that is left after they have given a discount. The seller actually manages to get out of his or her debt paying less

than what he or she had owed. The key benefit for the debtor is the avoiding of foreclosure.

Also, real estate short sales do not exactly get completed overnight. Consequently, sellers do not lose the rights to your home overnight either. They get to stay in their home longer than they would via a foreclosure. It allows them to completely avoid the drawn-out process and the stigma of foreclosure since they are actually selling their home.

In a normal foreclosure sale, the previous owner would be effectively kicked out – forcibly too. However, in the case of real estate short sales, you work with your lender in good faith to make things as right as possible. The vast majority of time, the price agreed upon for the sale is less than the price owed.

Other benefits of real estate short sales for the seller are to salvage their credit score. Working with a lender to minimize losses will reflect on a credit report versus a straight up walk away. A full completed foreclosure on a borrower’s record is critically damaging up to 7-10 years on record, and thereafter the consumer must contact the credit bureau to have it removed. It’s more time and energy extended that could have simply been avoided!

Lender’s Advantage:

When a debtor defaults on a loan, the most basic action to a lender is foreclosing on the property.

However, foreclosure is the same as forcibly kicking the original owner out. A number of things could go wrong in a foreclosure for the lender. Such cases may include:

⇒ An angry homeowner decides to damage the property before leaving it out of spite.

⇒ A homeowner leaves the property and just doesn’t take proper care of it, dropping its values as days go by.

⇒ Causing unnecessary problems by refusing to leave requiring legal intervention, typically via the sheriff.

⇒ Property management fees associated with a vacant property and securing it from the weather elements or intruders.

There are countless other things that can go wrong too. However, with the short sale process, it’s initiated by the debtor. And as such, the lender does not have to deal with any of these extremely problematic and unfavorable conditions. If the property in question is a home, the debtor usually decides to stay at the property till it can properly be sold off. By doing so, the bank gets decent occupants present which means proper care of the property is ensured.

While the lender could possibly receive payments, it’s not usually the case. The lender actually minimizes their losses from not having to pay huge foreclosure fees and in general, not having to experience the long

drawn out prospect of it. Since foreclosure sales take a lot of time to find a potential buyer and associated fees grow to upwards of $60,000 plus in legal fees. Even though the lender loses money, they actually still come out farther ahead financially than they would from a foreclosure.

At the current rate, short sales will move on to become the new buzzword of the decade.

It’s a huge opportunity for potential investors in the real estate business to turn in huge sums of profit in a short amount of time. Because it relies on the lender settling for less than the debtor’s total mortgage, an investor can purchase considerably premium properties for much less than premium price.

To learn how to short sale real estate, check out this property course.

http://www.theinvestortoday.com/paid-courses/how-to-short-sale-course/