Buying Commercial Real Estate Using Tricky Short Sale Tactics ...

Like the traditional real estate investing model, short sale investing is based around the idea of finding and buying properties at a discount. Moreover, buying right is also important in the short sale business. The primary difference between the two models concerns the holding time and exit strategy used to profit on the deal. The most common exit strategy in the short sale business is a back-to-back closing where a property is bought and sold in the same day. This reduces the need to buy at 65 percent of the as-is value because there are no rehab or holding costs. This gives investors more options that can be pursued and a greater opportunity to generate more business.

In the example below, the subject property is in foreclosure and the mortgages are equal to or close to the ARV. Despite the recent interest in short sale investing, competition is still low. Many investors will not touch a property that is fully leveraged or over-leveraged and in foreclosure. For those investors that will, many do not have the complete understanding of the process necessary to make the short sale transaction work. A short sale deal involves several moving parts and requires a working knowledge of how these parts fit together. For those willing to take the extra time to really learn all facets of the residential real estate business, the results are rewarding, almost overwhelming. One attractive aspect of short sales is the limited exposure they offer the investor in the terms of risk. In learning how to successfully complete a back-to-back transaction involving a short sale, the investor greatly reduces risk while increasing profit potential. The quick-turn eliminates holding costs and the uncertainty of buying a property with the hopes of selling for a profit. If structured correctly a short sale property can be acquired, negotiated and sold in such a way that the investors risk level is minimal, almost eliminated entirely. In essence, a property is bought only when it?s already being sold.

Traditionally, investors looked for properties with equity to be bought at a steep discount, rehabbed and sold. Properties that are candidates for short sales are in foreclosure and have no equity and thus most investors do not pursue them. The opportunity to buy and sell properties in foreclosure through short sale negotiations is huge. With the collapse of sub-prime lending, the possibility of finding houses to buy using the short sale method have never been more plentiful. For this reason short sales have become a buzzword in the real estate industry. Take away the risks associated with traditional investing ? the holding costs, contractors, rehab, financing ? and add to it the ability to quick-turn properties and it?s no surprise that short sales have become so rewarding.

Each state and county has their own rules and laws pertaining to real property. Likewise, each state also processes a foreclosure according to their procedures and laws; however, some uniformity does exist. Most investors live and work in a judicial foreclosure state while some work exclusively in a non-judicial foreclosure state. A judicial foreclosure state is one where a lawsuit (called a complaint) is required to start the foreclosure process. Attached to the complaint are other documents that are served on the homeowner. These additional documents include a copy of the promissory note signed by the borrower or homeowner, along with the mortgage signed by the borrower or homeowner. Promissory notes are IOUs: this is what is really valuable. The mortgage backs up the IOU as collateralize by the real estate. The promissory note and mortgage are exhibits on the foreclosure complaint. If you are working on a short sale, get those papers. Information such as the interest rate, when the loan was originated, and all sorts of other valuable information are on those documents. The lawsuit starts when filed at the courthouse, but cannot proceed until the homeowner, or borrower are served with the complaint and other papers. This is usually done by certified mail, a sheriff?s deputy or a process server. Once the papers have been served, the lawsuits clock begins to tick. The bank prefers to move as quickly as possible usually varies 20 to 28 days state to state but investors will need additional time to negotiate a deal with the lender.

Buying Commercial Real Estate Using Tricky Short Sale Tactics ? Can You Legally Do It?

Source: http://www.financialcrossing.com/buying-commercial-real-estate-using-tricky-short-sale-tactics-can-you-legally-do-it/

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