Recession Real Estate Investing - The Short Sale
Anyone who has even taken a glimpse at recent real estate statistics grasps 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 usually pick a home up like this for only a portion 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 complex 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 course of foreclosure, you can then contact the owners and offer to buy the home. You can figure out 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 let to allow the original 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 bounces back. 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 actually 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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