How to Buy Real Property During a Real Estate Depression

In real estate, a short sale is a property being sold for less than ("short of") what is owed on the mortgage. Sometimes called "preforeclosure" sales in real estate marketing ads, it is a misnomer because a short sale can happen on any property for any reason but mostly because the borrowers are either insolvent (unable to pay their bills) or have too much debt (bankrupt), someone died, or most of the time because the value of the property has gone below what is owed on it.

While it is marketed by the homeowner, ultimately the decision on selling is up to the mortgage holder (or investors). This type of sale can not only be maddening for the sellers (mortgage debtors) but also for the staff working at the financial institutions which services the loan.

It can take up to sixty days some times just to get an answer on whether your offer is accepted or not, but in some cases, if you talk to the right decision makers and you have done all the proper homework, you can push a sale through with a confirmation of a meeting of minds in one day.

Short sale offers are now the only way for smart investors to buy real estate and many investors are now sitting on the sidelines looking for better places to put their money than in American real estate because real property values in the United States continue to plummet by as much as 80% in some markets, particularly land values where builders have defaulted on purchase options and no other buyers can afford to pay multi-million dollar price tags for undeveloped raw land.

Investors don't like to catch falling knives and get hurt. The old adage is "don't start buying until you see blood running in the streets" is as good as gold in today's real estate mortgage malaise market. Although that is a euphemism for waiting until the worst is almost over, we are very far from that date according to most professional real estate investors, some who made millions during the last real estate debacle during the Savings and Loan Crisis.

A metaphor for the ride real estate investors are going for...taken at Magic Mountain California.

Credit: Alex S. Gabor

Copyright: Alex S. Gabor