Short Sale Investing
When the real estate market crashed, many homeowners found themselves “under water,” meaning that, virtually overnight, they owed more on their homes than the properties were worth.
While real estate prices have made a comeback in most U.S. markets, many property owners still owe more on their loans than the properties will sell for, and some are turning to short sales as a way to get out from under the debt.
A short sale is a situation in which the amount of money that will come in from selling the property will fall short of the amount owed on the property. For example, a homeowner could owe $100,000, but only be able to sell the property for today’s market value, which is $80,000.
Banks and other lenders are often willing to accept a short sale, because of the expense of holding onto the property, foreclosing on it, and maintaining the property until it can be resold.
The advantage to you, as a real estate investor, is that buying a short sale property can result in instant equity. Due to the length of time it takes to close a short sale, many traditional buyers shy away from these types of deals, which means that, in the example cited above, the bank might need to price the home at $70,000.
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