Recession Real Estate Investing - The Short Sale
Anyone who has even taken a glimpse at recent real estate statistics
grasps that something major is happening here. The economy is
declining, steadily and rapidly. Unfortunately for many homeowners,
they can no longer find the means to fund their mortgage payments.
This leads to foreclosures across the board.
You can actually kill two birds with one stone by investing in these
properties. A home that is in foreclosure but not yet owned by the
bank is called a short sale. You can typically pick a home up like
this for a small part of the cost. The owner, in most cases, just
wants to be able to pay off the bank so that they do not have a
foreclosure on their credit record. A foreclosure can be devastating
to credit and most people want to avoid this calamity.
Finding short sale properties is not hard to do in this economy. You
can either work with a real estate agent or you can do your own
homework. Foreclosures are a long process and is something that has
to go through the court system. A bank cannot just foreclose on an
individual without getting a court order that gives them the title
of the property. Anything that goes through the court system is
public record. You can go up to your local county courthouse and
find a list of properties that are in the process of foreclosure
simply by looking on the court roll call.
Once you find a home getting ready for foreclosure, you can then
contact the owners and offer to buy the home. You can learn how much
the original mortgage was for the property through the county
recorders office. The mortgage and note are all recorded against the
property. This is a matter of public record. If you have some
knowledge of the real estate market as well and the current value of
the properties in the area in which you are looking, you can find a
You can find a home, for example, that is worth about $200,000 in
which the owner is behind on a mortgage that is about $120,000. You
can offer to purchase the home for $130,000 and give the owner
$10,000 in their pocket. You can also offer to allow the original
owner to stay in the house and rent it from you. You will
restructure the mortgage and make sure that you get a low rate. You
then have a home that is worth $200,000 for which you only owe a
small portion and a renter who will, essentially, pay your mortgage.
If the previous owner buys the home back from you, they will have to
do so along your terms. You can then ask for the $200,000 when the
market returs. You have just made $70,000 profit in a few years, a
much better yield than you can ever make in any other market
This may seem predatory, but you are genuinely helping the original
owner out. If they are about to be evicted because they cannot pay
their mortgage, you at the very least, buying them time and giving
them a chance to get back on their feet. If they cannot pay the rent
to you, they will at least have had a bit more time to plan their
move. If they manage to buy the home back from you, it is a win win
situation for everyone.
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