How to do a Short Sale

There is a tremendous amount of competition for pre-forclosure real estate these days. Everywhere you look you see a we buy houses sign or billboard posted by investors looking to rehab and flip a house for profit. Some of the larger companies even have T.V. commercials running all the time and they seem to have an endless supply of investment capitol. So, how can the average investor find a deal in this highly competitive market? Focus on Short Sales.

Short sale or REO (a.k.a. real estate owned) are houses that have already gone through the foreclosure process and were not bought at auction. The bank or lender that holds the mortgage takes the house back and is now the owner of the property. The only problem with this is lenders are typically not in the business of owning, rehabbing and managing real estate. They would much prefer to sell the houses to someone else and satisfy the debt obligations.

The term short sale is used because these lenders will often times sell the house for much less than the balance owed to avoid ownership and responsibility themselves. They are not in the business of rehabbing, renting or flipping houses.

How deep of a discount can you expect to get? That will depend on the area you are in and the number of houses that are either in pre-foreclosure or have been foreclosed on already. The other factors will be the condition of the real estate or house itself and the general market conditions overall. The key is to know your market and to buy the property right. If you really know your market thoroughly your chances of success will be increased greatly.