About Short Sales

It’s a tragedy that many people are forfeiting their homes during this sub-prime real estate crisis. It was recently reported that foreclosures account for 50% of the homes currently being sold in the US. Even though many people are losing their homes, there are many others who can finally afford a home or are now investing into real estate and taking advantage of these discounted prices.

Most real estate investors see this current crisis as an opportunity as it’s the perfect time to buy cheap and hold until the market returns to normal. “There are always opportunities”, explains Donald Trump. “When I first started out in Manhattan, everyone was saying what a terrible market it was”. It’s a good thing he didn’t listen to anyone else’s advice or he won’t be where he is today.

Many of the top real estate investors, including Mr. Trump, now feel that this is currently a good time to invest in real estate by purchasing pre-foreclosed or foreclosed properties.

The main reason is unlike foreclosures, a pre-foreclosure is made privately between the owner and buyer and therefore avoids the bank auction foreclosure process. This provides many advantages to the buyer including more time to inspect the inside of the house and a better chance to establish a mortgage with a bank.

There are macro (local community, etc.) and micro aspects to take into consideration when looking for a pre-foreclosed home. Here are the some of the macro aspects:

- Look around the neighborhood to see how many homes are being foreclosed. It’s best that the house you’re considering for purchase is the only one facing foreclosure. Obviously the more homes in forced sale, the more likely the properties will depreciate.

- Check with the local tenants to see what the rent levels are and whether they have been increasing or decreasing over the last little while.

- What is the employment rate in the area? If declining then that may indicate that it’s not the right area in which to invest. Does the local economy appear to be stable?

- Check with local authorities to become informed about any infrastructure projects that may be planned within the next two or three years. Things such as new buildings and highways being built or corporations moving into town can be a positive indication of future growth.

- What are the demographics? If there is an extremely high level of seniors in town and only a small percentage living in nursing homes, guess what, it could cause a housing surplus within 10 years or so.

If you do your due diligence and find positive answers to these questions when considering a pre-foreclosure then you can feel secure that it is a good community in which to invest. Successful real estate investors buy discounted properties at the right location at the right time.

It’s unfortunate but foreclosed homes currently represent half of all of all the homes sold in the US. Before the bank forces foreclosure there is in a period called pre-foreclosure which can last anywhere from two to twelve weeks. Many of the real estate gurus have made a fortune on pre-foreclosures and consider it as one of the best, if not the best, way to invest in real estate.

Many of the ‘for sale by owner’ signs that you see are from owners that are in pre-foreclosure. The bank usually allows the homeowner time in which to try and sell their home before it is foreclosed. This is common because the bank is not in the real estate business and would prefer the current owner sell the home to cut their losses rather then having to seize the home themselves.

Here are several reasons that real estate experts feel it?s a better idea to purchase a home during a pre-closure period instead of waiting to buy a foreclosed home at a government auction:

- Pre-foreclosed houses are often times cheaper considering it?s being sold by a home owner that is in a hurry to sell it before facing foreclosure.

- Because you are working with the owner you’ll be able to ask questions about the property you wouldn’t be able to otherwise.

- Typically less competition then at a foreclosure auction where there is multiple bidding for the same property. Foreclosures attracts more of the mass real estate market then pre-foreclosures does.

- More time to evaluate financial scenario then at an auction.

- You will be given more time to access and evaluate your finances before buying a pre-foreclosed home.

- You can bring an inspector along with you to inspect the pre-foreclosed home. You will be given more time to have it looked over.

- You will be allowed to make a low down payment on a pre-foreclosed house. At a government auction you would be required to pay the total amount in cash.

As with any house purchase make sure you check for any judgements, or liens against the estate. Bring along someone how is familiar with buying real estate and if possible have the house professional inspected. The risks are comparable to a traditional type of home purchase but with the advantages of foreclosure discounted pricing.