Short sales are an extremely popular strategy amongst real estate investors right now. However, there is not much that is short about the timing a short sale. Depending on your location and the lender you are dealing with, short sales can take an average of 3-6 months to close! You must be patient, organized, and diligent in order to be successful at short sales.
So, if a short sale isn’t a sale that takes place quickly, what is it?
A short sale occurs when the bank agrees to sell the property for less than what is owed on the property. This is also called selling the property “short.” This often happens in conjunction with pre-foreclosures. When banks realize that they will not receive full payment for a mortgage because it is delinquent, they are more willing to negotiate a short sale. This is because they do not want to take the property to auction. Banks do not want properties to go to auction because the bank would have to pay attorney fees, trustee fees, and would run the risk of being forced to take the house back. The impending auction is your number one negotiation point with the bank. As it gets closer to the auction date, the bank will most likely be more willing to negotiate a short sale.
A recent New York Times article shared the following information. “Gualberto Medina, a former state secretary of commerce who heads the New Jersey office of the commercial real estate company Cushman & Wakefield, cited a survey performed last fall indicating that half of the top 500 companies in New Jersey had laid off employees because of the recession. The same survey, produced by researchers at Rutgers University who interviewed senior executives during the final three months of the year, showed that 76 percent of companies expected to reduce, or continue reducing, costs in 2010, and 31 percent anticipated more layoffs.”
So, what does that mean for aspiring and current real estate investors? If the worst is not yet over with job loss and economic hardships, it is realistic to assume that many more homes will be facing foreclosure. If you can learn how to take advantage of this market quickly through gaining a knowledge of the short sale process, you can escape the “bad economy” and create massive wealth for yourself!
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