Short Sales- Long Term Strategy

My wife and I were having a discussion the other day. She feels that we cannot count on short sales as a long term strategy (for the next 10 years) and I believe we can.

I believe we can because as long as the banks have the non-performing asset ratio and need to get a property off their books then they will always be willing to do a short sale.

I also believe that when the market picks back up and there are not as many foreclosures then there will be less competition, but homeowners will still be willing to work with real estate investors.

How does everyone feel about this?

Edited: 06/26/2010 at 10:33AM

Nick J.

SFR Investor · Scottsdale, Arizona

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Icon_minipost Nov 17 '09, 11:39 PM

As the case with most wives, they're right and we just have to smile and nod :)

In reality, I think she's right though. As it may seem that banks will still have non-performing assets for years to come, the same banks are also spending a lot of money in lobbying to increase rules, regulations and laws further preventing an investor from getting involved at all.

There are too many legal cases being carried out against scam artist and they're all going to jail which I completely agree with, however, we as investors are guilty by association even though we may fly straight.

With increasing internal policies tightening up from the lenders helped by lawmakers creating blanket laws that are easy to make considering the sammers out there, I don't think Short Sales will be a popular strategy, if a strategy at all in less than 10 years.

Edited: 06/26/2010 at 10:33AM

Justin S.

Rehabber · Chandler, Arizona

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Icon_minipost Nov 18 '09, 12:54 AM

I agree that scammers are ruining for the rest of us. Short sales are great way to invest, but there is a lot higher risk from a legality standpoint that has and will continue to scare people away. Having said all that, I attended a local REI meeting last night and our REI president is working with our Attorney General (AG) so that investors can continue to work short sale ethically and legally. What I mean by this is that, the AG will provide us with what disclosures we need to make to the banks and the homeowners to cover us. If your REI is not being proactive like this, then you should raise it to them so they are. The real estate world needs investors, we move properties and repair them when no one will.

So, even though banks are being very strict right now, IMO, I do think once all the scammers are gone, rules are laid out, then banks will open back up to investors to help move their properties. I hope this happens sooner than later, but in the mean time disclose everything to cover yourself.

Short sales are not a new invention, they were around before the market crash and I think they will be around after, with just different rules.

Edited: 06/26/2010 at 10:34AM

Justin S., Wheelhouse Properties
E-Mail: wheelhouseproperties@gmail.com
Telephone: 4806780446
Website: http://www.wheelhouseproperties.com
Realtor, Re-modeler, Cash Buyer

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Icon_minipost Nov 18 '09, 01:44 AM

Hi Mitch!

Great question! I believe short sales will always be around...as far as beneficial for investors, that's debatable--the banks are trying to lessen their power - and there is nothing to say they couldn't make laws that make it near impossible for investors to get a worthwhile short sale deal.

But, that's not the big issue for me. I am extremely experienced with short sales and when done morally and ethically, they can be an effective method.

BUT, I prefer NEVER to have a business that is controlled by others. And even if it never becomes controlled by banks, it is always controlled by the appraiser or BPO agent.

You are at their mercy, whether you like it or not.

I like to decide my income, my family's future, and I refuse to leave it anyone else's hands-

A business is an entity where you reap what you sow (even if there are small exceptions to this)...not you sow what you hope to reap.

I would take control, get into new markets, leverage yourself, and slowly wean off short sales.

Just my honest thoughts,

Blake Templeton

Edited: 06/26/2010 at 10:34AM

Matt Mathews

Real Estate Consultant · yucaipa, California

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Icon_minipost Nov 18 '09, 02:37 AM

Your both right!! Short Sale Property has been around forever. Every down cycle will always have owners who owe more than the property is worth. With that said, however, from experience, short sales are not only a pain in the butt but they aren't really good buys. I can show you numerous Investors right now who joined the herd buying Short Sale Properties and are now upside down themselves. 80% of the market nationwide showed price declines this quarter from last year. Any price appreciation that you do see today is superficial because of all the Gov. handouts. The shadow inventory that everyone speaks about went from 800K to now over 1.2million. No matter what you niche' or strategy may be, If you don't allow for Future Value when you buy-I can almost guarantee that you will end up paying way too much.

Edited: 06/26/2010 at 10:34AM

Scott Hubbard

Rehabber · Tucson, Arizona

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Icon_minipost Nov 18 '09, 03:15 AM

Employing a short sale strategy should be a tool in every investors belt. For me, as a buy and hold investor, I can get short sale properties at REO prices without all the REO headaches. Of course, not every time... But for those I do not, I flip them to a retail buyer when the spread allows. In this case, I am not holding so there is no risk for me.

You can make money with short sales in any kind of market. But like anything else, you need expertise and patience.

As for the outlook, I agree to certain degree with what was said with regard to regulation. It may become more difficult to work within the framework of current and future regulation, but as long as your ethical and prepared to work within the confines of the law, there will still be a place for investors and short sales in the coming years.

The consiperacy theorists are all abound about John F Kennedy, Marilyn Monroe, and the Shadow Inventory. The FED, through TARP and other bailout programs and inconjunction with propping up Fannie and Freddie have virtually eliminated the floodgate theory for residential REO's.

If your waiting for the "release of thousands of REO's to batter the market prices", you will be on the sidelines for a LONG time.

Edited: 06/26/2010 at 10:34AM

Larry Moore

Real Estate Investor · Belvidere, Illinois

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Icon_minipost Nov 18 '09, 04:06 AM

Personally, I think it will become more difficult for the quick flip, back to back short sale investor, and perhaps that opportunity will disappear altogether. But distressed properties in need of more than cosmetic repair, that are rehabbed before selling 90+ days in the future will probably still be viable for short sale investing. Hope so.

Edited: 06/26/2010 at 10:34AM

James Ward

Real Estate Investor · Ocala, Florida

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Icon_minipost Nov 18 '09, 04:31 AM

Okay, here goes.

Short sales have been around for many, many years. And they will be around as long as a property owner can go into foreclosure.

Will being an investor that focuses on short sales be profitable down the road? Yes, as long as you have several styles of investing all working at the same time. (But you have have the same, many styles working at the same time now.)

Will it get harder to get a short sale approved? Maybe, but who cares. If you can make money, then you have to decide if it is worth it to you. Personally I love the chase, so if I can make money I will do them.

Are the laws/ regulations changing? Yeah, but again who cares. Everything changes in some form or another. Go with the flow. And again, if you can make money, and it is worth your efforts, then do it.

Later,

Edited: 06/26/2010 at 10:34AM