Short Sell = Small Profit Or... Maybe Not?
A short sale is nothing more than getting a lender to discount the mortgage on loans in default.
Braging about this hotest technique, Ron la Grand recently sad: Within the last months alone, I’ve received the following discounts…
$67,000 discounted to $40,000 – net $27,000
$115,000 discounted to $94,000 – net $21,000
$27,000 discounted to $2,000 – net $24,000
$56,500 discounted to $31,500 – net $24,500
So the question is: if the property have a 100% financing and you want to buy it and you end up buying it for 80% fmv, do the necessary repaire and pay the realtor to sell it, you end up with nothing. Right?
Now I know everyone will jum to tell me that you supose to sell it yourself and not use the realtor but do not foget that this is a job for which you would get paid if you done it for others and without making the investment.
When you consider that you'll have to pay for the loan origination points and high interest rates to hard money lander, I'd really like to know how much jelly is left on the tost by the end of the day?
Using HM lenders for SS makes it even dificult to lease option sell so how do you end up making the profit? 
I've been using this 'hottest' technique for 20 years. What is advertised today is primarily hype citing atypical results....
Learning how to facilitate a short sale will enable you to work deals that others pass up... and when deals are scarce that can keep you occupied and 'in the loop' in the real estate business.
The real money to be made in shorts will be the enhancement of market value after you effectuate repairs. The acquisition discounts are usually small, but if you've done your homework and have other skills... your new sow's ear can be manufactured into the proverbial silk purse.
One doesn't necessarily pursue short sales, nor can one make a career in short sales. They fall into your lap. If you have vision and can identify opportunity in a specific property... then short away.
Hi omega1,
I appreciate your post! It appears that you are thinking through these situations really deep . . . perhaps so deep that you miss out on the opportunities!
If I told you how much we made from Short Selling this year, You Would Fall Off Your Chair! The reason that we can make so much money is because all of the other investors in our area think the same way that you do. The truth is, I use to think that same way too, until I paid big dollars to learn how the hard-hitters were doing it! Then I made a new decision, based on new information. And after applying this information, I can spend months every year vacationing ... while others are hard at work!
And because this web site is called "The Creative Investor", I encourgage you, my fellow investors to GET OUT OF YOUR OWN WAY ! Continue to grow your mind and start thinking outside of the box! Whether you are doing Short Sales, Subject-To, Wholesale, Bird-Dog, etc. It doesnt matter, get creative, and you can get to making some money!
Best of Success!
BAMZ
Heres a nice example. $15,500 for submitting a successful short sale proposal! Nice job.
http://www.thecreativeinvestor.com/ViewTopic18718-35-0.html
BAmz: How much did you pay to learn "how the hard hitters where doing it?"
I spent more money than I even had at the time, because I saw the opportunity and I knew that I could conquer it with the right information.
If you want to become a hard-hitter in short sales, you dont have to buy as much information as I have. A good and reasonable place to start is to simply purchase Short Sale materials from Jeff Kaller and or Ron Legrand. Both of thier products will open your eyes to BIG Paychecks!
Best of Success!
BAMZ
BMAZ,
Your comments are always appreciated. You are expert in your aria and if I may suggest, maybe you can be more specific about what course or Short Sale materials from Jeff Kaller and or Ron Legrand should one look into for the right information.
The aria of financing SS deals is something I find that many might be interested in, so I'll try to enhance the subject further:
Let say, I found a $300K house going in foreclosure. 100% financed so there is no equity. I talked to owner and he and she agreed to sell it to me for $240K or 80% of the value. (If the numbers are not good in any way... should asked for a deeper cut or else, fell free to correct the scenario based on your experience and what is most likely to be on the table.) Now I submit application to the bank and the bank agrees to sell it to me for $260K. I like to pick up 40K or what's left after the cleanup, etc. but the question is: Were does those $260K came from, if I do not have it setting in my bank account.
As we know, hard money lenders will not land more then 65% LTV, so what should I do? Or even better a rookie.
Hi Omega1,
Thank you for your kind thoughts. First let me just say that not all pre-foreclosures are qualified for a short sale. Perhaps its the house, or perhaps it is the owners financial situation. Not all of the houses will work, but enough will work to keep you busy.
In the scenario that you presented of a house of $300,000 that is 100% financed, here is what I would do to try and make this transaction happen. I would locate nearby comps that would/or could suggest that the property is worth less. I would have the bank order a new BPO with me as the contact, and I would meet the realtor there to share my opinion (and comps) as to why I feel that the house is worth less in it's as-is value. If I can influence the BPO to come it at $270,000, my goal would be to get a discount of roughly 80% off of the BPO amount. So I would want to buy this house at about $216,000.
Where do you get that money? That is the magic answer that can make you BIG Paychecks! You will find your financing in Private Money Partners. It doesnt matter if they want a high interest return, or a cut of the profit. These people have access to dollars. Some money partners will have liquid cash, some will have a line of credit on their house, some will pull money from their IRA. It doesnt matter where they get it, the important thing to remember is that they CAN get it, and fast!
Read this article:
http://www.thecreativeinvestor.com/modules.php?name=News&file=article&sid=437
Let me use your same example with a different spin: Here is a hypothetical situation.
$300,000, 100% financed.
$200,000 1st
$100,000 2nd.
I would try to discount the 2nd mortgage to about $10,000. This would vary greatly depending on the value of the new BPO that I suggestedly influenced.
You would pay off the 2nd of $10,000 with personal, or a private money partner, and take the first "Subject-To.
In this example, you would have $210,000 invested in the property. I would try to sell the house quickly at a discount at about $275,000. This would leave you somewhere in the ball-park of a $65,000 profit range. Not bad for a little leg work.
I hope this helps. Let me know what you think about the article!
Best of Success!
BAMZ
BAMZ,
Your article answers my question well and reconfirms in fact that not only private investor's money is available but rather tons (of money) out there is anxiously waiting to be securely invested in real estate. JP Morgan Chase is advertising half a trillion, for example and we know whose money they have: OPM! What it means is that private investors need your deals at list as equally much as you need their money.
To add an interesting twist to your article, you might consider adding an idea on how would a newbie do business with a private investor who too doesn't have experience in landing money secured by real-estate. It's just a thought...