Let’s discuss how to find short sales in your area. Regardless of what your real estate investment strategy is, you likely want to acquire properties as inexpensively as possible. Short sales are a great way to do that, but where do you find them?
In this post, I’m going to share some quick, free, and simple ways to find short sales in your area. First, let’s make sure we have a clear understanding of what a short sale is.
Definition Of A Short Sale
A short sale (also known as a pre-foreclosure sale) is not a foreclosure. In a short sale situation, the borrower still owns the property, but they are in the pre-foreclosure stage.
In this stage, the borrower is granted a certain grace period by the lender to either sell the property or pay what’s owed to avoid foreclosure.
Since the borrower likely doesn’t have the money to pay the debt (if they did they probably wouldn’t be facing foreclosure), the only other option is to sell.
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However, in some situations the property value is less than what’s owed on the property. In such cases, to realistically get a sale, the borrower needs to sell the property for less than what’s owed. That’s what a short sale is.
Here’s a great video that talks more about short sales, and how short sales are different from foreclosures.
Pros Of Buying Short Sale Properties
You face less competition
Because the property in a short sale is being sold for less than what’s owed, the lender needs to approve all offers.
Well – this can take several weeks or even months, and, in the end your offer may get rejected. For this reason, some real estate investors choose not to pursue short sale deals.
You can get a great deal on a property
With less competition than non-short sale listings, and a motivated lender and seller, this puts you, as a real estate investor, in a strong position to negotiate and drive the price down.
Cons of buying short sale properties
Process can take seemingly forever
As previously mentioned, since the lender has to approve all deals, the approval process can take months, and, in the end, may not get approved at all.
You end up with a money pit
Since the seller knows they are losing their property, it’s likely they haven’t been overly motivated to take care of it. Be sure do to your due diligence and even consider hiring a property inspector.
Ok – How Do You Find Short Sales In Your Area?
We’ve identified what short sales are and highlighted some of the pros and cons of purchasing them. Now, let’s look at the two main ways to find short sales.
3rd party websites
Big surprise – there are a number of websites out there that will give you short sale listings if you pay them – although some offer free trials. If you go this route, you might consider checking out Realtytrac.com & Foreclosure.com
Disclaimer: I’ve never used these sites, so I can’t vouch for how accurate the information is.
Work With A Realtor
The great thing about working with a Realtor is they will do all the work for you in generating a list for short sale properties, and it shouldn’t cost you anything since Realtors are usually only paid when a property sells…and you don’t pay them – the seller does. So, why not get some great free help?
What a Realtor will do is pull a short sale list from the MLS database. MLS is a real estate inventory database that only Realtors have access to.
Before the Realtor pulls the short sale list, though, you’re going to need to provide them with information on the kind of real estate you’re looking to purchase.
Here’s what you’ll want to provide:
- where you want to buy – could be an entire city, multiple cities, or even a custom area – say – 5 miles around a certain zip code.
- property type – likely single family
- # of bedrooms
- # of bathrooms
- square footage
- Maximum price you’re willing to pay
There are many other search filters available in MLS, but these are the main ones to focus on for now.
It should only take about 5 minutes for the Realtor to generate the list and email it to you. The report will look something like the one below. You’ll see a list of properties on the left that you can individually select to get a more detailed view (shown on the right).
A Few Other Tips
As you view each individual listing, make sure you look at the CDOM and ask your Realtor for a Seller’s Disclosure Statement. CDOM stands for “Cumulative Days on Market.”
The higher the CDOM, the greater your chances are of negotiating a better deal. The Seller’s Disclosure Statement is filled out by the seller and discloses (or should disclose) issues with property.