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Buying Short Sale Property

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The housing market has been fluctuating for years now, but overall, houses are great investments. Buying a house today may not mean you can sell it in a year for a profit, but maybe after renting out the property or living in it until the market improves buying that house on short sale or foreclosure will be the best decision you ever made.

Short sales of property occur when the owner can no longer make payments (with letters of hardship and proof of inability to pay) on their mortgage and in order to reduce their debt, they sell the property for less than what they owe the bank and it affects their credit slightly less than a foreclosure. This can be a great opportunity for investors—for the right price.

The most obvious upside of buying these properties is cost. Much like foreclosed property, the houses tend to sell for less than what they are worth.  The Mortgage Forgiveness Debt Relief Act of 2007 makes it more appealing to homeowners to sell a property on short sale instead of waiting for foreclosure, since the taxation has decreased, thus eliminating one of the least appealing aspects of the process.

Buyers can scope out potential properties for foreclosure and short sale online or through real estate agents before the signs even go up for the sale of the property. If the property goes on foreclosure instead of short sale, it is likely the property will sell for near the value of the home, but with a short sale, the property sells for prices that are hard to pass up (and that others will fight for) so it is in your best interest to proceed with caution as well as also quickly.

When attempting to buy property, especially through a short sale, it is best to go through the real estate agents. They can access information (often through the Customer Service departments) that you could not due to authorization paperwork, which can become time consuming and difficult to obtain. Speaking to the Short Sale Customer Service representatives for the lending bank can be an arduous process without the aid of real estate agents authorized to discuss the account in question.

As the name suggests, short sales happen quickly, often in a matter of a month after the option is given to the home owner, whereas foreclosures tend to finalize nearly a year after the missing payments. Getting a loan in such a short period of time can be difficult, especially if you have less than perfect credit. If possible, a private hard money loan may be a feasible and useful option when buying short sale property. To see how to begin the process of obtaining a rehab/hard money loan, see here.

A major note on buying any property: see it first and get proof of what he property is actually worth, and beware of any residual liens. Weigh your options and learn what needs to be done to the property in order to get the best out of it (building codes, location, or cost of repairs, renovations, or aesthetic changes).

Short sale and foreclosure properties can be a wonderful investment, especially if you plan to flip the property or rent it out. Not all of these properties are in great shape, but just based on the criteria for short sale, you may end up with a more valuable property than a foreclosure.

For more details about short sale properties, see here.

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