What Is A Short Sale? The Essential Facts You Need To Know
Short Sales are a great way to earn money fast in the house flipping world— but What Is A Short Sale?
One niche in the real estate community is the lesser-known art of a short sale. “What is a short sale?” you might ask. A short sale, in essence, is when the owner of a home sells their property to a buyer for less than the amount of money they owe the bank.
What’s great about short sales is that they benefit everyone involved. The seller’s credit rating is not affected as much as it would be if the house were to be foreclosed. Although not ideal, the perhaps unscathed credit rating will help the seller to be able to purchase a different home once his or her finances are in check.
Most importantly, the short sale benefits you as the buyer immensely. These houses are typically in a distressed state, perfect for flipping. For this reason, you should be able to negotiate with the bank to sell the house to you at a lower price. From there, all you need to do is repair, renovate, and sell at a much higher value. If you do everything correctly, you should end up with a decent profit.
Dealing With The Bank
Since the bank technically owns the property before you buy it, you will have to negotiate with them a great deal.
First, you shouldn’t move too hastily to buy if the price is not right. Many banks will often raise the cost of the property above the market value price, and thus above its AVR, or “after repair value”. Instead, wait until the bank is willing to lower its offer to 70% of the AVR or lower.
You must also make sure that the bank is willing to remove, or forgive, some if not the entire existing loan from the previous owner. If the bank does not budge on this issue, the property might not be worth buying.
What Is A Short Sale Specialist?
You may feel as though a short sale is a daunting task. However, you always have the option of hiring a short sale specialist to help you along your journey.
But, what is a short sale specialist exactly?
A short sale specialist is a person, (usually a real estate investor), who is an authority on making short sale deals. These specialists have dealt with many negotiations in this very field and can be a highly valuable tool in the house-flipping world.
Most notably, short sale specialists have had to handle many banks in their time, and know how to deal with each one. Because of this, they can help you with the logistical and bureaucratic particulars of each bank. They can even help you with all the paperwork too, so you’ll never feel like you need to brave the minute legalities or fine print alone.
You can find these specialists exactly where you would find anyone related to real estate and investing—at an REIA, or “real estate investor association”, meeting. You might also find them by networking or asking other people you know in real estate. If you have another real estate agent that helps you with other projects, he or she most likely already knows a short sale specialist.
You can always, of course, try to tackle a short sale project alone. Just make sure that if you do, you have the proper understanding and guidance. Otherwise, you might end up loosing a great deal of money, while sitting on a worthless property and the mortgage that might come with it.
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