What is and How To Win a Short Sale?Imagine that you bought a $ 200,000 house. You put 50,000 down as a down payment (good for you!) So your mortgage is 150,000. Now for whatever reason, you can’t afford your mortgage anymore. You can’t pay your bills and a foreclosure is looming. What do you do? You, as the seller, could look into a short sale. You put the house on the market at a low price, and collect offers. Then you go to the bank and tell them “we can’t afford to pay back all 150,000 – but would you accept one of these 50 offers that are less than what we owe, but aren’t as costly as a foreclosure?”. The bank then looks through the offers and says yes or no. If they say yes and accept a particular offer, the people essentially sell their mortgage for less than it’s worth back to the bank, in exchange for their home. But do you see the catch there? It was hidden, so if you didn’t, no worries. Here’s the issue: short sale homes can collect tens or even hundreds of offers. That’s not such a good thing for a buyer, who thinks they’re getting an unbelievable deal and are just “waiting on the bank’s approval”. In reality, there’s a very, very small chance that a buyer’s offer is accepted on a short sale home, just due to the volume of offers.
Why To Buy A Short Sale ?That’s not to say that a buyer can’t get a house at an unbelievable deal with a short sale. It’s entirely possible – but you can’t get too emotionally attached to one house (or one low price). If a buyer purchases a short sale property at a price that is lower than what the property is appraised for in today’s market, then the buyer enjoys a discount and picks up some equity. If you want to “win” a short sale, here are seventeen things you need to know. In most cases it’s a great idea because:
- Better price, in most cases price below market value of the property – Short selling investment opportunities offer buyers a great deal. As with an execution, a short sale is never offered at market value, but at a large discount. An important part of the short sale process for any real estate investor is comparing the property value to comparable properties. The Mashvisor can be a very valuable tool in this regard as each short sale property on the Mashvisor Property Marketplace is accompanied by a listing listing.
- Short Term Value Increase – the short sale property in most cases needs a repairs, they are sold ‘AS-IS’ that means, after sometimes small repairs the value f the property increases 10%+ in first year. Unlike traditional selling, where increasing market value will be the key way to add capital, short selling is a quick route to capital. Almost to blame. You will need to make major repairs to most short sale properties, and the capital may come from you if you are able to do some of the work yourself. A properly planned short sale will result in a significant jump in capital after finalization of the transaction and repairs.
- Empty unit without dealing with tenants – For any property that has a pre-existing tenant, the post-transfer plan should be clear and legal. For a short sale, insist that the seller leaves the property on the closing date. Don’t even think about renting your property again on this site. These are already proven to be bad credit risk and breaking completely is a must. In addition, short selling comes with major repairs and after-sale maintenance. The empty unit here is a blessing in disguise. No tenant will want to tolerate the amount of construction that may be needed. Work with your real estate broker or develop your own marketing plan for your new property and showcase representative photos with a “Ready For” date to generate interest before showing. It is unreasonable to show a unit that is planning a repair. It can only work to exclude buyers or tenants. Treat an empty unit as a benefit and start over with a new tenant when you bring it up to the standards.
1. BULK IT UPIf you’re determined to get a house for a really good price through a short sale, you have to put in offers on a lot of houses. One investor who makes YouTube videos says he and his team put in 100 offers on different short sales every day.Then, months later, they might win 1-3 out of those 100 short sales. It can take that long and be that competitive. And here’s the issue with that for most people. They don’t have the capital to go through with three short sales, even if we were to win them. So how do you amend that strategy for someone with a more realistic budget? Keep putting in offers on short sales, but don’t do 100 a day.Maybe do one every other day, if the house is in your area. A short sale isn’t something you want if you have to move in ASAP. It can be months before the owners even take the offers to the bank, let alone get them approved.
2. KNOW WHEN TO ENGAGE IN THE SHORT SALE PROCESS
Short sales are not quick sales, even though the “short” in their name makes it sound like they are. It takes longer to go through with a short sale than it does to buy a house the conventional way.
That’s to say, you have to know when to start the short sale process. If you’re just starting to think about moving but you still have six months to a year, then you could play the short sale game. But if it’s May and you have to move by August – skip the short sale process.
If you put all your eggs into that basket, you could very well find yourself moving into a too-small apartment and still waiting on approval come August.
3.MAKE A HIGHER OFFEROne good way to get a head start on short sales is to research the true market value of the home. Sites like Zillow make this easy, and you can see what homes around it are worth. Now – you absolutely shouldn’t offer the full market price.That defeats the purpose of a short sale. But if it’s listed for 50% of what it’s worth, come in at 70% or even 75%. Remember – you don’t really care what the owners think of the offer, it’s more about what the bank wants.And the bank is going to lose money on this sale, no matter what. So if you can make that gap smaller for them, they’re more likely to approve your offer.
4. BE PATIENT
If you haven’t figured it out yet, short sales aren’t for people that lack patience. You’re not just going to get that good of a deal without paying some sort of price. In this case, the price is time.
You will never be happy if you continue to search for what happiness consists of. You will never live if you are looking for the meaning of life.