In the United States, most properties are sold through professional real estate agents.  However, many list their homes or properties for sale by owner.  Most do this because they have complete freedom over the sale.  They can choose how much they want to sell the property for, to who, and when.  With the current state of the real estate market, many selling their homes are doing so to avoid foreclosure.  They simply cannot afford the property anymore.  A sale prevents foreclosure.

If you are looking to buy your first home for cheap or make a profit through renting or reselling, you should target these types of homes.  Unfortunately, it isn't always easy.  Most home sellers will not advertise upfront that they are selling their home to avoid foreclosure.  First, you need to schedule a meeting.  Ask to for a showing of the property.  Start a conversation.  Be friendly.  In no time at all, you may have the full story behind the sale.  It may be due to relocation, but it may also be due to foreclosure.  If this is mentioned, ask out of curiosity for the mortgage lender's name.  Be discrete about it.  "Who is your mortgage lender?  They really aren't willing to work with you?"

If you like the property in question, inquire more about the selling price.  Is it inline with the home's appraised value?  It should be.  In fact, it should be less.  A homeowner who is selling their home to avoid foreclosure should be willing to take just about anything.  Their main goal should be to pay off their mortgage.  This mean you should get a good deal.  If not, try bargaining first.  If the outstanding mortgage is a relatively low or affordable figure, offer that as your asking price.  As a good deed, offer to throw in an extra thousand or so for the cost of relocation or first and last months rent.  If you are met with a refusal, you may just move on.  But, you do have another option.

As previously stated, you want to get the name of the mortgage lender.  Although a little deceitful, it can result in a low-cost home or property for you.  What you do is approach the lender.  Speak to a loan officer.  State you tried to buy the home, but the sellers were asking too much.  Emphasize your interest in the home, but state your unwillingness to pay an unfair value.  See what the mortgage lender can do for you.  In fact, suggest a short sale.  Only do this if the borrow and current home seller outright stated that their home will be foreclosed on.

A foreclosure short sale is an agreement between the mortgage lender and the homeowner.  They agree to sell the home for less than the outstanding mortgage on the home.  Borrowers accept this to avoid foreclosure.  The home sells and they don't have a foreclosure listed on their credit report and bankruptcy is avoided.  Mortgage lenders agree to short sales because they want their money, even if less than what is owed.  It also saves them from long and costly foreclosure proceedings, where many borrowers and occupants become difficult and unruly.

If you approach a financial lender acquiring about a short sale, it will not happening right away.  Remember, the borrower is still trying to sell their home independently.  With the poor state of the real estate market, many homebuyers are unable to secure needed financing.  This means that many homes sit on the real estate market for months.  It may take a month or more or threats from a mortgage lender about foreclosure before the borrower agrees to a short sale.  But, if you approached the mortgage lender and already made an offer, you should be the first person they contact!

Convincing a mortgage lender to agree to a short sale on a property you do not own is risky.  You risk insulting the mortgage lender and the homeowner, but if you want to profit from soon-to-be foreclosed properties, you must take risks.

Do you want to profit from the real estate market?  Even if you are classified as an inexperienced buyer, now is the best time to turn a profit.  Whether you opt for owning and renting or real estate flipping, it is a buyers market.

Most looking to profit from the real estate market opt for foreclosures.  These properties are typically auctioned.  In some cases, the lender regains ownership of the property.  This is known as a lender owned or real estate owned sale.  Either way, you will find dirt-cheap prices.  However, it is important to familiarize yourself with short sales.  Although they cost more than foreclosed properties, buyers do get a better value for the money.

Short sale properties are sold for less than the outstanding mortgage due.  How much less depends on a number of factors.  One is property value.  If a mortgage lender believes they can get more for a property by letting it enter into foreclosure or by selling it as REO home, they may out for that route and deny all short sale offers.  The next being the lenders ability to take a loss.  A $100,000 loss on a home is a lot to sallow.  If an agreement is made where the delinquent borrowers repay the difference through a standalone unsecured loan, more flexibility is likely.

So, as a first time short sale buyer, what should you expect?

A good value for your money.  As previously stated, properties are sold for less than the outstanding mortgage due.   In most cases, this does result in a good deal.  Although foreclosed properties are usually cheaper, think long-term.  If a borrower owes $100,000 on their mortgage, you may pay $85,000.  Although a relatively high amount, it works out well if the property is valued at $175,000 or more.

The run around.  Unfortunately, mortgage lenders try to avoid short sales.  Most only use them as alternatives to foreclosures.  For that reason, a lender may wait until foreclosure is right around the corner before accepting a short sale purchase offer.  Buyers experience the biggest delay with properties with two mortgages.  Both lenders must approve the sale.  One lender will get all of their money and the other will be shorted.  No one wants to lose money; therefore, lenders will exhaust all other options before turning to a short sale.  This may mean a delay.

Various calls to mortgage lenders and real estate agents.  Either the lender or a real estate agent sells short sales.  Either way, be prepared to apply pressure.  As previously stated, some lenders give short sale buyers the run around.  They are trying to buy themselves more time.  During that time, they will wait to see if the borrower's financial situation improves, if they receive a higher short sale offer, and they will compare short sale with foreclosure.  Even if you can, don't wait forever.  Contact the lender and real estate agent to apply pressure.  If you go two months without a response, demand one within two weeks.

Difficulty of getting a proper inspection.  All homebuyers want to inspect homes before the sale goes through.  Most lenders give you the chance immediately before the final signing.  Unfortunately, the home occupants may have vacated the property by this point.  This may mean no functioning utilities.  Your hired inspector will be unable to test the electricity.  Try to schedule a showing or inspection ahead of time.  Get your real estate agent, ask the mortgage lender, or approach the current home occupants to let you inside sooner.

The possibility of repairs and upgrades.  If you are able to purchase a short sale property, be prepared to spend more.  Borrowers often suggest short sales.  They do this because they are concerned about their financial future.  They know the impact a foreclosure and bankruptcy can have.  These individuals truly care about their homes; they just can't afford them any longer.  Typically, you will get a clean and well-kept home.  What you may find problems with is needed upgrades or repairs.  If a homeowner couldn't afford their mortgage payments, they may have been unable to fix that leaky faucet, lose tiles in the bathroom floor, and so forth.

So, there you have it!  You now know what to expect when buying a short sale property.  Despite the various bumps you may experience along the road, it is easy to profit from the buying and reselling or renting of foreclosure short sales.

If you own and rent just one piece of property you are consider a landlord.  Property owners have the potential to make money and a lot of it, especially when the right cards are played.  Are you making money now from your rental properties?  Would you like to make more?  You can with foreclosure short sales.

Short sales are an alternative to foreclosure.  The decision to offer the property in the form of a short sale is made by both the borrower and the lender.  Everyone needs to be in agreement because less than the outstanding mortgage amount is sought.  For example, if a borrower owes $20,000 on a $45,000 home, the property may be listed for sale at $15,000.  Some lenders try to get as much of their money as possible, while others want to unload the property as quickly as possible.  This means there is always the potential to make money.

So, why should you, as a landlord, closely examine foreclosure short sales?

1 - Wide Range of Properties to Choose From

The poor economy has everyone in a pinch.  With a high rate of unemployment and a troubling economy, many homeowners are unable to make their mortgage payments.  Soon their debt is spinning out of control.

Right now, you may be running a profitable rental business, but not all landlords are.  Due to non-paying tenants, empty units, and poor financial choices, some landlords are finding themselves in or nearing foreclosure. 

This means you will find a wide range of properties for sale in the pre foreclosure stages, often available as short sale properties.  All of these properties, including single-family homes, can be purchased, renovated, and rented.

2 - Get a Good Deal

As previously stated, short sales are alternatives to foreclosure.  They involve selling a property for less than the outstanding mortgage amount due.  Why do borrowers and lenders agree to short sales?  Because it is much better than foreclosure.  Borrowers do not suffer damaging consequences to their credit and most are able to avoid bankruptcy.  Mortgage lenders get their money faster, even though they do accept a lower amount.  They also avoid lengthy and costly foreclosure proceedings.

Since both mortgage lenders and borrowers are willing to accept less money for the home, there is the potential to get a good deal.  By looking in the right places and bargaining with all lenders directly, you can get an amazing deal on any type of property.

Foreclosure short sales often result in a good deal, but always proceed with caution.  Homes do depreciate in value in a poor market.  Ensure the short sale price is significantly below the home's appraised value.

3 - Easy to Turn a Profit

Most buyers of foreclosure short sale properties are first time homeowners or investors.  These investors buy a home and resell it.  You do have this option, but use your experience as a landlord to make a profit. Consider the long-term aspect.  By finding a low-priced short sale property, you can turn a profit in no time at all.  For example, if you are able to purchase a 2-family home for $20,000 and rent out those two rental units for $800 a month each, the rental units pay for themselves in just 13 months.  After that, you profit.

4 - Easy Way to Expand Rental Properties

If you are a successful landlord who is already making a profit or in good financial standing due to your rental properties, you may want more.  Unfortunately, the poor real estate market makes that difficult.  Many homeowners try to sell their home as soon as they notice a problem.  They know that foreclosure may be months away.  Unfortunately, most of these property owners have unrealistic expectations.  They not only want to get out from their current mortgage, but make a profit.  In most cases, that will not happen.  You and all buyers know, the less you spend the more money you make.

For landlords, foreclosure short sales are an easy and affordable way to expand a rental property business.

5 - Bargaining Power

If you are like most Americans, you may need financing to purchase a short sale property.  Since you are an established landlord, you are at an advantage.  Not only should you have decent credit and adequate cash flow, but you have bargaining power.  Not only approach lenders about buying a short sale property, but financing the mortgage directly through them!  This is a win win situation.  Sell yourself.  You have experience buying properties, making repairs, finding quality tenants, and paying your bills on time.  Remember, mortgage lenders want to avoid foreclosure proceedings at all costs.  This leaves you with the power to bargain.

With the current state of the economy and the real estate market, many individuals are holding off on purchasing a home.  On the other hand, you will see that professional investors are buying up properties as soon as they hit the real estate market.  These properties are either foreclosures or short sales.  Why do they do this?  Because they are able to make a profit. 

If you want to become a first-time investor, target short sales.  Why?

1 - It Is a Great Starting Point

As previously stated, professional investors are buying foreclosed properties and often in large amounts.  As a first-time investor, you may find foreclosure auctions to be intimidating.  You are in a room with hundreds of foreclosed properties for sale, but also hundreds of experts in the field of investing and real estate.  To get started, try foreclosure short sales.  It is less intimating.

With foreclosure short sales, you deal directly with a real estate agent or the mortgage lender. Yes, others may be competing for the same home or property, but you will not have to meet with them face to face or go through a rigorous and fast-paced auction.

2 - You Get a Good Deal

Short sales are a foreclosure alterative.  Foreclosures appear on credit ratings for at least 7 years and most borrowers later find themselves declaring bankruptcy.  So, they suggest a short sale to the lender.  The lender will usually agree to a short sale once the borrower has reached the point of no return. They cannot pay their mortgage and foreclosure will happen.  For mortgage lenders, foreclosure proceedings are long, full of hassle, and costly.  They want to avoid the process just as much as the borrowers.

As for how you get a good deal, a short sale involves selling a property for less than the outstanding mortgage due.  For example, if a home is valued at $125,000, the outstanding mortgage is $100,000, you could expect to pay around $80,000 or less.  Your goal is to pay as little as possible, but you still profit when the short sale price is significantly lower than the home's appraised or fair market value.

3 - Bargaining Power

As previously stated, you want to pay as little as possible for a short sale property.  This is how you make a profit.  Many lenders want to unload the property as quickly as possible, even if it means losing money.  Their view is "at lest we get some and the property is not our problem anymore."  On the other hand, you will find lenders and real estate agents who try to sell the home at fair market value.  If you know the home is a short sale property or in pre foreclosure stages, bargain.  You have nothing to lose and you may get a better deal.

4 - The Many Ways You Can Profit

As an investor, the goal is to make money.  You invest money into a short sale property and use it to turn a profit.  There are many ways do so.  The easiest and quickest approach is to buy a short sale property, turn around and sell it.  Your next option is to improve the home by making needed repairs or valuable upgrades.  This should improve the home's attractiveness to buyers; increase its value, and your profits.  Your third option is to rent the property.  Even single-family homes can be rented for a profit.  Unless you have experienced in the rental industry or purchased a home for dirt cheap, this option is not recommended as it could take years before you see any money.

5 - The Profit You Do Make

As previously stated, investors have multiple ways in which they can profit from short sale properties.  How much you make will depend on a number of factors.  These include the home's fair market value, the amount you paid, whether repairs were made, the resell price, or the rental rate.  The good news is the different options give you complete control over home much money you make with short sales, how, and when.

Are you looking to become a first-time homeowner?  If so, you may turn to foreclosures to save money.  Unfortunately, foreclosure auctions are often jammed packed full of professional investors.  Yes, you can still try to buy a home in foreclosure, but the best option is to opt for a foreclosure short sale instead.

A foreclosure short sale is when the borrower and the lender agree to quickly sell the home.  It is used as an alternative to foreclosure.  To avoid poor credit markings and to avoid lengthy and costly foreclosure proceedings, both parties usually agree to a short sale.  To quickly sell the home, its price is greatly reduced.  Some mortgage lenders do take the home's appraised value into consideration, but others opt for an amount near or smaller than the outstanding amount due on the mortgage.

So, why should you, as a hopeful first-time homeowner, target foreclosure short sales?

1 - Wide Range of Properties Available for Sale

It is most common to see single-family homes offered for sale via a short sale.  With that said, you never know.  Landlords are also struggling with the poor economy.  Some are making poor financial choices and others are stuck with non-paying tenants.  Not only can you find single-family homes for sale via short sales, but multi-family homes too.  If you not only want to own a home, but profit too, live in one of the apartment and rent the other.

2 - Cheap Properties

As previously stated, foreclosure short sales are an alternative to foreclosures.  Mortgage lenders have accepted the fact the borrowers cannot and will not pay them.  Instead of taking total lost and spending months and thousands of dollars in foreclosure proceedings, they agree to a short sale.  In doing so, they are willing to take a small loss.  This results in cheap properties for you.

Yes, short sale properties are sold at a reduced rate, but be cautious of those sold through deceitful lenders or real estate agents.  They try to up the price and make more money.  Before agreeing to a foreclosure short sale, compare the selling price with the home's appraised value.  It should be less.

3 - Typically Well-Kept Homes

Borrowers who approach their lender for a short sale are responsible individuals.  They have just fallen on hard times.  They are concerned with the short-term and long-term financial impacts of foreclosure.  These individuals care, unlike those who sit in a home that they cannot afford waiting for an eviction notice.  What does this mean for you?  It typically means a well-kept home.

Those who opt for foreclosure short sales care about themselves, their reputation, and take pride in their home.  They just can't afford it any longer.  These individuals take care of the property.  On the other hand, it is not uncommon for those who receive an eviction notice during foreclosure to become unruly and even damage the property.  In this instance, it means costly repairs.

4 - Can Profit Later

If you are a hopeful first-time homeowner, your goal is to find an affordable home, not make a profit.  With that said, don't forget about the long-term aspect.  In five or ten years, you may wish to purchase a new home or relocate across the country.  This involves a home sale.  If you only paid $100,000 for a home valued at $200,000, you automatically make a profit.  Throughout the years of owning and living in the home, upgrades are likely.  These upgrades will only increase the home's value, meaning more profit for you.

5 - Bargaining Power

If you are in good financial standing, have the ability to obtain financing, or have the needed financial resourced on hand, you are in a good position to bargain.  If you know the property is being sold as a short sale, research the home's appraised value.  This should be on file with the mortgage lender, real estate agent, and should be public record.  If you aren't getting what you deem to be a good deal, bargain.  If dealing directly with the mortgage lender, ask about obtaining financing through them.  This result in a continuing relationship.  If you have the needed financial resources on hand, state your price and offer to make payment right then and there.

Are you a first-time real estate buyer?  If so, now is the time to act.  Most experts say the real estate market is in a poor state.  Yes, this is true, but mostly for sellers.  If you have the needed financial resources now is the time to buy.  To improve your chances of making a profit or getting the best deal, look at short sales.  They are increasing in popularity and present many opportunities for buyers.

If you are unfamiliar with the real estate market and short sales, you may be looking for more information.  Please continue reading on for short sale information and the answers to commonly asked questions.

Question:  What is a short sale?

Answer:  A short sale is used to describe the process of selling a home for less than the outstanding mortgage.  For example, if a borrower still owes $50,000 on their mortgage, the lender may be willing to sell the home for $40,000 or less.

Question:  Is there a difference between short sales and foreclosures?

Answer:  Yes.  In many ways, they are similar.  The borrowers and current homeowners must leave the home, but there is a huge difference in how it comes about.  With foreclosures, home occupants are forced out of the home.  With short sales, they were involved in the decision to sell, so they are already prepared to leave.  Also, short sales are sold directly through the mortgage lender or a real estate agent.  Foreclosed properties are typically sold through an auction.

Question:  How does a short sale come about?

Answer:  The process begins when the borrower realizes they can no longer afford their home.  This may be due to job loss, a pay reduction, adjustable rate mortgage, or just poor financial choices.  Typically, a borrower asks a mortgage lender about a short sale.  They do so because one is less damaging to a credit report than a foreclosure.  The mortgage lender reviews the borrower's assets, income, and hardship letter.  Unless the lender believes they can get more from the property in a foreclosure auction, most will opt for a short sale.

Question:  What types of properties are sold via short sales?

Answer:  All.  Most short sale properties are single-family homes.  Right now, these are the individuals most likely to fall behind in payments.  The owners of multi-family homes and commercial buildings should have income coming in from tenants.  That does not mean the property cannot enter into default, it is just less common.

Questions:  Are shot sale properties a good deal?

Answer:  Most of the time, yes.  Short sales involve selling a home for less than the amount due on a mortgage loan.  Lenders who agree to a short sale have already accepted the fact they will not get all of their money.  Still, some is better than nothing and lengthy foreclosure proceedings.  Since most have already accepted the fact, they are willing to take a loss and offer a great or decent price.  The only instance in which a short sale may not be a good deal is with underwater homes.  This is when the borrower owes more than the home is worth.

Question:  How long does a short sale take?

Answer:  It depends on the lender in question.  With short sales, the borrower has no say.  The lender makes all the decisions.  Small banks, where the supervisors are onsite, can have an answer for you by the end of the day.  Most often, it may take a month or more.

Question:  Should I have payment for a short sale property upfront?

Answer:  It is not required, but will be beneficial.  If you need financing, acquire it upfront or get pre-approved.  A mortgage lender is more likely to accept your purchase offer and quicker when you can pay right away.

Question:  Can I bargain for a lower price?

Answer:  It will not hurt.  Mortgage lenders are already taking a loss with short sales.  For that reason, they will be less likely to lower their selling price.  If you have cash in your hand and are ready to pay, bargaining for a lower price may work.

If you are looking to profit from the poor real estate market and the large number of foreclosed homes across the country, there is one important thing you must know.  You do not need to wait until foreclosure proceedings start.  Yes, you can get amazing deals on foreclosed properties, but there are other options too.  These include foreclosure short sales and deeply discounted for sale by owner properties.

Foreclosure short sales occur when the homeowners or current home occupants cannot pay their mortgage.  There is no foreseeable solution in the near future.  They will lose their home.  It is honestly just a matter of when.  To save their credit score and to avoid costly and lengthy foreclosure proceedings for the mortgage lender, a short sale is decided on.  The mortgage lender agrees to sell for less than the outstanding mortgage debt.  The lender will take a loss, but they still get some of their money and avoid foreclosure proceedings.

For sale by owner sales are often last minute attempts to avoid foreclosure by the delinquent borrower alone.  Sometimes, the mortgage lender refused a short sale. 

Unfortunately, it isn't always easy to find soon-to-be foreclosed homes for sale.  In some cases, they are risky.  You need to target homeowners who have reached the point of no return.  There are many steps for homeowners to avoid foreclosure.  You need to familiarize yourself with these steps to save yourself time.

Loan reinstatement 

With today's economy, many individuals are finding themselves in the unemployment line.  In some areas of the United States, it is difficult to find a job.  It can take a year or more.  In other areas, an unemployed person can find a job and be working in as little as a few weeks or months.  Don't avoid, but proceed with caution with individuals who are only facing temporary hardships.  When dealing with for sale by owner homes, the owner can change their mind at any time before the final closing.  If the current home occupant finds employment or gets their mortgage lender to work with them during these tough, but temporary times, you may be left out in the cold.

Loan modification 

This shouldn't be a major issue for you as a potential homebuyer.  Most homeowners approach lenders with this option right from the start.  A loan modification involves readjusting the interest rate, the monthly payments, or the overall term of the loan.  Many homeowners, unless unemployed, can save their homes from foreclosure with loan modifications.  If you want to do a good deed, offer the suggestion.  If you want to make a profit, keep this to yourself.  After all, the homeowner should already know about loan modifications.  If not, it is their loss and your gain.

Foreclosure short sales

As previously stated, the decision to short sell is made by the mortgage lender and in agreement with the current homeowner or occupants.  This is considered a last ditch attempt to avoid foreclosure.  In most cases, short sales are a great way to profit from the real estate market.  You must proceed with caution though.  If a new homeowner just acquired a mortgage within the last year, they owe a significant amount on their mortgage.  Always compare the home's appraised value with the short sale selling price.  Homes can depreciate.  Remember your goal is to get a good deal and possibly resell for a profit.

For sale by owner properties 

As with foreclosure short sales, proceed with caution with for sale by owner properties.  You will always find homeowners who want to turn a profit.  This means selling a home for more than it is worth.  If you know the home is near foreclosure, use this as a bargaining tool.  Those who are truly interested in avoiding foreclosure and protecting their credit will sell the home at a fair price.  Aim for the outstanding amount on their mortgage, plus a small amount for first and last months rent at a new apartment.

As you can see, there are ways that a homeowner can avoid foreclosure.  Use these steps to your advantage.  Save time and money by opting for those who have reached the point of no return.  If they don't sell their home, foreclosure right around the corner.

Are you looking to profit from the poor real estate market?   If so, you will find a lot of tips and information online.  Most "professionals" encourage you to target foreclosures and foreclosures alone.  Yes, foreclosures have the potential to bring in significant profits, but so d o short sales.

What is a foreclosure short sale?  It is when the property in question will soon enter into foreclosure.  The borrower fell behind on their mortgage payment and does not anticipate a solution in the near future.  The property is sold for less than the outstanding mortgage.  Not all lenders agree to short sales, but it is becoming a common practice.  Short sales enable lenders to bypass the cost, time, and hassle of foreclosure proceedings.  They lose money, but they do recoup some.  Unless a lender knows a foreclosure auction will bring in more cash, they typically opt for a short sale.

As nice as it is know about short sales, you may wonder how the process got started.  If you know a home seller is trying to avoid foreclosure, you may wonder if suggesting a short sale is a viable option.

As previously stated, short sales result from a borrower's inability to pay.  This is the first stage.  The homeowner loses their job, receives a pay cut, loses money from the stock market, or had and another unforeseen financial complication.  First, borrowers will approach their lender for help.  This may include refinancing or a reconditioned loan.  If denied, a short sale is the next option.

A borrower cannot decide on a short sale themselves.  They must receive approval from their financial lender.  This is not always easy.  The borrower contacts the mortgage lender to see if a short sale is even a possibility.  If it is, documentation is required.  Mortgage lenders send various forms for borrowers to submit.  The most important is an authorization lender for personal information.  The price of a short sale property is determined by the outstanding mortgage.  All prospective buyers will see your name, your address, the amount due on your loan, and so forth.  The bank needs permission before disclosing this information.

A letter of authorization does not mean the short sale was approved.  It is just one of the many stages.  Next, most lenders require submission of income, assets, and a hardship explanation.  Those who fell behind in their mortgage due to unforeseen circumstances, such as layoffs, as opposed to criminal activity, are likely approved.  Mortgage lenders only use short sales when necessary.  They discourage borrowers from using it simply as a way to avoid paying for their home.

Documentation of assets and proof of income is used to determine a borrower's financial standing.  As previously stated, lenders use short sales as a last resort.  If these documents prove a borrower can no longer pay their bills, a short sale is likely.

The final foreclosure short sale step, which involves listing the property for sale, depends on the lender in question.  Some opt for in-house selling and others turn to real estate agents.  Regardless, once the lender agrees to a short sale, the property is listed for sale almost immediately.

So, there you have it.  That is how a short sale property becomes.  Unlike buying foreclosures, there is little to no risk of disgruntled property owners.  These individuals agreed to a short sale.  As a buyer, this not only means you get a home for a great price, but you should get a well-kept home with occupants who will not put up a fight to leave the property.  After all, a short sale was likely their idea.

Have you heard that short sales are the alternative to foreclosure?  They are and they are increasing in popularity.  More borrowers and lenders are agreeing to them.  For borrowers, short sales lessen the credit blow.  For mortgage lenders, short sales allow the avoidance of costly and lengthy foreclosure proceedings.  So, if you are looking for a great deal on a home or another property, don't discount short sales.

As nice as it is to hear that short sale properties often result in good deals, you may be curious as to what they are.  Short sales are when the mortgage lender accept the fact their borrowers cannot pay.  The property will soon enter into foreclosure.  Unfortunately, foreclosure proceedings are long and costly.  Plus, otherwise cooperative borrowers put up a fight when it comes time to vacate the property.  In fact, some must be removed by force.  This is more than many lenders want to handle.  Instead, they opt for a short sale.  This is when the home is sold for less than the outstanding mortgage due.

On average, short sale properties are a good buy.  For example, if a home is valued at $125,000, the borrower owes $70,000 on the mortgage, and you are able to pay only $60,000 you make out well.  Essentially, you get a steal.  Yes, you do have to put up a large amount of money upfront, but think long-term.  Whether you want to flip the property right away or live in it a few years before reselling, you automatically make a profit.  After all, you paid $65,000 less than the home was worth!  Even if you cover the cost of the mortgage, money is still made.

In most cases, short sale properties are a good buy.  You get a good value for the money.  However, there are cases in which buyers lose money.  So, how do you prevent that from happening?

Know if a property is a short sale property.  Lenders either opt to sell the homes themselves or use a third-party realtor.  In either instance, they want their money.  They may try to sell the home for more than the outstanding amount due.  In some states, it is legal to not disclose the true status of a property.  Essentially, it may be a short sale property, but you may not know. 

So, how do you know if a for sale property is actually a short sale?  Properties that are sold directly through the lender are almost always short sale properties.  It is that or else the lender repossessed the home at a foreclosure auction.  Either way, you can and should get a good deal.  As for real estate agents, they may not outright state the status of the property, but most drop hits.  Review the listing for phrases such as "lender must approve," or "in pre foreclosure."

Know the property's appraised value.  This should be public records.  If the appraised value is years old, hire your own appraiser or inspector.  A quick examination will let you know if you are getting a good value for your money.  A true short sale property should be less than the home's fair market value.  In dire situations, where the lender wants to avoid foreclosure at all costs, they don't even consider the fair market value.  They just want to recoup as much of their money as possible.

Know if a home is underwater.  A problem facing many homeowners today is that they owe more than their home is worth.  This is common with second mortgages or homes that were purchased during the real estate boom.  If a home is underwater, proceed with caution.  Remember, not all lenders take a home's value into consideration.  They just want their money.  This typically works out to your advantage, but not with underwater homes.  For example, a home may be valued at $250,000, but the borrower owes $300,000.  Even if you pay the $250,000 you don't get a good value for your money.  Yes, you are purchasing a home at fair market value, but your goal is to get a good deal.  Unless buying a first home that "you must have," walk away.

In conclusion, most buyers get good deals with short sale properties, but there are no guarantees.  For that reason, do the research first.  Don't spend more than required, especially if your goal is to profit from the buying and reselling of short sales.

Here is the scenario; you see a great home available for sale.  The price seems a little high, but it still looks like a good value.  You think buying would be an easy way to turn a profit or buy a cheap first home.  After a little bit of research, you see or hear that the home is nearing foreclosure.  What do you do?

The first thing you should do is contact the real estate agent selling the home.  If the home is being sold by the owner, schedule a meeting.  See the home and inspect it for your own eyes.  If satisfied with what you see, ask to do a professional inspection.  If you are truly getting a good deal, make an offer.  If you feel the asking prices are too high, make a lower offer.  If the home is entering into foreclosure soon, the homeowner may be willing to work with you.  After all, they are selling their home to avoid foreclosure.  But, you may run into a problem.  The homeowner may be unable to lower their selling price, due to the outstanding mortgage due.  So, what do you do?  You ask about a short sale.

Not all borrowers, even those nearing foreclosure, are familiar with short sales.  Unfortunately, many believe their only two options are to sell the home or enter into foreclosure.  Borrowers actually have many options, starting with refinancing, reconditioned loans, and short sales.  If a homeowner plainly states they cannot lower their selling price due to their mortgage, ask if they have considered a short sale.  If they are unfamiliar with the process, they may ask you for more information.

A short sale is when the borrower and mortgage lender agree to sell a property for less than the outstanding mortgage due.  Borrowers who suggest short sales want to avoid foreclosure.  They want their credit to suffer little damage.  Mortgage lenders also want to avoid foreclosure.  Proceedings are long, full of hassle, and costly.  The worst that can happen is the borrower or lender will say no.  You have nothing to lose, so why not offer the suggestion to the borrower and current seller.

For a mortgage lender to accept a short sale, the borrower needs to prove they cannot afford their payments.  They do this by submitting proof of income, assets, and a hardship letter.  This hardship letter details the reason they are in debt.  It may be due to health complications, job loss, reduction in pay, or an adjustable rate mortgage.  If a mortgage lender is open to a short sale, these documents will be sent to the borrower.

When suggesting short sales to soon-to-be foreclosed persons, it is important to not give them false home.  Lenders reserve the right to say no.  Also, depending on the lender in question, they may be required to pay back the difference.  For example, if the outstanding mortgage is $75,000 and if you buy the home for $65,000, they may have to pay back the $10,000 difference.  Some lenders do forgive this debt and others will set up affordable payment plans.  Your best takers for short sales are borrowers who don't want to damage their credit or declare bankruptcy.

If you are prepared to buy the home if a short sale is accepted, work with the borrower.  When they submit their documents for approval, submit a purchase offer.  When all documents are submitted together, mortgage lenders are more likely to approve.  There are no guarantees that short sale properties sell.  Mortgage lenders not only take a loss, but they take a risk.  A purchase offer can sway them to a yes.