July 23, 2024


Mad about real estate

Short Sale Magic – Steps a Huge Profit Margin

A  short sale occurs when a property is sold for less than the amount owed on the mortgage or the loan.  Financial institutions allow such sales to happen because they fear that the mortgage or loan will not be repaid otherwise.  Thus, they can recoup some of the money from a bad loan.  Realtors and real estate investors jump at such opportunities because the low prices that these properties sell for offer huge profit margin possibilities.  Such short sale magic can be improved and heightened by adhering to some basic rules and following some simple steps.

First, when approaching a financial institution with the intent of purchasing a short sale property, have your homework done.  Have a licensed real estate professional prepare a CMA, or comparative market analysis.  This analysis, by studying current market prices in a surrounding area, states what a particular property is likely to sell for.  The financial institution will also have an independent CMA completed so it best to be as honest as possible about the outcomes of such studies.  Keep in mind that results should indicate depressed market values or the short sale would not have been initiated in the first place.  Use the information and data gathered by the CMA to help improve your profit margin.  Remember that the financial institution is trying to recoup as much of the bad loan as possible, so the more information you have about current market conditions, the better your ability to demand a lower sale price.

The second most important aspect to short sale magic is your ability to negotiate and close the deal.  Many a real estate deal has been broken because of bad or unprofitable terms settled upon during the closing process.  It is important to negotiate the best deals possible.  When considering a short sale possibility, remember that, typically, the purchased property or asset is only in the possession of the real estate agent or investor for a very short period of time.  Thus, short term stipulations that may include higher interest rates or seemingly unprofitable stipulations can be acceptable if the bottom line is lowered.  The basic principle is to secure the lowest price for the asset, sometimes at the expense of less than ideal financing terms, to help guarantee a high profit margin.

Finally, when pursuing a short sale it is important to keep in mind that, as a realtor or investor, you have the upper hand in the negotiations.  The bank or owner of the property is desperate and extremely motivated to sell.  This does not mean that negotiations will be smooth.  Even though their desperate, most sellers will try to recoup as much of the bad loan as possible.  Therefore they want the highest price they can get.  Stand firm and, when pressed, rely on current market prices in the surrounding area as a bottom line.  Many large scale investors or real estate buyers have begun outsourcing the negotiation process.  This is a sign of just how commonplace short sales have become.  Follow these simple steps to maximize your profit margin and guarantee your short sale magic.