Profiting from Short Sales and Foreclosures
Brad Hess
Profiting from Short Sales and Foreclosures
The key ingredient to real estate success is simply “finding the right deals,” and short sales are a great avenue to investigate. Although many investors shy away from short sales because they don’t believe there is a real profit in it, profiting from short sales and foreclosures can be quite lucrative for the savvy real estate investor.
What is a Short Sale?
The philosophy behind a short sale is simple. The real estate investor wants to convince the lender to sell the home for less than what is owed, in exchange for payment in full. It seems easy enough -- buy the property from the bank at a huge discount, sell it, and make a profit. It’s not a difficult process, but you must approach the lender fully prepared.
Marketing Strategy
When you locate a property, you must move quickly. You can place ads in your local newspaper to generate leads, “Are you facing foreclosure? You don’t have to ruin your credit. I can help. Get a free consultation. Call today….” You want to make sure your ads are honest, short and to the point. Emotions are high for the homeowner, and the chances are increased that they will call if you trigger those emotions. It’s bad enough that they’re losing their home, but their credit is going to be ruined too. No one wants to be in that situation. If you have a possible way out and you reach them first, you have a great shot at winning them over.
Make the First Move
Most inexperienced investors don’t take the initiative. Instead of going out and locating properties, they tend to wait for listings that are sent to hundreds of others as well. Stay ahead of the competition and be first in line. This could mean setting up a meeting with the homeowner, going to the court to check notices of default, etc.
If you are working with the homeowner, you want to gain their trust. This is a stressful time for them and if it has come to a point where they know they’re going to lose their home, it’s up to you to convince them that you can help. If you can successfully explain how it would benefit them if you purchased the property before the bank foreclosures on it, you’re halfway there (closing the deal). Remember to be sensitive of their situation. Once they agree to work with you, make sure you have the necessary paperwork that allows you to talk to the bank on their behalf.
When working with the lender, deal with the Loss Mitigation Department. Be honest and upfront about your plan of action. The forceful approach never goes over well. Let the bank know that you are working with the homeowner and you are interested in the property. Let them know the amount that you are willing to pay. No doubt there will be some negotiations, but be ready to state the condition of the property, the value, etc. Have your facts and your numbers in order, and respond quickly.
It doesn’t take a rocket scientist to see that there is money to be made with short sales. Finding the properties and taking quick action is the key to being successful. Not everyone has the patience to deal with short sales, but if you have what it takes, you can turn a profit.