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What happens to the second mortgage in a short sale?
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How to make money with pre-foreclosures
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Question:
The real estate market is tanking, possibly for several years. How can I make money from these (pre-)foreclosures?Answer:
Here is one plot. Today (December 2007) is a great opportunity to buy cheap. Buy REO for 80% of the 1st mortgage, banks need to unload even if this 80% is way below fair market value, fix it up and sell it.Example:
house sold in 2000 for $300k. Peak value in 2005 was $700k. First mortgage balance today is $400k (owner did a refi with cash out). House is in pre-foreclosure. Offer the bank 80% of those $400k = $320k and tell them that this house has plenty of code violations so that they cannot sell it easily. You will get this house for $320k.
Take care of the violations, fix it up, offer it for $390k. Someone will be very proud to get a house that was valued $700k in 2005 now for $390k, don't you think so?
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