Pros And Cons of a Short Sale in Real Estate Investing Header image

Pros And Cons of a Short Sale in Real Estate Investing

Short sales and other types of distressed sales (foreclosures, bank-owned sales, etc.) make up about 12.5 percent of all home sales.

Some people think that short sales are a bad thing, but that’s not always the case. There are some definite benefits to them from an investment perspective.

If you’re considering buying a short sale home, keep reading.

Explained below are some of the pros and cons of a short sale for real estate investors. You’ll also learn more about the process and the best way to handle it.

What Is a Short Sale?

A short sale is a tool for distressed borrowers. Distressed borrowers are those who are behind on their mortgage and/or have a home that’s underwater (meaning it’s worth less than the balance on the mortgage).

When a homeowner short sells their home, they typically initiate the process. This is different from a foreclosure, where the bank informs the homeowner that they’ll be foreclosing on the house. Short sales still have to be approved by a lending institution before the homeowner can move forward.

Once the lender has approved the short sale, the homeowner will negotiate with a buyer to agree on a sales price for the house. Then, the lender will approve the purchase.

Many homeowners choose a short sale over foreclosure because short sales have less of an impact on the seller’s credit score (compared to foreclosure).

For more information on your credit score and credit repair, click here

Pros and Cons of a Short Sale

There are pros and cons of short sales for homeowners, but they’re not the only ones with skin in the game. There are also pros and cons for investment buyers looking to purchase short sale homes.

The following are some pros and cons you ought to keep in mind if you’re considering buying short sale:


When you buy a short sale home, you can often get a good deal on a property. Because the homeowner and the bank both want to sell the home quickly, they usually offer it at a lower-than-average price.

There’s less competition for short sale homes, too. The short sale process is quite lengthy, and most people don’t want to wait around for it to be complete. There’s less of a chance that you’ll get caught in a bidding war for a short sale home.

Buying a short sale home is also much less risky than buying a foreclosure. Homeowners usually occupy their home while short selling it. Because they’re the ones handling the sale, they’re less likely to damage the property or neglect it.


When we say that the process of buying a short sale home is lengthy, we mean it. It takes several months — sometimes even up to a year — to get the sale finalized. Creditors have to approve the offer along with the seller, and the escrow process often takes much longer than average.

It’s important to note, too, that you might not always get a great deal with a short sale. Don’t just assume that you’re getting the lowest price possible. Sometimes, when the lender wants to recoup as much money as they can from the sale, they’ll raise the price of the home.

Often, short sale homes need a lot of work after they’re purchased. The owners might not have neglected or damaged it, but they also might not have taken as good of care of it as possible.

If someone is short selling their home because they’re in a difficult financial situation, they likely haven’t been doing as much maintenance as the average homeowner. There might be issues with the plumbing or the roof that require immediate attention and can be costly to fix.

Short Sale Tips for Investors

If you decide that you want to take on investing in a short sale home, you’ll need to be strategic. Here are some tips that will help you ensure you’re getting the best deal possible on a short sale home:

Do Your Research

Do plenty of research before choosing a short sale home in which you want to invest. Look at online listings and search courthouse listings to find short sales in your area.

When choosing a home, figure out how much is owed on it relative to its value. Look for homes where a high amount of money is owed — you’re more likely to get a good price on these homes as opposed to ones where the owner has lots of equity.

Ask About Liens

Be sure to ask the owner about liens on the home. Liens are payment agreements between a buyer and a lender.

Find out the lender that is the primary lien holder as well.

It’s a good idea to confirm the information about the liens by conducting a title search on the property first.

Figure out Your Finances

To speed up the short sale process, it helps if you know exactly how you’re going to pay for the investment property.

Do you have the cash ready to go? Have you been pre-approved for a loan?

If you can prove that you have the money and are ready to purchase, you’ll have a much easier time buying the house quickly and the right price.

Examine the Property

Finally, don’t forget to examine the property. Take a good look around it yourself to see if there are any obvious repairs needed.

Reserve the right to have the home professionally inspected, too. Make this a condition before you sign anything or agree to buy the home.

Learn More About Short Sales

As you can see, there are a lot of pros and cons of a short sale that you need to take into account before you dive in and invest in a short sale home.

Keep this information in mind (especially the tips on buying short sale homes) so that you can make the best investment choices for yourself.

Do you want to learn more about short sales? If so, be sure to check out the Short Sale section of our website today.

You’ll find all kinds of helpful articles here that will teach you everything you need to know about short sales from both the buyer and the seller perspective.

how to renovate a house on a budget

How to Renovate a House on a Budget and Boost Your Profits

Are you considering selling your home?

For the majority of homeowners, your home is the biggest investment that you have. So, when it comes time to eventually sell your home, you want to ensure that you are maximizing your profits and making the most of your investment

One of the best ways to maximize your profits is to renovate certain aspects of your home and opt for a facelift. While home renovations can be costly, there are steps that every homeowner can take to minimize the cost of a home renovation and make it affordable. 

If you’re considering doing some home renovations before listing your home for sale, you’re going to want to read this. We’re sharing our best tips for how to renovate a house on a budget. Not only are these tips sure to increase the value of your home, but they’re also incredibly wallet-friendly for those on a budget. 

Goodbye dark, 1990s kitchen and hello bright, contemporary kitchen! 

1. Opt for DIY Projects 

First things first, it’s best to opt for DIY projects that allow you to conduct the upgrades yourself. 

The truth is, hiring contractors is one of the most expensive aspects of renovating a home. In forgoing this cost, you’re bound to save a large portion of your budget. 

Today, DIY projects have never been easier for the common homeowner to conduct. Even without a contracting background or experience, online videos make it possible for the common homeowner to conduct renovations. 

Fortunately, the majority of these home renovation projects are simply facelifts. This means that very limited knowledge is required for completing these tasks and the majority of homeowners are capable of completing these tasks. 

2. Replace Carpeting

If you have carpeted flooring, it’s always worthwhile to consider installing a more appealing option. 

Of course, most buyers today prefer to have hardwood. That being said, there are still ways to strive for a classic wood floor look but without the price tag. This is where laminate flooring or engineered hardwood come into place. 

Remember, carpeted flooring is more prone to holding spills as well as scent. 

3. Paint Kitchen Cabinetry 

For many families, the kitchen is the heart and soul of the home.

After all, this is typically where friends and family gather in daily life as well as times of celebration. In understanding this fact, it’s clear why an upgraded kitchen will appeal to potential buyers. 

Fortunately, upgrading your kitchen doesn’t have to mean a total renovation and spending thousands of dollars. Instead, it’s best to focus to attention on providing your kitchen with a facelift rather than a renovation. 

The most simple and effective means of providing your kitchen with a facelift is to paint your cabinetry. This has the ability to transform dark, outdated cabinets into bright, contemporary cabinets. To finish, you can also upgrade the handles and light fixtures to provide a fresh, modern look.

4. Make Use of Recycled Materials 

Where possible, it’s always best to opt for recycled materials throughout your renovation. 

If you’re replacing doors, windows or even flooring, why not peruse the lightly used section? This is a great way to source high-quality materials without the high-end price tag. 

Many businesses such as Habitat for Humanity carry secondhand furniture. This furniture is often of high-quality and is donated by contractors, real estate professionals and homeowners. 

5. Apply a Fresh Coat of Paint 

Applying a fresh coat of paint is the most inexpensive way to give a new sense of life to a home. 

Remember, your aim is to keep your home as neutral as possible. This means repainting walls that are bold in color and opting for neutrals such as white and grey. This also serves as your opportunity to cover up any major holes or scratches in your current paint. 

Fresh paint is also extremely beneficial to the photography for your future listing. This is extremely important considering that 95 percent of buyers use the internet to find their future home. 

6. Maximize Curb Appeal 

The entryway is often the aspect of the home that many homeowners mistakingly forget about

The truth, however, is that the entryway is possibly the most important aspect of home when it comes time to selling. In fact, studies reveal that 99 percent of real estate representatives suggest that homeowners focus on correcting their curb appeal prior to selling. 

Remember, the entryway of your home is what radiates either positive curb appeal or negative curb appeal. Without great curb appeal, many potential buyers will forgo the opportunity to view the interior of the home. 

To maximize curb appeal, be sure to minimize your furniture, maintain your grass and gardens and minimize furniture. It’s also beneficial to update your entryway door or opt to paint it a bright color. The door sets a tone for what is expected to come of the rest of the home. 

How to Renovate a House on a Budget 

One of the most significant concerns homeowners face prior to selling a home is whether or not to conduct any renovations. 

While there’s no doubt the kitchen needs upgrading and the walls could surely benefit from a fresh coat of paint, are these renovations worthwhile?

The truth is, there are a number of home renovations that every homeowner can conduct without going into serious debt. These projects are minimal, DIY friendly and won’t take a large hit to your wallet. 

If you find yourself wondering how to renovate a house on a budget, why not take these renovations into consideration? In the end, these simple renovations are sure to increase the appeal of your home and, in turn, maximize profits. 

Once you finish these renovations, you can move onto your next step of finding a realtor. If you’re looking for tips on how to choose the best realtor for your sale, be sure to visit our blog post! 

best places to invest in real estate

These Are the Best Places to Invest in Real Estate in 2019

Americans prefer real estate to stocks for long term investing. And that’s especially true of younger Americans. While 61% of people 35 and over invest in the stock market, only 37% of Americans under 35 do.

Whether you’re just starting to invest or you’re a seasoned investor, real estate is the perfect way to diversify your portfolio. It’s a relatively low-risk way to build wealth over time.

But how do you decide where to buy? Do you stick with the local market or do you take a chance on a new town?

Wonder no more. These are the best places to invest in real estate in 2019.

Orlando, Florida

The City Beautiful has been in the top five for years. Invest in a house near the House of Mouse.

Orlando’s employment and population growth is steady. And home values have increased by 10%. 

Disney World’s ever-expanding compound is like job security. The parks will always be a draw for vacation renters and for people moving to the area for employment, making it one of the best cities to invest in real estate.

Atlanta, Georgia

Billed in some circles as the “next Silicon Valley,” Atlanta is on the rise. The southern city is home to promising tech startups, as well as standbys like Mail Chimp. There’s also a Microsoft presence drawing business from around the world.

Job growth is up. Home values are up. And rental prices are competitive.

St. Petersburg, Florida

Tampa’s coastal cousin, St. Petersburg makes the list for its vibrant downtown and cultural offerings. Like Atlanta, St. Pete has a burgeoning tech scene. Its rich railroad history is matched by a flourishing future.

Cost of living is low in the Sunshine State’s Sunshine City. A recent trend of price reductions makes it a great time to buy.

Plus, it’s a great place to go back to. There’s something for everyone in St. Petersburg. It’s a celebration of the Arts, sports, and, of course, the beach.

Cleveland, Ohio

Long-suffering Cleveland is having the last laugh. Once an easy punchline, the Ohio city is enjoying a renaissance as young professionals settle in, among them the tall Kardashian.

Jobs are growing at a higher rate than the national average. And there are a variety of job sectors, including manufacturing. When one industry stagnates, the others can pick up the slack.

Low home prices mean you can get more house for your money which makes it one of the best places to buy rental property. You can buy one large home and divide it into several rental units. 

There’s a bustling theater district and plenty of architecture to admire. Cleveland is also home to two winning sports teams, overshadowing the other not-so-winning sports team.

Charlotte, North Carolina

North Carolina’s largest city Charlotte has a lot to offer. Equal parts southern charm and busy metropolis, it’s been one of the country’s recent fastest growing cities.

Charlotte is an east coast financial hub and home to several NASCAR races, the perfect example of its two complementary sides. It’s also a family vacation destination, which makes it prime real estate for vacation rentals.

Silver Spring, Maryland

Located near our country’s overpopulated Capital, Silver Spring, Maryland, is rife with some of this year’s best property investments. The northern suburb can keep its distance while taking advantage of DC’s growing job market. It’s just a metro ride away. 

Silver Spring’s updated downtown area is home to restaurants, live music, and outdoor activities. Public transportation is first rate.

Arlington, Texas

With its central location and strong local pride, Texas often has a spot on any list of best places to make real estate investments. Arlington’s family-friendly atmosphere and proximity to Fort Worth and Dallas make it this year’s Texas representative.

The average house is less than $200,000, but high rents are common, giving you more return on your investment. Home of the Dallas Cowboys and Six Flags, Arlington has a strong tourist draw.

Colorado Springs, Colorado

The best places to buy property have a lot going on, and Colorado Springs fits the bill. Nature and culture come together to make the mountainous city a peak investment opportunity.

There are national landmarks and lots of convenient hiking, thanks to nearby canyons and state parks. The historic district is a chance to relive the Wild West. Museums in the city run the gamut from the military-focused to an exploration of the gold rush.

Employment growth in Colorado Springs is among the highest of the bunch. The cost of living hovers around average, but it’s rising quickly. 

Honorable Mention: The Midwest

Rising home prices nationwide mean fewer people are buying and more people are renting. This is particularly true in the Midwest where people are looking for a place to raise a family. Renting a home with a big yard for kids is the next best thing to owning one.

Places like Cincinnati, Indianapolis, and the Twin Cities are holding steady with job growth and make for a good endgame investment strategy. It might not be flashy, but it’s a good bet.

As ambitious young earners move home after a stint on the coast, they turn their eye toward the familiar. In an effort to make home a more attractive place to live, they resuscitate and develop their hometowns.

As recently as the mid-2000s, the Over the Rhine neighborhood in Cincinnati was a notoriously dangerous hotbed of criminal activity. Now it’s home to some of the city’s best restaurants and luxury condos.

The same thing is happening in Indianapolis’s Monon 16 area where the city has invested millions of dollars for revitalization. Kansas City has similar plans for their east side.

The Best Places to Invest in Real Estate Are Slow and Steady

The best places to invest in real estate in 2019 are the safe bets. While the market bubbles of yesteryear would have netted you handfuls of cash, the economy is still nursing its wounds. 

Florida remains an investment stalwart. And the Midwest rises as an unexpected dark horse.

Are you looking to invest in real estate this year? Brush up on your investing technique by browsing our investment articles.

best places to invest in real estate

Is Real Estate a Good Investment? 5 Reasons Why the Answer is Yes

Whether you’re thinking about retirement or you’re trying to learn ways to build your wealth, investing is always a viable option. And, there are more ways to invest your money than playing the stock market. You could also consider investing in real estate. 

But, is real estate a good investment? And, if so, why?

These may be just a few of the first questions you will ask when starting to build your investment portfolio. You may also wonder what type of real estate investment is right for you. 

Not to fear! In this article, we’re discussing a few good reasons why investing in real estate is such a great idea. We’ll also give you some pointers to get through your first purchase. Keep reading to learn more.  

Is Real Estate a Good Investment?

If you’re wondering why a real estate investment is the best way to secure your future, then you’re in the right place. Here is a detailed breakdown of what a real estate investment can do for your financial dreams. 


When you’re investing in stocks, you’re taking a risk against your available assets, especially if the stock plunges below market value, or worse. 

A home investment yields great potential for your assets because there will always be value in your land and your home or investment property.  

You also have an opportunity to protect your investment and corresponding assets with a homeowner’s or property insurance policy. 

Better Returns

Why do people invest in real estate? 

Because it provides better returns than the stock market with little to no volatility. Traditionally, the longer you hold onto your investment, the more your risk of loss is minimized. This will help you build equity as the market improves.  

Real estate offers you more control over your investment. Your property is a tangible asset that can be used to leverage and capitalize on other revenue streams, all while gaining capital appreciation


Real estate values will always increase over time. This means, even if the market takes a dip, your investment will bounce back when the market recovers. And, the longer you hold on to your investment, the more return you will see when you finally sell.

You can also feel secure during times of inflation. Home and rent values typically increase during times of inflation leaving you with a sound investment that will appreciate while keeping pace with the market.  

Portfolio Diversification

So, why invest in real estate? 

Your financial planner will probably tell you that investing in real estate is one of the best things you can do for your investment portfolio. Diversifying your portfolio spreads out your risk and mitigates potential pitfalls. 

On the other hand, many investors have increased their wealth significantly by solely investing in real estate.  

Tax Benefits

Unlike other investments such as stocks, real estate investing offers many tax advantages. You can write off mortgage interest, operating expenses and other costs, as well as property taxes, cash flow from your investment and insurance and depreciation. Add all of this up at the end of the year and you could see tremendous deductions that add cash to your wallet. 

Advice for Investing in Real Estate

Now that you know why real estate investments are so popular, it’s time to gain a better understanding of how it all works. Read on to learn more about what your first real estate investment transaction should look like.   


Before you can begin investing in real estate, you’ll need to make sure you have a budget for it. Buying a home or apartment or piece of land is expensive. Not to mention maintenance costs and potential income gaps between tenants, if you’re renting.

It’s important to weigh out all of the potential costs you may face with your new investment before making a commitment.   

Pay With Cash

Many financial experts recommend paying for your real estate investments in cash. This eliminates the financial burden of a mortgage so you can begin enjoying your returns right away. 

If you can’t pay with cash, you should make sure that you can afford the mortgage payment, even without rental income. Missing mortgage payments will negatively affect your credit which can cost you thousands or more in the long run.  

Research Properties Thoroughly

Especially if you’re purchasing property that you’ll want to sell later, you should research the deed of the property to ensure there are no liens or judgments. Also, consider the neighborhood and comparables in the area that could affect your property value, now and later. 

If you’re considering purchasing a foreclosed property, you’ll want to keep an open line of communication with the bank to avoid any surprises at the time of closing.

Start Small 

The best way to get into real estate investing is to start with a small home or property. You can work your way up to an investment property such as a duplex or apartment complex after you’ve gained some returns on your first investment.

Alternatively, you may consider purchasing an apartment building so that you can live in one unit while renting out the others. This is a great way to get your feet wet and get more comfortable with being a landlord and managing your investment property. 

Final Thoughts

If you’re still asking yourself, should I invest in real estate, then you may not be ready. Don’t jump into anything that you can’t handle. Sometimes it’s best to wait for the next property on the market while you compose your finances and other preparations.

Overall, the final answer to the question, is real estate a good investment, is a resounding yes. The market remains steady and rates are still low, so what are you waiting for? Get out there and find your next investment and start building your wealth right away. 

If you still have questions or would like to perform more research on investing in real estate, check out this blog post for more information. We strive to bring you accurate and up to date details about short sale real estate and other real estate transactions.  

real estate investment

7 Tips For Funding Your First Real Estate Investment

I’m not going to pretend that the average person reading this is a millionaire, or is Donald Trump himself. The reality is that real estate investment is an expensive endeavor.

There are so many different types of funding available, it can be tricky to know where to even start.

Despite the benefits that investing can have, some people are still a little cautious about taking that dive.

That’s why I’m going to give you seven useful funding tips on real estate investment financing for your first property. That way, you’ll be able to take the plunge with a little more confidence.

1) FHA Loans

Otherwise known as the Federal Housing Administration, this is a loan that is insured by the FHA and backed by the US government.

Because of this, FHA loans usually have lower interest rates and are more attractive to first-time buyers.

Not only that, but down payments are only 3.5% as opposed to 20%. This means a property that’s worth $250,000 would only require a deposit of around $8,750 (which is not a lot when you think about it).

This definitely makes FHA loans a lot more appealing.

2) Hard Money Lending

As there are different types of loans for real estate investment, I’m going to try and look at a couple of different ones.

If FHA is not what you’re looking for, then a hard money loan could be what you need.

This is a loan that is determined by the value of the property itself. They are funded by private businesses and are often used by investors looking to renovate a property.

It’s worth noting that hard money loans are usually short-term (6-36 months) and are set at a higher rate (8% minimum), so it’s wise to do a bit of research beforehand.

3) Private Investment

When it comes to real estate funding, sometimes you don’t want to go through a loan scheme or a bank. In which case, private investment may be what’s right for you.

These work similar to other lending programs in that you are still borrowing money at a specific interest rate.

The difference here is that a private investor is an individual rather than a professional lender.

They are helping you to invest in your property on the understanding that they can foreclose and seize it if the mortgage isn’t paid.

The good thing about private investment is that there are no hard and fast rules about borrowing and terms can be anywhere from six months to thirty years.

This gives you a good amount of leeway.

4) Owner Financing

You may also hear this being referred to as seller financing.

Essentially, the property owner and the investor looking to purchase (i.e. you) strike up a mutual agreement.

This is where the owner of said property agrees to help with funding. The new buyer will then make payments to the owner instead of a bank.

This is a fantastic route to go down to cut down on fees and upfront costs.

The only complication to this type of real estate investment is the owner needs to actually own the property itself and cannot already have an outstanding mortgage.

Other than that, owner financing can help speed up the overall transaction and also create a professional one-on-one relationship between seller and buyer.

5) Conventional Mortgage

This one needs to be mentioned as it’s still a useful path to real estate funding.

A conventional mortgage is probably the most obvious type of financing that most would think of.

By going down this route, first-time buyers will have to put a down payment on a property (usually 20%) before they can borrow.

It can often be the most expensive form of financing. However, because of its popularity, interest rates are usually quite low.

Buyers will also need to undergo a credit score check (with a minimum of 680) and have proof of income.

The US Bank website does have a handy mortgage calculator to help you get started.

6) Family and Friends

Of course, you don’t have to look into any type of conventional loan or private investment scheme. You can always ask friends and family for help.

This doesn’t necessarily mean badgering the people you know for money.

You can actually combine this with another financing option, such as an FHA loan.

By doing so, you can pool resources together from multiple people to help reduce the initial investment fee. This helps keep costs down at the beginning, but doesn’t pressure one family member or friend into lending a large sum of their own money.

Having said that, if you do happen to know someone who you think can lend you what you need, there’s no harm in striking up a conversation with them about it.

No one said it was an impossible route!

7) Your Own Money

Even in tough economies, you’d be surprised how many people can actually save up enough money for a real estate purchase.

In fact, in 2012, around a quarter of all investors were able to fund using their own money.

For many people, this may seem like the most difficult option as it can require years of financial saving beforehand. However, it is by far the easiest way to invest in property.

You may hear people refer to this as using ‘all cash’. The reality is – especially in this day and age – a transaction of this magnitude is unlikely to be done with real, cold, hard cash.

However, you should still consider other options if you wish. Just because you have the cash doesn’t mean you have to use it.

Final Thoughts on Real Estate Investment

I’ve shown you various real estate investment paths that I think are the best. But there are probably more that you can explore yourself.

The best piece of advice I can give is to make sure you do a lot of homework before you decide.

This is a huge commitment, especially if you’re a first-time buyer. One thing you should have on your side is knowledge; knowledge of which method is going to be the best for you.

If you would like more information on real estate investor funding, you can check out more blog posts here.

buying a short sale home

Pros and Cons of Buying a Short Sale Home

Short sales are becoming more and more common. Why is this fact true?

Many people bought homes at the height of the housing market. They leaped at the chance to have a zero-down policy and a beautiful home, too. So when the prices of houses went down faster than they came up, people were stuck with a home they couldn’t afford.

Short sales happen if both the homeowner and the bank agree that it would be best. To avoid foreclosure, many look to a short sale instead. This is a “cut your losses” compromise that allows both parties to get away as free as possible.

The upside? More people are considering buying a short sale home at a major discount.

Like anything, there are pros and cons to this method of obtaining a house. This article will lay out both sides so you can make an informed decision.

Advantages and Disadvantages of Buying a Short Sale Home

Buying a short sale home may not be for you.

But maybe it is!

Let’s review what purchasing this type of home entails. Then we’ll get the pros and cons in order.

What Is a Short Sale Home?

A short sale is when a property is sold for less than the balance that remains on the mortgage. This occurs to avoid foreclosure, which is costly for the bank and your credit report. Foreclosed homes get bought by the bank, and it’s not an inexpensive process.

Buying a short sale is very similar to buying a regular home for sale. The main difference between the two is the addition of a third party or escrow. This third-party lender has to approve or disapprove of any offers and negotiations.

Short sales typically occur when the homeowner can no longer afford to make payments. This can be due to personal or financial reasons. Many people saw this coming after the 2008 housing market crash. It turned 5% more of the population into renters.

2008 is in the past, and the market has been looking good for a solid decade with no hints of crashing.

Are you still in the buying market? Here’s what you need to consider with a short sale.

What Are the Pros of a Short Sale?

There are many advantages to this process:

  • Potential to get a great deal on price
  • Fewer people are looking into short sales, meaning more opportunity for you
  • You avoid the pitfalls of buying a foreclosure
  • Tenets usually maintain the space until moving time. This doesn’t happen as often with foreclosures

If you see a home that you love, don’t you want to live in it? Short sale homes should be no different. Find a home you love and go after it.

After all, it’s much better than considering a foreclosure. Foreclosures come with a laundry list of disadvantages:

  • They’re not usually located in a prime neighborhood or area
  • You have to buy the home “as is,” which means that once you’ve purchased it, the problems are yours, too
  • The prices of foreclosed homes are harder to negotiate. You’re working with a bank that needs to make its money back

Go look at a short sale today, and chances are it’s in a nicer area than a foreclosure would be. Most people who sell their homes on short sale bought them with good intentions.

What Are the Cons of a Short Sale?

There are some unfortunate aspects involved in purchasing a short sale home. We emphasize that the biggest issue with short sales is the time it takes for approval. And even then, approval is not always a guarantee.

Are you willing to take the risk? Here are other things you’ll have to gamble:

  • A lender has to approve of the short sale. Without their approval, there’s no done deal
  • It may come at a competitive price if the owners are trying to squeeze out as much as possible
  • Once again, the wait time can be longer than that of a regular home sale
  • There may be extra costs in the repair of the home

The best way to avoid some of these pitfalls is to get a look at the home. Does it need extensive repairs? If you don’t have the extra cash for renovation, you may need to look elsewhere.

If you’re able to look inside and determine the cost is worth the effort, then you’ve got an easier decision to make. This isn’t always possible. Once again, risk comes down to a key player in this decision.

Is This the Right Decision for You?

We hope this guide led you to that answer.

If you’re not in the market for an immediate move, then a short sale may be right for you. Got a place to stay while you wait for the process to wrap up? Then you’re good.

If you’re not afraid of a little work and time, then buying a short sale home is right up your alley.

Do you need to move right away? Then you might want to consider something else. A short sale has the potential to be a long process.

If you don’t have the time or the patience to wait, then it’s not for you.

A short sale comes with many benefits if you’re willing to put in the effort. It requires the same love as your average home up for sale.

Are you in the market? Check out our short sale blog for great information!

buying a short sale home

A Guide to Buying a Short Sale Home for Investors

If you are planning on investing in a short sale home, you have the opportunity to buy a home at big bargain prices. However, these great prices don’t come without the investment of a lot of time and hard work.

Making the right choice and learning how to buy a short sale can be difficult to know how to do the first time.

To make things easier for you, here’s our guide to buying a short sale home for investors.

What is a Short Sale

One way a short sale can occur is if there is a homeowner who would like to sell however they owe more money on the property than it is actually worth.

An investor will then communicate interest with the owner’s lender to purchase at a low price. They will then try to resell the property at a later date for an increased profit.

In a short sale, the seller does not own what is up for sale. Instead, they will place a sale order through the broker-dealer.

Short sales are margin transactions. This means the current amount of equity the investor has put in and its value in the market.

The reason why you should consider buying short sales is because of the potential to get the best cost due to a drop in value and the possibility of profiting from the investment in the future (a.k.a. buying low and selling high).

Generating Leads

You might find success in networking with local real estate agents when trying to find short sale leads.

Working with these real estate agents can help build powerful (and profitable relationships) especially if working out terms for the commission.

Another way to work on generating leads when buying a short sale home is to focus on online marketing. This can be in the form of starting a website to drive traffic to your services or even through social media advertising.

Look at the Terms and Conditions When Buying a Short Sale Home

If you are looking to resell your short sale property, make sure that you carefully look at your acceptance letter from the mortgage servicers.

The acceptance letter will have certain terms and conditions that you have to comply with when you purchase the home.

The terms may put certain restrictions on how soon you are able to resell the property.

These restrictions may also apply to renting out the property.

Some buyers will buy the property with plans to rent it back out to the original seller who was the borrower.

Unfortunately, this might not be a possibility if there is a requirement to sign an affidavit with everyone involved (agents, sellers, buyers) saying this will not happen.

The Buying Process

You will need to start by verifying the homeowners and understanding the circumstances that are causing them to sell.

Once this checks out, you will then be able to send them a package that explains the short sale process.

The packet will also have a checklist of things they will need to complete and information to gather. This information will be helpful for you to use later on when submitting to the lender.

You will need to add any supporting documents from your end after you get the packet back.

These supporting documents can be in the form as:

  • Values of other homes in the area
  • Any possible sex offenders living near
  • Sales information that is comparable
  • Anything that can devalue the property

Remember, you might have to send the information packet to multiple lenders depending on how many the current homeowners have.

You will then need to make an offer and make sure to verify receipt so that you can get a confirmation that the offer and proper paperwork has been received.

After this is complete, get a negotiator and a broker’s price opinion. It is then when you will be happy you have done your homework.

Overvaluing the property can quickly ruin the deal. In order for this not to happen, prepare and help out by showing other comparable home values in the area. This can help get their value of this property approximately where you want it.

The negotiator will help you work with the lender. This will help you be on the way to getting an approval letter for the short sale. You will need these from all lenders involved which can prove to be tricky.

A written agreement with the homeowner will make sure that they understand any liabilities and any other information they need to know in order to get closer to finishing the process.

Now you will need to complete the transaction by getting together the funding and working with a real estate attorney to finish the deal.

This Requires Full Disclosure

Everything will need to be out on the table in order for everything to go through when buying short sale houses.

This includes whether or not you will be using the assistance of an investor.

An investor will help contribute funds to your efforts in hopes for approval of the deal. Record any additional cash and you will need full disclosure of the investor.

Do Your Homework

If you want the deal to go as smoothly as possible, you will need to do all your homework.

This means, make sure to do research on the current real estate market in your area and most importantly always prepare in case things don’t go exactly as planned.

Although there is nothing to do to guarantee success, preparation like this will help you to the best of your abilities avoid the deal falling through after months of work to secure it.

Buying a Short Sale Home

Buying a short sale home isn’t always easy, but hopefully, this guide has made it easier to understand.

The Short Sale Blog is your one-stop shop to teach you all that you need to know about short sales.

Take a look at our blog to read up on more tips and tricks when it comes to buying and selling short sale homes.

buying a short sale

8 Tips for Buying a Short Sale Home

Buying a short sale home offers buyers a great opportunity. The sellers are looking to get out from under the home and will offer the sale at a discounted price just to get rid of the property.

This means that if you’re looking for a home for yourself — or as an investment property — you can save tons of money and still find the home you’ve always wanted.

There are a few things you need to consider, however, before you start looking for short sale properties. The short sale process can be tricky, so you need to arm yourself with the foreknowledge you need to find the right deal.

Luckily, we’ve got you covered with some tips that’ll help you determine whether you want to start looking at short sales and what you need to do to find a great one.

So read on!

What Exactly is a Short Sale?

A short sale is when a seller is motivated enough to take less than they owe on the home. This usually happens because the seller needs to get out from under the home quickly or to avoid foreclosure.

It sounds simple enough, but there are a few problems.

The biggest problem is that the lender has to agree to accept less than the value of the loan. Since no company wants to take a loss on their investments, you can see the difficulty in a seller convincing a lender to do so.

Again, this doesn’t mean it’s not possible. The process just may take some more time than an average home sale.

The other problem is that foreclosure is always a possibility. If things don’t go right, the lien holder will force a foreclosure and all will be for naught.

But sometimes, the possible deal is just too good to pass up trying and it’s worth the effort.

Buying a Short Sale

Let’s get into the nitty-gritty. If you want to buy a short sale home, here some the most important things you need to consider.

Find a Professional

Anytime you are looking to buy a property, you should hire an agent. it’s even more imperative to find one when considering buying a short sale.

There’s a lot more paperwork that goes along with a short sale. And there are a lot more potential problems you’ll have to face.

Finding an agent that specializes in short sales can save you headaches and the possibility that you don’t fill out everything correctly which can jeopardize the sale. That agent can also find out all of the details of the current lien, the conditions of the house, and all of the vital information on the seller you will need.

Find the Short Sales in Your Area

Your agent will obviously help you do this, but you can also do a little research yourself to find sales you like.

Many listings will say outright that the property is on a short sale, but some will not. Look for keywords such as “preforeclosure,” “must meet bank approval,” and “headed for auction,” as clues to possible sales.

Understand Your Expectations

Know what you are looking for in a short sale and tell your agent. Are you going to be living in the home or renting it out? Is it an investment opportunity to resell after some upgrades?

Understanding exactly what you are looking for in a property will help you narrow down your choices and make everyone’s life a little easier.

Get Your Budget Together

Even though you could be saving thousands of dollars when buying a short sale, you need to know exactly how much you are willing to spend and how flexible you are willing to be.

There are tons of resources online that can help you manage your money and give you a full account of what you can spend on a new home. The earlier you know your total budget, the better your chances will be at finding the perfect short sale to buy.

Don’t Expect Negotiations

Short sales are stressful for the sellers and the lenders are wary of losing too much money. This means that you shouldn’t expect the standard negotiations that come with buying a home the traditional way.

When you see a sale price on a short sale, assume that’s the best they can do. The home is already undervalued, so don’t expect any wiggle room.

This means that you need to…

Give Your Best Offer

Don’t try to lowball a short sale. It won’t work and it’s just wasting everyone’s time.

Instead, find out the most you’re willing to pay and offer it. Chances are, you’ll already be getting a great deal, so don’t let someone else swoop in and take it from you because you tried to get cute and save a few more bucks.

Go with a great offer on your first try and you’ll save time and have a great chance at landing the property.

Add a Contingency

You need to be able to walk away if the house needs more repairs than you originally thought.

Make sure you add a contingency on repairs and other possible problems on the property that gives you a way out of things aren’t as expected. This is a very common practice in real estate and should be no problem, even with a short sale.

And if it is a problem, maybe it’s time to look for something else.

Have Patience

Because of the special nature of short sales, the process will take a little longer.

Don’t let the length distract you from your goal. You set out to buy a short sale to save money, so some extra time shouldn’t hurt. Stay focused, and it’ll be worth it when you finally close.

Short Sale Knowledge

These are some of the most important tips when it comes to buying a short sale home. There are many nuances and unexpected challenges you may face, but a short sale provides a great investment opportunity.

For more information on short sales, you can visit our blog.

Good luck!

short sale realtor

Short Sale Realtor: Do You Need One To Sell Your Home?

1 in every 2000 home purchases will go through a foreclosure. When they do, it destroys credit and often lives.

On top of that, foreclosures cost banks a lot of money.

A short sale is a mutually-beneficial way to walk away from a home that you can’t afford. But should you try to navigate the process alone? Can just any realtor handle a short sale?

You need to know when it’s time to hire a short sale realtor. Let’s take a look at questions to ask yourself as you decide.

1. Do You Fully Understand What a Short Sale Is?

A short sale is when the price you’re able to sell the home for doesn’t cover obligations to the lender. The lender must agree to take the lesser amount rather than foreclosing or requiring you to pay the difference.

If the lender refuses, you don’t have a short sale. You can’t legally sell the home.

But there’s more.

The sale price must also pay your closing fees and commissions. This could amount to several thousand dollars.

Because the sale price must also cover these expenses, it may make a home that you think isn’t underwater a potential short sale.

Short sales are often a better option for those late on payments and facing foreclosure. But someone might also seek out a short sale if they purchased a home that later dropped in value due to market, damage, neighborhood problems or other factors.

2. Do You Know If You Have a Leg to Stand on?

Many people seek out short sales because they just want to get out of the house for one reason or another. They don’t want to lose the money.

But they don’t realize that if they have significant assets, it will be hard to negotiate a short sale with the bank.

You may be thinking: they can’t ask me to liquidate my kid’s college fund or retirement! But in some cases, they can.

A short sale realtor will help you evaluate your financial situation and work with lenders to make your case.

3. Do You Know How to Work with the Lenders?

A short sale realtor has experience working with the lender. They know what documents you need. They understand what a lender or lenders need to see to approve a short sale.

They understand how much money your bank loses if they have to foreclose. The realtor can use this a leverage.

Lenders will be looking for discrepancies. They’ll try to find anything in your documents that suggests that you’re not being 100% truthful. If you really can pay the difference, they won’t authorize it.

You may even be working with two lenders if you have a second mortgage.

An expert helps you navigate this complex process. You’ll have peace of mind that it’s done right.

4. Have You Explored How a Short Sale will Impact Your Credit?

A short sale will impact your credit report and score. Future lenders will be able to see that you took this option. They may be wary of lending to you soon after.

What it won’t do is keep you from borrowing money or buying a home for up to 7 years like a foreclosure would.

A short sale demonstrates that you took the initiative to understand and exercise your options. You didn’t just let the property get taken from you.

Although a short sale realtor is not a financial advisor, they will be able to further answer credit-related questions.

4. Do You Know How to Find the Right Buyers?

A regular realtor may say they handle short sales. What they may not tell you is that they’ve handled maybe 3 during their 20-year career.

This by no means makes them an expert.

But a short sale realtor is. Short sales are what they do. They understand the rules and that just any buyer won’t do.

The lender must not only approve your short sale. They have to approve the buyer when an offer is made.

Certain buyers are more appealing to the bank. Others will get almost instantly rejected like a buyer who is only putting down a 5% down payment.

6. Are You Able to Weigh the Pros and Cons of a Short Sale?

A short sale realtor will walk you through the pros and cons so that you can make the best decision for your family.

Some of the pros you’ll consider include:

  1. Your mortgage is paid in full.
  2. They can’t come back later for the money.
  3. It’s not a foreclosure.
  4. It’s less of a blemish on your credit.
  5. You’ll be able to buy a new home sooner.

Some cons to consider include:

  1. It’s very time-consuming… unless you hire a short sale realtor.
  2. It forces you to act quickly when a buyer comes along.
  3. You don’t get any money out of the sale of your home.

This only scratches the surface. That’s why speaking with an expert is so helpful.

7. Do You Know Your Rights and Responsibilities?

There are lots of laws and rules you must follow. Not knowing isn’t an excuse. You could miss deadlines that make your short-sale fall-through. In many cases, this forces families into foreclosure.

Other rules are in place to protect you from unscrupulous or negligent lending practices. These rules speed up the process which is generally good for you and the buyer.

Let’s take a look at some of the rules you need to know about:

  1. Buyers must have a pre-approval or cash in hand.
  2. Lenders must decide on an offer within 10 days.
  3. Lenders must allow a 45-day closing so you can make arrangements.
  4. A buyer can’t resell a short sale for 90 days.
  5. Banks can’t foreclose on you for a specified time.
  6. Banks can’t charge you extra fees for a short-sale.
  7. Banks can’t lower commissions after an offer is made.

It’s Time to Get a Short Sale Realtor

If your home value is close to the mortgage balance, you have a potential short sale. Navigating the short sale process can be complex. But a short sale realtor knows what to do.

They can save you time, money, stress and headaches during the process.

For more tips and information related to short sales follow our blog.

what is a short sale

What Is A Short Sale?

What are you going to do if you lose your job and can’t pay your mortgage?

If you’re having trouble paying your mortgage, or you’re foreseeing a time when you won’t have the money to, you may have come across the idea of a “short sale.”

You may also be familiar with short sales if you’re on the other end, exploring ideas for purchasing a house at an exceptional price.

The word is thrown around a lot, but you’re probably still asking yourself, “What is a short sale?”

What is a Short Sale?

Let’s say, for example, that Brenda gets a mortgage on a $350,000 house. Life is great, she pays her mortgage, everyone is happy.

Then she loses her job.

Now, unable to pay her mortgage, she gets an appraisal to see what her home is worth.

The appraiser lets her know that her neighborhood value has dipped, making her house worth only $275,000. Brenda still has $325,000 left to pay on her mortgage, and she needs to figure out a way to cover the remaining $50,000.

Selling the home for its new market value, with the permission of the lender, can often be enough for lenders to waive the remaining value of a mortgage.

Lenders must be involved

Brenda needs to give her lender a package of financial information, as well as an explanation of her financial need. If the lender grants Brenda the option of “short selling” her house, there is a good chance that the lender will consider the mortgage fully paid.

Brenda saves $50,000.

The lender, usually the homeowner’s bank, could lose a lot of money in this situation, so it’s difficult to get them to accept an appeal.

In most situations, the lender will accept the terms to avoid dealing with a costly foreclosure. This doesn’t mean that they will always accept.

There are pros and cons for buyers and sellers in this situation, so it’s important to have a good idea what you’re getting into.

“What is a short sale going to do for me?” – To answer this question, you’ll need to consider the following factors:

If You’re Selling

When you find yourself in the unfortunate situation of needing to sell your home, a short sale is a good thing to consider. That being said, it isn’t always a good idea.

What could you gain?

1. Money

There is the obvious perk that, if approved by the lender, you could save tens of thousands of dollars. If you are able to agree with your lender upon a mutually beneficial deal, a short sale might the best thing to pursue.

2. Avoid foreclosure

At the very least, you retain a level of control in a short sale.

You are avoiding eviction and suffering heavy blows to your credit, you also show that you were proactive and aware of the situation before it reached the point of foreclosure.

What could you lose?

1. You may have to pay the difference

There’s a decent chance that your lender won’t accept the terms, and require that you pay the full difference on the mortgage.

2. You will invest time and money in the process

In order to go through with a short sale, you’ll need to hire listing agents, seek buyers, negotiate prices, and wait an excruciating length of time for lenders to respond to your requests.

That means time and precious money will be wasted if the lender doesn’t give you the option of a short sale.

3. Your credit will suffer

The degree to which your credit score is affected depends on the situation, but short sales have the potential to affect your credit as badly as a foreclosure does.

That being said, a short sale looks better if you plan to purchase another home in the future.

If You’re Buying

1. You score on a house

The fact is, the seller has no option but to sell their house. If you understand how short sales work, you’ll be able to estimate just how much leverage you have as a buyer, and likely save a lot of money.

2. It may be a great investment

If you end up getting a good deal, odds are you’ll be able to flip the house and make a profit, or live in a house that you normally wouldn’t be able to afford.

The worth of your investment will depend on why the house lost value in the first place, as well as other market factors that you should be aware of.

What could you lose?

1. It could be a bad investment

Who knows why the value of the home decreased? It may seem like a steal, but the property value could be on the decline anyway. You could end up putting a lot of time and effort into something that loses you a lot of money.

2. You might pay too much

You may end up paying more than the house is worth; lenders will work the seller to the bone to get them to pay the full mortgage. If you pay the full price of the mortgage, you’ll be paying more than the home is worth.

3. The price might not be real

The home may be listed as short sale, but the price could be entirely speculative – the lender may not have approved the terms. Sellers will often market the home at a price they have asked the lender to approve, meaning that the price listed may be totally up in the air.

If the lender hasn’t approved the sale, there is no way to know what the price will be. There’s also no way to know if the approval will go through, meaning that you’ll be risking a lot of time and effort on something that may not be real.

Do Your Research

Hopefully you can now answer the question, “What is a short sale?”

The information above is by no means exhaustive. There are plenty of insightful resources that offer extensive knowledge on both sides of the short sale.

If you’re thinking you want to be on the buyer’s end of a short sale, make sure you understand your end of the equation. Research the home’s area, the specifics of the home itself, and why the buyer is selling. Most importantly, make sure the lender has approved the sale.

If you’re selling, make sure a short sale is the smartest move for you. Consider refinancing, renting out your home, or exploring other alternatives before you jump in.

Start acting now. Ask yourself, “What is a short sale?” Make sure you can explain it to yourself before taking any major financial steps. Explore the ins and outs of short sales to see if you should enter into one.