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San Diego real estate library
Recession Real Estate Investing - The Short Sale
Anyone who has even glanced at recent real estate statistics
understands that something major is happening here. The economy
is declining, steadily and rapidly. Unfortunately for many
homeowners, they can no longer find the means to fund their
mortgage payments. This leads to foreclosures across the board.
You can actually kill two birds with one stone by investing in
these properties. A home that is in foreclosure but not yet
owned by the bank is called a short sale. You can typically pick
a home up like this for small percentage of the cost. The owner,
in most cases, just wants to be able to pay off the bank so that
they do not have a foreclosure on their credit record. A
foreclosure can be devastating to credit and most people want to
avoid this calamity.
Finding short sale properties is not complicated in this
economy. You can either work with a real estate agent or you can
do your own homework. Foreclosures are a time-consuming process
and is something that has to go through the court system. A bank
cannot just foreclose on an individual without getting a court
order that gives them the title of the property. Anything that
goes through the court system is public record. You can go up to
your local county courthouse and find a list of properties that
are in the process of foreclosure simply by looking on the court
roll call.
Once you find a home in the process of foreclosure, you can then
contact the owners and offer to buy the home. You can learn how
much the original mortgage was for the property through the
county recorders office. The mortgage and note are all recorded
against the property. This is a matter of public record. If you
have some knowledge of the real estate market as well and the
current value of the properties in the area in which you are
looking, you can find a real bargain.
You can find a home, for example, that is worth about $200,000
in which the owner is behind on a mortgage that is about
$120,000. You can offer to purchase the home for $130,000 and
give the owner $10,000 in their pocket. You can also offer to
allow the initial owner to stay in the house and rent it from
you. You will restructure the mortgage and make sure that you
get a low rate. You then have a home that is worth $200,000 for
which you only owe a small portion and a renter who will,
essentially, pay your mortgage.
If the original owner buys the home back from you, they will
have to do so along your terms. You can then ask for the
$200,000 when the market returs. You have just made $70,000
profit in a few years, a much better yield than you can ever
make in any other market investment.
This may seem predatory, but you are really helping the original
owner out. If they are about to be evicted because they cannot
pay their mortgage, you at the very least, buying them time and
giving them a chance to get back on their feet. If they cannot
pay the rent to you, they will at least have had a bit more time
to plan their move. If they manage to buy the home back from
you, it is a win win situation for everyone.
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