So my friend became a short sale expert in Miami. He literally buys people’s homes when they owe more money on them than they have in equity. I’ve always wanted to emulate his success, but I didn’t even know what a short sale was!
So, I sat down with Antonio Lopez of Antlop Investment Properties and learned about it. Pretty neat stuff actually. This is something I could really get my mind around and try to make a career out of.
Definition of a Short Sale
A short sale is when a lender which is typically a bank allows the loan taker to give a smaller and discounted amount back after he or she has already defaulted on payments. The bank accepts a smaller amount by the first loan taker himself or from a buyer from the real estate market.
Even though on the outside it may seem that the bank is incurring a loss, they are actually saving themselves from a lengthy foreclosure process.
The bank or the lender which can be a financial institution will actually prefer a short sale since foreclosures look like failures on their accounting books and they will want to avoid such entries. However the homeowner does need written consent from the lender in order to start any kind of proceedings like this.
The homeowner can approach the lender at any point before the formal foreclosure starts. It is best to go to the lender directly before a notice is issued regarding loan default. The homeowner must write a letter regarding his or her hardships and must elaborate on them in detail.
This will serve as an official document which will be a prelude to the lender giving permission for the short sale to be handled by a real estate agent.
Particular real estate agents make it a point to specialize in short sales because the process is often a little more complicated and tricky than regular real estate deals. Real estate investors also take an interest in short sales because it offers them an opportunity to make a quick buck by buying a house or apartment for less than it is worth or less than what the market price is.
Investors prefer to even put their money in houses that require a significant fixer upper because the asking price and the market price are not the same. It can prove to be a good deal even after money for repairs has been taken out. The reverse can also happen as the house can go for more than it is worth especially if the buyers responds well to marketing tactics and does not read the market analysis of that location.
Essentially the short sale is a discount and for a homeowner who can no longer meet mortgage payments, it can be an attractive offer when compared with eviction and being homeless. It also gives the homeowner back a small measure of control.