Real Estate Investing: Short Sales Explained

I always start off every interview asking the speaker to speak temporarily about there meticulous area of knowledge. Below is Graham's answer to what a short sale is and why banks accept short sales.


“We'll go over the numbers, Ross. A short sale is attractive simple. If you have a property that's worth $523,000 and let's say it has a first credit for $300,000 and a second mortgage for $55,000-what that means is the total liability on that property, or the total mortgages, is $260,000. Being a real estate shareholder, I wouldn't want to buy a $225,000 house for $220,000. It doesn't make intellect.

A short sale is when you get the bank to not take $550,000, you get them to take less, like $360,000. The banks are going to do this for quite a few reasons. First, they're going to have a lot of operating expense that are related with a foreclosure. They're going to have realtor's costs, foreclosure costs, holding costs, repair costs-they're going to have all sorts of fees linked with a foreclosure.

Unavoidably, the bank is only going to recoup somewhere around 70% of the value of the property. That's why banks will take short sales on foreclosures. The natural follow-up to that is, “Why are foreclosures such a hot service right now, and why is there a lot of drone about them?” There are several reasons to that too, and it's really scaring the banks right now.

Home Staging Ideas

Besides the distinctive winter slow down in sales, today's market also makes selling your home more tricky. Market concerns include:

1. Rising interest rates
2. More houses on the market
3. Longer time frame--days on the market

If you're promotion your home or speculation property during this shifting real estate market, you can tempt buyers to get out of their warm cars and take a look at your home with home staging methods. Here are a few home staging strategies to help you sell your home during the holidays:

Home Staging the Exterior

Door wreaths welcome all to your home and set the stage for celebrating. Make a simple wreath to hang on your front door with holiday colors that blend in with and dress up your home's exterior colors. Use tree branches from your garden; attach a few gourds or pomegranates, nuts, and ribbons.

Commercial Property

Interest rate on commercial property finance is kept lower which has enabled the aspirants in buying properties and the property business has been booming. But the rate of interest depends also on the type of the property. Lenders usually like to offer finance more for a property which is already generating income. This secures the loan even more and therefore lender may consider reducing interest rate further to keep the customer.

So you must be clear on the purpose of the loan. If you are buying a property or acquiring it, the lender may offer finance up to 80-90 percent of the property value. If refinance is the purpose then you can get additional cash from the value of the property. The lender clears the current mortgage note and balance amount is paid to the finance seeker. If getting finance for rebuilding real estate is the purpose, the lender will give finance on the base of completed property and its value.

Make sure that you choose right lender. While searching for the lender on websites see for the specialization of the lender. Usually lenders take particular field of property for finance offer so that they are focus and have a better understanding of its market aspects. If the lender knows your property well then he understands your financial needs better. He also understands the benefits and risks you are going to take in future. Your finance requirements may change from what they are at the time of finance deal. So the lender may be willing to offer you more finance in future if you choose the right one who understand your type of property.