Hi Everyone:
I am located in Prince George’s county Maryland. Foreclosures for this area are at an all time high. The interest rates are coming due on those interest only loans (which allowed people to afford more house) and the owner’s are foreclosing.
Problem is that they purchased these houses at inflated prices. Question: How can an investor capitalize on these situations, if at all? I have heard of Short Sales, where the bank takes less than what is owed. But these people paid so much, I don’t believe the bank will accept too much less than owed.
Note: Used 3 level 4 bedroom townhomes went for 400-500k in this area.
This is an open question for all. Free for all ;D
dlmcgill
Short sale is you’re only good option. There’s no equity or negative equity in a lot of properties like that. I think banks will resist until they pile up the REO’s and can’t move them. Then they’ll have to face reality and move them at a discount. They have ratios they want to be at for non-performing assets. Once the ratio starts to climb the banks become motivated sellers.
Your best bet is to find someone with equity that needs out fast. Then keep an eye on the REO market. When you see it increase a lot, then try some short sales.
Hi Marcus335:
How can you make the numbers work for short sales? On foreclosures with equity its easy. But I’ve never done a short sale. And these are inflated values. Can it work?
dlmcgill
The numbers work when the bank is willing to accept a low enough offer on a short sale so there’s profit in the deal for you. You need the owner’s permission to speak to the bank. You have them sign a release, fax it to the bank, then start talking to the bank.
I don’t think banks are at a point where they’ll accept less than what’s owed very often though. That’s why I say the REO’s need to pile up before banks will want to short sale. The recent hot market in real estate gives banks little incentive to short sale. I think it’ll take some time for them to change their mentality.
I think your best bet to short sale now is to find a house with a 1st and 2nd on it. You may be able to negotiate with the 2nd to signifcantly reduce their amount. Then you’d have to buy them out at the reduced amount and buy out the 1st. The 2nd stands to be the big loser on a foreclosure. They have more incentive to negotiate.
Thanks for the information Marcus335. You have been very helpful. I will be interested to see what happens to those properties if they go to full foreclosure. I don’t see how anybody would be able to make any money off of them because they would never sell today for what they sold for 6 months ago (But who knows, there’s a sucker born every minute) 
Maybe someone looking for a primary residence will buy them.
Or maybe a truly savvy investor can make money on these properties. I’m still learning even though I’ve made money on 3 deals so far. I’m trying to keep it moving is the reason I am curious about the owners foreclosing on properties that are priced too high.
It’s getting more difficult in my area to find and close the good deals. I have no problem finding them, however, closing them is another issue. More and more owner’s in pre-foreclosure prefer foreclosing than to sell the property and put 20-50k in there pocket.
However, I truly understand how they have problems trusting people they do not know. When some stranger comes to them and ask about buying a house or their house, and tells them that they can walk away with thousands rather than foreclosing and getting nothing, they find it difficult to believe.
I’m trying to get more and more creative and savvy when approaching people in financial distress. I try to put my self in their shoes. And hey. It’s not like I haven’t had financial difficulties. So, seeing things from their point of view isn’t that difficult for me ;D
dlmcgill