- Northern Illinois to get $8.3 million for state construction projects
- Tree-lighting festival kicks off holiday season in Machesney Park
- Roscoe Boy Scout Troop’s tree stand at new location
- Tips for selecting safe toys for kids this holiday season
- Prayer service for World AIDS Day Nov. 30
- Food Bank joins national #GivingTuesday movement
- Lee Hamilton: What lies ahead for Congress
- Rockford Public Schools faces $8.8 deficit, board OKs flat tax, HR chief
- Literary Hook: A holiday tradition: ‘This Thanksgiving, Remember’
- Cold snap does not negate global warming
On Real Estate: Working the short-sale market
By Jim Hagerty
With a plentiful number of foreclosures still on the market, many of which continue to remain idle, lenders are in need to stop the bleeding. Unlike days when the foreclosure process was simple and properties moved, lenders were able to minimize losses.
In today’s home-lending market, foreclosure is slowly losing effectiveness as REO lists continue to swell. While mortgage modification has been a safety net, thousands remain whom lenders simply can’t help by restructuring troubled accounts. Seizing properties is a bigger game. In a number of markets, short-sale properties are beginning to replace foreclosures and moving well.
Buying a short-sale property, which is simply a home listed for less than its mortgage is worth, can come with challenges. However, knowing how to avoid being shorted themselves is all buyers need to realize profits on pennies-on-the-dollar transactions.
Researching sales comparables
Let’s face it. Short sales can be a gold mine for investors. Buying low and selling high is the name of the game. If not researched properly, however, flipping short-sale homes for a profit can sometimes be difficult. Because short-sale properties have mortgages worth more than the homes themselves, it is wise to do a comparable sales search before making an offer. In some markets, short-sale prices aren’t bargains.
Count the liens
Some short-sale properties contain first and second mortgages. This is usually not a problem if both liens are owned by the same lender. When there are not, sales can become problematic, especially when second mortgage lenders demand they be paid in full upon sale. Ensuing negotiations between lenders can result in delayed sales, rejected offers and a final sales price not capable of realizing buyers’ incentives to make offers. Most real estate agents are able to discover the number of liens short-sale properties have attached to them.
Search for approved prices
One of the keys to purchasing short-sale homes is locating properties with approved sales prices. These properties have already been through the initial stages of the short-sale process, and lenders have agreed seller prices. Properties with approved prices are usually not littered with liens and are priced to sell.
Avoid low-ball offers
Because lenders are already at a loss when short sale properties hit the market, low-ball offers are commonly rejected. Some are not even considered and get lost in the scramble to move the property. While offers for slightly less than asking prices may be considered, blatant low-balling should be avoided.
From the Sept. 15-21, 2010 issue