Real Estate Investor · Triad, NC · Member since 2010 · 38 posts · 9 votes
What criteria do you use to determine if a property is a good candidate for short sale? I have picked up from BP that this is used for properties that have a larger loan balance than FMV but are there other criteria?
Investor · Melbourne, FL · Member since 2008 · 90 posts · 39 votes
16y
There seems to be more to your question than appears at first glance. If you are asking what makes a home a candidate for a short sale, it is that the current fair market value is less than what is owed on the property.
If you are speaking of buying through a short sale, then other questions must be answered. Are you wanting to buy to live in the property?
Are you going to wholesale the properties, retail them, or buy and hold? This can make a difference.
If you are a wholesaler, in what areas do your buyers want to purchase? Retailer, are properties moving in the area? Buy and Hold, is it a good rental area? Your exit strategy can have a lot to do with the area you purchase in.
The price you pay can also vary, depending on your exit strategy. If you are wholesaling, your target price should be below 70% ARV - repair costs - profit.
If you are retailing, you might be willing to pay a higher price because you will be attempting to sell for ARV, but also take into consideration profit, closing costs, holding costs and the market trend. If the market is trending downward, meaning the prices are still dropping, you have to take that into consideration, when making an offer.
If you are buying and holding, then the target to shoot for is the 2% rule. This means that you can get 2% of the purchase price in rent each month. If you can get $1000 in rent, then you would want to spend no more than $50,000. This is an oversimplified explanation, and is not a hard and fast rule, but a good guide.
Investor · Melbourne, FL · Member since 2008 · 90 posts · 39 votes
16y
There seems to be more to your question than appears at first glance. If you are asking what makes a home a candidate for a short sale, it is that the current fair market value is less than what is owed on the property.
If you are speaking of buying through a short sale, then other questions must be answered. Are you wanting to buy to live in the property?
Are you going to wholesale the properties, retail them, or buy and hold? This can make a difference.
If you are a wholesaler, in what areas do your buyers want to purchase? Retailer, are properties moving in the area? Buy and Hold, is it a good rental area? Your exit strategy can have a lot to do with the area you purchase in.
The price you pay can also vary, depending on your exit strategy. If you are wholesaling, your target price should be below 70% ARV - repair costs - profit.
If you are retailing, you might be willing to pay a higher price because you will be attempting to sell for ARV, but also take into consideration profit, closing costs, holding costs and the market trend. If the market is trending downward, meaning the prices are still dropping, you have to take that into consideration, when making an offer.
If you are buying and holding, then the target to shoot for is the 2% rule. This means that you can get 2% of the purchase price in rent each month. If you can get $1000 in rent, then you would want to spend no more than $50,000. This is an oversimplified explanation, and is not a hard and fast rule, but a good guide.
Real Estate Investor · Triad, NC · Member since 2010 · 38 posts · 9 votes
16y
Another REI I know has offered to shoot my wholesale deals out to all of his buyers and has ask me to let him know if I get any short sale prospects, as that is his main focus at this time. I really didn't want to seem like a total dummy so I didn't ask a bunch of questions. I know that his strategy is to buy using HM and then resale for FMV. He said he makes his money from the spread. I guess all I need to do is tell him when I get a seller that agrees to short sale. Thanks for the info.
Flipper/Rehabber · Bakersfield, CA · Member since 2008 · 3k+ posts · 3k+ votes
16y
Good to meet you..
Criteria
1) Is the seller alive?
2) Do they owe more on their home then it is worth?
3) Are they wealthy enough to pay the arrears?
4) Have you found the lead before a real estate agent has listed it...
Real Estate Investor · Ocala, FL · Member since 2008 · 742 posts · 463 votes
16y
You really need to understand how to evalute the deal. These are a few of the items that you need to consider:
1) Who am I doing to sell the property to? (Wholesale, Retail, Flipper, etc.)
2) What prices are properties in the area selling for?
3) How much will it cost me to close the deal? (I.e.: closing costs, fees for funds, Realtors comissions, etc.)
4) What is the MOST I can pay for the property and still sell and make a profit?
5) Are all of these numbers real? Can this be done?
6) What will I do if any one or more of these items falls apart in the middle of the deal?
I hope this helps. If you need more info, just ask.