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What is a Short Sale?

December 15, 2010 by Marco Santarelli

You may have heard the term “short sale” and wondered what it referred to – and what kind of opportunities these types of transactions offer in the real estate market. Let’s define a short sale first.

A short sale can occur when a home owner’s debt on a property is greater than the amount for which the property can be sold. The result – lenders are sometimes willing to accept less than the total amount due on the house if the economic situation dictates such an action.

Here’s where the term “short sale” came from: Assume a homeowner has an unpaid loan balance of $200,000, but the property will only sell for $150,000. The lender accepts that $150,000 as full payment. This is “short” of the full $200,000 amount.

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Filed Under: Economy, Financing, Real Estate Investing Tagged With: Real Estate Investing, short sale, short sales, What is a Short Sale?

Short Sales: Fact vs. Fiction

June 15, 2010 by Marco Santarelli

Looking for big profits in short sales? An internet search for the phrase “investing in short sales” brings up tens of thousands of hits, many of which offer strategies and tricks to make a killing on the rising number of short sales in the U.S. These properties are sometimes viewed as easy money because the seller is in distress. But this is not necessarily the case.

The concept behind a short sale is this: a homeowner is unable to continue making mortgage payments; however, the outstanding mortgage on the property is higher than the market value of the house (i.e. “upside-down”). The homeowner makes a deal with the lender to sell the property at market value, and the lender eats the loss.

But are short sales really the money-making scheme that many believe them to be?

Not that it’s impossible to get good deals – many investors manage to buy short sales at a discount – but investors should be aware that negotiating a short sale is no walk in the park.

“Our biggest challenge [with short sales] is getting the banks to recognize that the property is not worth what they think it is. When we submit offers, and we think it’s a fair offer, and we fight with the banks on behalf of…the buyer, it’s very difficult to get them to meet us halfway at times,” says Mia Lutz, president of Say No To The Bank, a community counseling organization that works with foreclosure buyers and sellers.

Time frame can also be a major impediment for real estate investors looking to purchase short sale properties. Short sales can take anywhere from 30 days to six months from contract to closing, and the deal can fall apart at any time.

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Filed Under: Foreclosures, Real Estate Investing Tagged With: Foreclosures, pre-foreclosures, Real Estate Investing, short sale properties, short sales

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