Investing in Short Sales

Les Christie for CNNMoney.com discusses how investors (“vultures”) are swooping in and buying up short sales for long-term rental investment, instead of buying and flipping them as had been popular. While he cites markets like Las Vegas, Phoenix and Miami – communities who’s climate will keep them popular destinations for both seasonal visitors and full time residents – investors are helping combat the growing inventory all over the country, by lining up for deals.

Now, I can’t say I agree that lenders have “gotten faster at processing short sales” as he states in the article, but I can say they certainly profit on them far more than they would on a foreclosure. Between the money they save on legal fees, to the costs of carrying the property until they’re able to re-list (in some states, for months to even years), there is no doubt a short sale saves the lender money.

For the investors, the need for rental units will be high for some time. It’s expected that home values will continue to drop through 2013 and it could be decades before property values come back to their bubble peaks. Factor in high unemployment, strategic defaults, etc., and that leaves a lot of people in need of a home, but with credit that might not merit a decent mortgage for the foreseeable future. Many people we work with, say they’ll never own again and plan on becoming renters for life.

Generally speaking, it’s a win for all sides – the lender, the investor, the homeowner and the renter. Still, we come across plenty of lenders and servicers who have yet to grasp the realities of the new real estate world order. Here’s hoping they come around before the investors lose interest…