Yesterday we talked about foreclosure investment strategies and we covered public options. Today I want to talk about another option which is to seek out foreclosure short sale homes.  These properties are in the midst of the foreclosure process and purchase negotiations take place with a lenders’ loss mitigation department.  A simple search of real estate comps using your InvestorCompsOnline account can give you an idea of what price you would want to offer for these properties.

With short sales, lenders agree to accept less than the full amount owed on the home loan.  Properties are listed through realtors or sold directly through the bank.  The short sale process can be complex and lengthy; taking up to four months or more to complete.  Buyers must obtain prequalified financing prior to submitting an offer.  Also, keep in mind it is important to note that banks rarely accept offers lower than the asking price unless property inspections reveal major problems.

Short sale houses can provide investors with a good deal, but may not be the best option for investors who participate in house flipping or plan to use the home to generate rental income.  Buyers willing to wait out the process can generally purchase homes at 10- to 20-percent below appraised value.

Stay tuned for tomorrow’s post as I wrap things up with the last of my foreclosure investment strategies.  Buying bank owned homes or REOs; and the advantages of buying these homes in bulk.