Las Vegas Short Sales
All the rage these days, a Las Vegas “short sale” to the uninitiated means snatching a valuable piece of property from a grateful lender or desperate property owner at so-called “bargain basement rates.”
Actually, the short sale phenomenon, born from the ashes of the Las Vegas housing burnout of the last few years, is not always what it may seem on the surface. One sees a property that may sell at a considerably below market price, just sitting there, waiting to be snatched up and moved into, or “flipped” for a fat profit. Or so you might think!
A short sale is the result of a home owner’s default on mortgage payments due to an inability to pay as the result of a loss of income, or some such related financial difficulty. The homeowner is facing foreclosure, and the bank is confronted with an unwanted foreclosure proceeding.
So, a short sale is basically a problem solver of sorts for both debtor and lender. Both parties have agreed to sell the property, and the lender hopes the property will sell for as high a price as possible, but is willing to allow the distressed homeowner to sell at less than the mortgage balance if necessary, sparing the lender and homeowner the difficulties of a foreclosure proceeding.
Sounds simple, but it’s not. There are many complexities involved in a short sale, particularly since the prospective buyer’s price offering may or may not be acceptable to the lender. A further complexity for the buyer deals with the issue of the record low mortgage rates currently tempting competing investors from everywhere.
The record-low rates now in effect have attracted even more hungry investors roaming the real estate “jungle” and the lenders now realize they can minimize their losses by encouraging buyers to bid on these distressed properties, which has had the result of driving selling prices upward. Good news for the mortgage holders.
A further complexity –and often frustration – for the buyer is that, unlike in a “normal” real estate transaction, the prospective buyer’s good faith deposit money does not obligate a lender-who may be selling the home through a listing agent- to sell the home to the qualified buyer, or even have an obligation to sell at the original asking price for the property. Instead, the good faith deposit only means that the lender will consider the buyer’s price offer as one of many “bids” the lender is in the process of reviewing.
This process is to the lenders advantage, since the “bidding” encourages many investors to offer higher prices for the property than the competition. The frustrated initial bidder has no choice but to either withdraw the offer and search elsewhere or offer a higher bid and then patiently wait until the lender decides which of the investor bids is most acceptable.
We are not talking strategies here. We are only discussing the basics of the short sale procedure, and emphasizing that patience and persistence, and an understanding that the lender may take weeks, or even months to decide which bid would be acceptable, is the norm these days.
Having a thorough understanding of the processes and procedures involved in short sale investing is the foundation for a strategically workable approach to a profitable undertaking. Bottom line: short sale investing can be a lucrative undertaking, but only for the savvy investor.
One more thought. Since short sale deals often take so much time and effort to close, and as often as these deals can fall through, bidding on short sales shouldn’t really be the focal point of your overall real estate investment strategies.
Should you have any questions about investing in short sales, feel free to give us a call at 702.376.7379 or reply below with your questions.