Q & A with a potential Short Sale investor.

Q: 1- What are the risks? A: The risk when investing in Short Sales is no different than investing in any other section of the Real Estate Industry. The better question is how does one limit the amount of risk they take on when buying investment real estate? Buy low, sell high however, stay competitive and if necessary, cut your loss early and move on. Q: Can I end up in the same boat as the sellers and lose all of my assets - i.e. condo, pension plan, bank account etc? A: Sure you can. If you don't manage your investments wisely and end up over extending yourself, then you will most likely end up in the same boat as the seller's find themselves in now. Q: - How do I actually get qualified to become a short sale investor? A: No real universally accepted certification exist for becoming a Short Sale Investor however, I would strongly advice you first find someone who is doing it successfully and have a real heart to heart conversation with them. In a perfect world, I would suggest you "shadow" a Short Sale Investor for a couple deals then determine if it is something you really want to do. Q: - If I need to qualify for a loan, what type of loan would I be looking at and where would be the best place to get one to enable me to do short sales? A: If at all possible, don't get a loan when it comes to purchasing Short Sales. Truth is, too many stipulations are involved when getting a loan for investment purposes. Cash is always best when buying Short Sales. If, ultimately you do want to invest in Short Sales with money from a loan, you need to find a loan that acts as much like cash as possible. In other words, a HELOC (Home Equity Line of Credit) or something similar, anything with the least amount of rules, regulations, guidelines and stipulations the better. Basically the easier we can make it for the bank to sell the property without worrying that something from your lender is going to pop up last minute can kill the deal, the better. Q: 4 - Would a down payment be necessary to qualify for a loan, if so, approximately what percentage would be needed? A: This questions is best answered by a lending professional, of which I am not however, the answer to this question is most likely going to revolve around your credit score. FYI: with the continuing credit crisis the country is facing, even with a great credit score, you may be asked to put up some type of down payment...with investment properties, it could be at least 10% or more. Q: 5 - To qualify for a loan, would the dollar amount of the loan (like most loans are) be calculated in conjunction with my annual salary and debt to ratio? A: Most likely Q: 6 - Apart from fix up costs on the property; can you give me some sort of break down as to what other outgoing costs I might occur as a short sales investor? A: You need to make sure you get a Net Sheet or Estimated HUD-1 from your Realtor when you are prepared to sell. This is a estimated itemized break down of each and every fee you will pay to get out from under the home when you have a buyer. This is a great way to see in writing exactly what you will likely walk away with. Keep in mind, the HUD-1 involves all the Real Estate cost, not the cost you will have to fix up the property...that will be up to you to keep track of. Q: 7 - If I wanted to sell a short sale property after any needed fix ups have been completed, what are the best ways to sell the property (flip it)? A: Flipping is what you are going to be doing, no question about it, unless, you plan on holding onto the property for rental purposes. By the way, you will want to be prepared to do just that and that is, rent the property. In areas where we see prices dropping monthly....you could find yourself with a debt on the property greater than what you could make from the sale so, the only real choice you have is to rent it out and try to cover the cost of your mortgage, if you get one. This is just another reason to buy a Short Sale in cash if you can. Q: 8 - Once you get a home via a short sale and it is still occupied (with the view that the seller will leave very soon), what's to stop the seller from doing major damage to the home once everyone has signed on the dotted line - hence making it too late to go back and the seller knows it? What can be done to make sure damage does not happen in anyway? A: DO NOT DO THIS TYPE OF TRANSACTION!!! DO NOT DO THIS TYPE OF TRANSACTION!! IF THE HOME DOESN'T COME TO YOU ALREADY VACATED.....MOVE ON! Avoid buying a short sale with a resident in the property......or at the very least, write in your purchase agreement that the property is to be vacant on or before closing.

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Q & A with a potential Short Sale investor.

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