Short Sales

Everyone reads the headlines that foreclosures are increasing but few understand how to take advantage of this situation. By definition a “short sale” is where the buyer bypasses the owner of a property and buys directly from the lender at a price under what is presently owed on said property. Obviously this development is initiated by the owner telling his lender that he can no longer or does not desire to make any more payments on his house, and the lender begins the foreclosure process.

In the initial stage of foreclosure, called the default stage, you have many investors looking for properties that have a large differential between what is owed by the owner compared to what the residence is valued at. They swoop in and make low bids on said residences to the lender, knowing the lender simply wants to recoup as much as possible on said property. Then said investor either spruces up the property for resale or rents it out and initiates a cash flow profit situation with future appreciation available. Yes you can be a part of this equation and Barnes and Noble has plenty of books and tapes to get you started but that is not what I want to quickly pursue here in this update.

Let’s take a look at the houses that have NO EQUITY built into them when the foreclosure process starts. Investors aren’t interested in these as much because the “big score” they believe is simply not there. This is where individuals looking to purchase can find tremendous deals with little competition. You take a $250,000 valued house that has $240,000 in mortgage against it and investors aren’t knocking down the doors. However a savvy buyer with a good realtor and mortgage broker, can make a bid here of $220,000 that very easily could get the residence.

This individual property has flown under the radar of the many investors trying to score big on foreclosures but the lender agrees to the short sale. My client buys said house for $220,000 with no out of the pocket expenses and immediately has $30,000 in value. Furthermore, if he/she so desires I have a new 2nd waiting in the wings to get them said $30,000 in cash. That loan could close as early as one month behind the original purchase.

I see no reason for anyone to pay full price on a residence in this market. I know that is not going to endear me with clients that are selling their present properties but it is the nature of our business that when too many houses are on the market and foreclosures are extremely high there are great deals to be made on the buying side. No question this is where we are. I would highly recommend understanding this process if you, your family, or your friends have a desire to make money in the real estate market.

So back to my original point if you come across a situation where a foreclosure is being started on a real nice piece of property but you know that the original owner has very little equity in said property look at this as a potentially great deal. The lender involved does NOT have to or necessarily desire to get back what is presently owed on the property. Make a substantially lower offer on the property and wait. Maybe you make three or four low offers before you find the lender that capitulates and gives you the residence for said lower bid. Be willing to walk on many because your offers are not accepted. I personally like to start no higher than 80% of the value of the property. Thus on the $250,000 house with a $240,000 mortgage I would offer $200,000. The lender may say no. Five lenders may so no. Trust me eventually one will say yes and with what is happening in the market today more and more great deals are available in the short sale market every week.

I have many foreclosure lists available if you are interested. Simply send me a zip code by email and I will send you said update lists. I am not a realtor and am not going out with you to look at these properties. I am not charging you for the lists. I am simply offering you an idea and a way of pursing such as a complimentary service for my clients, and their referrals. Naturally as you decide to purchase I would like to offer my rates and programs. I sincerely hope this article gives you ideas. I am always available for any questions. I would prefer email but do not hesitate to call if you need advice in this area.

Steven F. Coombs
Capital Financial Network, LLC
stevec@cf-n.com
303-431-1588 extension 105