The pre foreclosure short sale

If you want to make money through real estate short sales, you need to understand the three main types of foreclosure opportunities which happen at different stages of the foreclosure process. All provide opportunities for investors looking for real estate short sale opportunities. These are the pre foreclosure, the foreclosure auction and Real Estate Owned (REO) properties that have been passed in at the foreclosure auction stage. To profit from foreclosure short sales, you will need to understand how each stage of the foreclosure process and know how to do foreclosure short sales effectively and understand the bank techniques for short sales. 

When a property owner is unable to make repayments on their home, the first stage of foreclosure may begin with the bank encouraging the property owner to sell the property before the lender takes official foreclosure action. Basically there are two types of pre foreclosure short sales. These are the Notice of Default sale (NOD) and Notice of Trustee (NTS) sale. In these cases, the lender is looking to get out of the situation quickly by offloading the property and therefore saving the time and money involved in selling the property at a later stage. For the lender who cannot repay their loan, it means the opportunity to escape without adversely affecting their credit rating. 

For most investors, especially those starting out in real estate short sales, the pre foreclosure short sale provides the best opportunity. When dealing with the lender, it’s important to stress the benefits to the lender of selling the property as a short sale. If, in the first instance the bank rejects your offer, make another offer. The bank will look at the benefits of offloading the property in a short sale by determining factors such as the current real estate market, the condition of the property, and the current market conditions. They will also weigh up the costs of sending the house to auction and the likelihood that the property will sell. If your short sale offer looks attractive to the lender after they have taken these factors into consideration, then your short sale will likely succeed. 

The foreclosure auction
For beginners to real estate short sales, real estate foreclosure auctions are best left to the more experienced real estate investor. Foreclosure auctions occur once a lender has gone through the foreclosure process. The property is sold at auction. As it is an auction, any successful real estate investor has to have a good idea of the current property market and how easy or difficult it will be to make money from the short sale. As the investor may be bidding against other short sale investors, they will have to be able to make a decision on the spot and calculate at what point they will still be able to earn a good profit. Apart from competing against other professional short sale investors, there is little or no time to evaluate the property and the investor must put up the total purchase price.

Good profits can be made from foreclosure auction short sales, but you need to know what you are doing. 

Real estate owned (REO) properties
The third type of real estate short sale opportunities comes from the properties that are passed in at the foreclosure auction. These homes then become the property of the lender. While there are many REO opportunities available, they often provide the lowest potential for profit. However, there are advantages here for the novice short sale investor as you generally have the longest time to evaluate the property in REO short sales. Also, the lender will usually provide financing. In REO short sales, in many cases the investor will repair the property or make some improvements before selling the property for a profit. 

So these are the three main types of foreclosure short sale opportunities. Each has its own set of advantages and disadvantages. Before investing in short sale opportunities, you should develop a good understanding of each of the stages and assess the merits of each. Also, understand the bank techniques for short sales, such as making realistic bids and appreciating the lender’s motivation for offloading the property quickly. If you understand all these, then you will have the potential for making money from real estate short sales.

 

Do you own real estate articles or stories and want to share with other investors? 
You have chance to win $100 Amazon Gift Certificates. We will give away 3 prizes for top authors each month!

Email your articles or stories to:  articles@buyincomeproperties.com

 

© Copyright 2001 - 2010 by BuyIncomeProperties.com               

 

 

Visit Real Estate Forums for every real estate investing topics!  Enter Here

    

Top of Page