There are many purposes of utilizing short sale as a work out or a real estate investing strategy on a pre-foreclosure property. These are some of them:
1. To save the home owner's credit.
2. To simply sell a property that has encumbrances valued more that itself.
3. To help a borrower run away from his/her mortgage payment responsibility.
There is however one bottom line purpose why an investor is or should be doing a short sale. To make profits should be the only reason. If anyone claims to be doing it for charity or non-profit, check them very well. Chances are their interest lies somewhere else and it would not be surprising that they never close successfully or very low percentage of closings.
With that been said, without exiting a short sale deal, there will not be a profit. Here comes the famous saying; exit before you enter. This simply means one needs to know the methodology to apply make the profit before even picking up the deeds and contracts at all.
Sometimes, it may be necessary to determine what the final agreed offer would be in order to determine the right exit strategy. Some numbers are just better for some exit strategies than the other.
There are about 7 different ways to exit a short sale deal. Many of them can be done legally but many can also cause potential legal trouble in the future. It is always advisable to consult your legal advisory before concluding on using any of these exit strategies. Here are the 2 easiest and most straight forward exit strategies:
1. Buy and Rent For Monthly Income.
If you plan to be or you are actually are an experienced landlord, short sale is a beautiful way for you to pick up some good deals. The downside to this is if you actually have enough patience to wait on a short sale process. I would hope so because patience is suppose to be vital in any business.
However there is a thin line here. Some may mistake patience for wasting of time or vice versa. Monitoring short sale or bunch of short sales can be quite time consuming and may not be feasible for a busy landlord but may be good for 1-4 family residential land lords.
Buying in order to rent for monthly income is a good strategy and it is best when the margin at which you are picking up the property is not the greatest. The monthly rental income must be cash flowing significantly to be worth all your effort.
2. Buy and Flipping for a Quick Profit.
Tell me the truth; this is why you are reading. I do not blame you. Quick short sale flip involves investing only time and a couple of calls. There is no money or down payment necessary in most cases. It is simply the most cost effective exit strategy. This exit strategy is feasible especially when the bank has accepted to sell the property at a huge discount; sometimes big enough to net you $50,000 while you flip to your buyer at still attractive prices.
You can buy and sell (double close) the subject property at the same closing table on the same closing date. The difference of these two transactions is your profit. The tricky part to this is when there is a mortgage origination needed by your buyer to pay for this property. Lots of time, the mortgage lender will require a seasoned title. There are ways to maintain the chain of title but unfortunately it is best you consult your local legal professional or better yet, join a local real estate investment association to in order to do it right. The associations have the secrets.
These are my favorite short sale exit strategies. I personally prefer the latter but if you want to play it real safe, you can go for the former. There are many other exit strategies like lease option, lease back, buying with an option, taking a note back etc. These two strategies will bring you more money with no strings attached.
Author Resource:-
Tux Lawrence is a Short Sale Expert, Business and Real Estate Consultant. He has bought and sold numerous properties using mainly Short Sale for the past 5 years. For more information on becoming a Short Sale Expert, click here Short Sale Expert.
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