How To Flip Short Sale Properties

With home sales trending downward, and the sub-prime lending market collapsing, there are sure to be an increasing number of distressed properties in most areas. Because of the increasing amount of people not being able to meet their loan obligations, the amount of defaults that will be happening will be at a record pace. A large amount of people will be ready to throw in the towel, and will need some assistance to get back on their feet.

The great thing for homeowners is, property investors are happy to use to become the owner of properties that are worth less than their loan amount called a short sale.

A short sale is a home transaction where the market value of the home is less than the balance of the mortgage on the home. To complete the sale the lender accepts an amount that is lower than the outstanding balance of the loan. The lender regards the purchase price as payment in full for the property.

What is it about a short sale that would make a lender agree to take less money than what is owed on the home?

There are several reasons, but the biggest one is that the mortgagor may feel that overall, that it would be less expensive to accept a dollar figure under the note value than it would to spend dollars to begin a foreclosure on the home. A mortgage holder will figure that by the time the fees are paid to initiate a foreclosure, the mortgage holder figures to spend way more on expenses, filing fees, etc., than to just accept a bid for the property that is under loan value.

In addition, owning real estate ties up a lender's funds, meaning there is less money to lend. A lending institution's goal is to loan money to borrowers, and when a lending institution has to take back property, there is a smaller amount of funds available to lend.

In addition to making sense for the lender, a short sale is also beneficial for the real estate owner. The distressed property owner can pay off the note and does not have to fear foreclosure. This can be a boon to the property owner who needs good credit to move on with his life. Many bankruptcies can be prevented through the use of short sales.

The buyer also is a happy camper because the property is purchased below market value. Truly a win-win transaction for all concerned.