Short Sales, Tall Profits - In today's changing real estate market, short sales and foreclosures are essential topics for realtors to understand. However, even seasoned real estate pros are sometimes nervous to venture into the business of foreclosed properties.
Many people find t...
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Short Sales, Tall Profits
In today's changing real estate market, short sales and foreclosures are essential topics for realtors to understand. However, even seasoned real estate pros are sometimes nervous to venture into the business of foreclosed properties.
Many people find themselves upside down in their mortgage payments in today's housing market. Foreclosures happen more and more frequently. Many homeowners find themselves in default and feel compelled to sell their homes short rather than face full foreclosure. Up to 50% of all homes for sale are owned by sellers who owe more on the home than it is currently worth.
A savvy real estate agent knows how to help others get out of this bad financial situation and make a profit doing it. How to do short sales is now a required skill for successful realtors. Understanding that, you need to answer two questions for yourself:
1 - Do I want to be in the real estate business over the next 3-5 years? If the answer is 'Yes' then you will need to know how to do short sales.
2 - If I knew how to do short sales, how many more houses could I sell a year? Remember, up to 50% of the homes on the market are in need of some sort of mortgage relief; like a short sale.
Like most things in business, a short sale is just a process. Most agents don't know the steps in this process and often try to wing it. The problem is that banks are overwhelmed with short sale cases and if your file is not in order or is incomplete, they simply refuse to process it.
A property officially becomes a foreclosure property when a notice of the owner's default is filed in public records. This usually happens after a buyer misses two mortgage payments, but there are also other reasons a lender can foreclose on a property. Assuming the buyer fails to pay the lender, the property can be reclaimed by the lender.
The lender then has the option to auction the property. This is where a good real estate agent should start seeing dollar signs. A property acquired at an auction will often be sold only for the balance of the loan; allowing the agent to reap nearly all of the property's equity.
A short sale is defined as the sale of a property for less than what the owner still owes on the mortgage. Lenders will usually agree to a short sale in order to avoid the time and expense involved in a foreclosure. Sources report that lenders lose an average of $50,000 during a foreclosure and liquidation; not counting what they lose in the mortgage itself. They are often very open to short sales as an option out for them as well. They essentially agree to cut their losses and sell the property for a bit less than the mortgage amount. Short sales benefit the people that default on their loans by helping them avoid the devastating effects of a bankruptcy or a foreclosure on their credit rating.
Short sales are very profitable people-helping endeavors, but you absolutely must have the proper knowledge before you attempt them. Different states have different laws governing the short sale and foreclosure process. Rather than walk blindly into a legal minefield, it is important to do your homework. You also need to be aware of the tax ramifications that accompany short sales.
Short sales are a great financial opportunity, but you need to know what you are doing. It is usually best to follow a tried and true method when you are first starting out with such properties. But once you have the proper information on short sales and pre-foreclosure investing, you will be well on your way to earning amazing profits.
You will be helping people avoid scars on their credit ratings, helping banks recover their money and helping yourself to a nice paycheck. It really is an all-around smart business move to learn more about short sales and foreclosure properties as a real estate professional. A down market with soaring energy prices is creating more and more investment opportunities for the smart realtor every day. Learning how to maximize on such opportunities will make every year a great one, regardless of market conditions.
Tim Harris is a co-founder and head coach of Harris Real Estate University. After a long and successful career of selling thousands of homes, he sold his real estate business and started HREU. Since 1997, has thousands of Realtor-Students participating in education courses on a daily basis.
Read more in Tim's blog.
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