The current sub prime housing crisis has unfortunately given rise to an increase of foreclosures in the real estate market. The timing could not be better to start buying foreclosures for profit as well as specifically profiting from the incredibly lucrative niche of "short sales" investing. The "short sale" creates a win-win-win situation for the bank, homeowner, as well as you, the investor. A short sale occurs when an investor makes an offer to a homeowner for less than what is owed to the bank. Many banks are now listening more than ever to these types of offers where they will accept less than what is owed on the mortgage. The bank gets a quick payoff without having to go through the foreclosure process. The homeowner doesn't receive any funds from the short sale however the homeowner does get to avoid a full blown foreclosure which will damage his/her credit. Lastly the investor gets a property with newly created equity, which can now be fixed up and flipped for a profit. The key to getting a quality short sale property is to avoid deals where too much money is owed to the bank hence there is no equity for the investor to profit from. Short sale properties are not difficult to find, but your success on getting a good deal depends on a number of different factors.

I have been buying foreclosure properties for over 16 years in New York and in my opinion the best place to start for these potential money maker deals is finding the RIGHT real estate broker. You will want to find a broker who has experience in selling short sale properties. The broker needs to be fluent in the process. There is a process involved, which involves producing information needed by the bank in order to consider the short sale. You will want a broker who has experience working with the bank that has and an understanding of the banks guidelines & requirements. Some of the items that may be required by the bank are the B.P.O (broker's price opinion), seller's hardship letter, and estimate for repairs. Having a broker with this experience will greatly increase your chances of success in picking up a nice short sale deal.

The first thing you will want to do is call up your local real estate office and ask to speak with the office manager. Ask him/her to kindly refer you to an agent who has experience with short sales, or who has recently sold one. Move on to the next office if there are none since short sales are very common these days. When you find a broker, ask if he/she has any properties in his/her inventory with short sale potential. This would simply be asking for any listing where the seller owes more than the house is worth, and that the seller will cooperate on a short sale. If the broker does not have any listings in-house, then ask the broker to do a search on the MLS (Multiple Listing Service). The broker will probably already know this, but just ask him/her to put "short sale" in the "remarks" section of the property search for "available".

I did a search like this in my area of Long Island NY, and came up with many more than I could handle! Try to have the broker focus on properties that need work, as this will also increase your chance of success for an approved short sale. Banks will be more likely to unload a property that needs lots of repairs, and will also help you to get the discount you need. You will make an offer on the property, and if the seller agrees, you will then go to contract to purchase the property. The contract will be subject to the bank's approval. If you are making multiple offers, you will want to put down as little money on contract as possible, so you don't tie up too much money. Some banks move faster than others, but if all goes well & the bank gives its approval, you will become the owner of a good short sale deal!

written by Peter Lopipero