Short-Sales on Pre Foreclosures for Real Estate Investing

A short-sale is when the lender (mortgage company or bank, etc.) will agree to sell the property at a loss during pre foreclosure because they do not want it to end up on their books as a non-performing account. Therefore, will discount the asset prior to foreclosure. It will save the lender both time and money by accepting a short-sale.

To do a short-sale you need to be able to move quickly to close the deal. The lender is allowing the homeowner the opportunity to sell the property before it goes to auction without slowing the process down.

The strong motivation to sell fast is one of the advantages of a short-sale, which means you can usually get the property for a good price.

The lender has to approve the sale and in some cases will take a loss on the property. However, most all lenders frown on a seller receiving any monetary gain through such a short-sale, understandable in lieu of the lender's agreement to accept less than the existing note. After all, this is a legal and binding agreement between all parties to remedy a financially stressful situation.

You can go directly to the homeowner and sign a purchase contract so you can submit it to the lender showing that you are ready to buy the property. You cannot negotiate with the lender until you have the homeowner sign an Authorization To Release Information form. This will give the investor the opportunity to talk directly to the lender.

With the signed purchase contract and Authorization To Release Information form the investor will then contact the lender's loss mitigation department to negotiate a short-sale. Be prepared when contacting the loss mitigation department. You must give them a reason to execute a short-sale. Financial or health conditions of seller, physical and market condition of the property and area, and make it easy and quick for them to take the burden off of their books.

A short-sale will benefit the seller (homeowner) because they will not have a foreclosure on their credit record. It will benefit the investor because it is a fast moving process and will result in paying a lower price for the property. It will benefit the bank because they will not have to go through the time and expense of foreclosing. If handled correctly, a short-sale can be a win-win situation for all parties.