Short Sales – Its emerging as a savior to the Foreclosure Crisis many homeowners currently find themselves in, but can it be an investment opportunity? Yes indeed, sir… or mam.

What's the difference between buying a Short Sale or a Bank Owned home? Anyone? Anyone? Well, the difference is vast even though both scenarios involve making bids on distressed properties and requiring a 3rd party approval. 

In simple terms, a short sale involves a property that is still owned by a human being and not a corporation, not a bank. However, in order to sell a property that has a mortgage lien far larger than the current fair market value, the Seller needs to apply to the bank by presenting a Hardship Package as well as an Offer from a buyer sufficient enough to gain approval from the Bank's Loss Mitigation and garner a lien release and appropriate transfer of title to the new owner/buyer. 

Making a bid on a short sale, often times, is a longer waiting process for a decision on an Offer (30-45 days) than bidding on a bank owned property(7 days) , however, there exist better opportunities for buyers in a short sale. 

Things to remember:

1. The house is being listed by a Real Estate agent specializing in Short Sales and if they're worth their salt, they can often price the property below market value and get a supporting value from the bank.

2. There are so many short sale listings, the buyer can cherry pick their favorite, throw out a lowball offer and the Seller's will take it, submit it to the bank – only for the purpose of getting the process started. So, even if the offer is so low its "insulting", ie. $100,000 on a home worth $199,000, the seller(who is still the decision maker on whether to submit offers or not) will often agree to submit the offer – to jump start the process. NOW – the bank will conduct their own appraisal and likely make a much higher counter offer or outright REJECT the offer. 

3. The Seller is fine doing this because they can keep marketing for backup offers and always submit a Substitution bid to the lender/lien holder. 

4. The buyer is also able to submit bids on multiple properties, akin to throwing darts at the dartboard and trying to hit the Bulls Eye! Disclaimer: The buyer when making an offer must be able and willing to close on the transaction, if not, this is considered a Straw Buyer and that is not lawful. 

5. Where a bank owned property is "AS-IS" and seller concessions are often not considered, Short Sale transactions involve multiple payouts to cover: existing liens, back taxes, current taxes, repair credits and seller relocation funds. Lien holders are only looking at the bottom line – "Will we net more money doing this versus the costly action of Foreclosure?" 

6. There is very little competition in the bidding process and even if a bank Rejects the Offer, there are procedures that a competent Short Sale Real Estate Specialist can fall back on to Escalate the file, challenge a wrong Appraisal and outright fight for the deal. 

For more information on the Short Sale process or to speak to a professional visit: 

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