Real Estate Investing Business Models - Short Sales, Reos Or Motivated Sellers?

In a real estate market with so many deals lying on the market, most real estate investors get confused where to get the best investment deals.

Should you get bank REOs? Should you negotiate short sales to buy the houses for less than the mortgage balance? Or do you stick to buying houses directly from motivated sellers?

We will analyze these 3 situations here.

Each method has its good and bad sides; let's look at each one:

1) Buying bank owned REOs
Banks have a lot of foreclosed houses in their hands and they pile up more every day. As soon as they foreclose on them, their next step is to put them back on the market to sell them.

Buyers are few and these properties can take a long time to sell.

Banks can therefore offer great discounts, especially if they need to be fixed up.

As a real estate investor, shop carefully for good REO deals because not all them will meet your buying criteria or equity margin for you to make a profit.

2) Short Sales
If a home owner is behind on their mortgage, the bank eventually forecloses on those homes. Before they foreclose, they are often willing to take less than the mortgage balance. This is called a short sale.

Typically, a bank will do an appraisal to know the exact value of the home. Then they can give you a discount on the mortgage based on their numbers.

The holder of a first mortgage is less willing to negotiate, offering usually not more than 20% discount.

A bank that holds a second mortgage can lose 100% of their investment in a foreclosure, so they are more willing to negotiate much lower. You can get 80-90% discount on the mortgage.

A property with a 1st and 2nd mortgage is therefore a lot better for a short sale.

Short sales can also take a long time, usually 3 to 6 months. You must therefore have enough patience and capital to last you through such long waiting periods.

Banks can reject your short sale application even when all numbers look good. Be prepared for rejection.

You must close fast as soon as you get an approval. Banks will not accept creative financing on short sales.

When all is said and done, you can create a lot of equity and profits as long as you select the right deals, have patience to wait for a long time, can take rejection and you can close fast.

3) Motivated sellers
You can employ a wide variety of techniques to buy houses from motivated sellers.

This includes creative financing.

If the mortgage balance allows, you can also negotiate with flexibility directly with the motivated seller. And you can be as flexible as you need when closing, e.g. you can wholesale a deal right from a motivated seller to a wholesale buyer.

This is always the best way to buy investment houses as long as you can target people in need of selling their houses.

Article Source: http://casinoarticles.us

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