Short Sale Real Estate Investing in 2018: The Pros and Cons

April 9, 2018 by Julia Rae
short sale real estate investing

Short sale real estate investing is when a developer purchases a property for less than the mortgage amount owed. These types of deals became more popular after home prices collapsed several years ago. As values took a serious dive, many homeowners owed a lot more than their property was worth. From the perspective of a lender, a loss on a sale can be much better than the complexity of a foreclosure.

For real estate investors, short sales can be an amazing opportunity, but they also have distinct rules to follow too. For every investor who does everything they can to avoid short sales, there are still some that thrive off them. Like any other decision, it’s important to form an opinion before making a final choice, by looking at the information available.

How to Short Sale an Investment Property

Finding real estate financing for a short sale property might not be as difficult as some developers think. The most obvious benefit of short sale real estate investing is that it’s possible to pursue a property for a huge discount. This means that it might be easier for experienced borrowers to get the support they need just by tapping into crowdfunding resources.

There are plenty of good discounts available, and once an investor finds a property that appeals to them and gets the seller on board, all they need to do is present their case to the lender. Usually, for those wondering how to short sale an investment property, the process is very similar to traditional real estate investment. A short-sale financial package can be offered to the lender including statements, and other important documents.

The Benefits of Short Sale Real Estate Investing

Aside from the discounts available with short sale real estate investing, it’s worth noting that this solution also helps the seller, even if it seems as though the investor is paying much less than they should be. A short sale is one of the last options a seller will often have before foreclosure, and foreclosures remain on a buyer’s credit report for a number of years, making it harder for them to buy cars, apply for credit cards and more.

Additionally, investors will be able to work with lenders to negotiate over the deals available for the property in question. With a short sale, investors will often have more scope to influence the decisions of investors, particularly if they can supply information like comparable sales, cost of repairs, and other negative items that might affect a lender’s ability to see the value in an investment.

Addressing Short Sale Real Estate Investment

While short sale real estate investing does have a lot of benefits to offer in the right circumstances, it can also be a lengthy and complicated process. There is a great deal of paperwork that needs to be filled in before a deal can be put across, which means that it might not be the ideal option for an investor that wants to jump into action as quickly as possible.

Additionally, to close a short sale, everyone will need to be on the same page. This means that it’s not necessarily enough for a buyer to want to buy and a seller to want to sell. Lenders must agree to the offer too, which is often why crowdfunding is such an appealing alternative option.