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5 Tips for Purchasing a Short Sale Property

Real Estate Image Gallery While short sales are definitely not fun for homeowners, real estate investors may be able to get some bargains. See more real estate pictures.
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At this very moment, millions of homeowners are late with at least one mortgage payment. Several million of those will miss even more payments and will receive official Notices of Default. A high percentage of those will continue past default, and the homes will be repossessed by the bank, which puts the home up for foreclosure auction.

2010 was rough, with 2.87 million homes in various states of pre- and post-foreclosure. 2011 appears to be 20 percent worse than 2010, likely taking us to a peak in foreclosures and a bottoming out in pricing [source: Levy and Gopal].

If there's a bright side to this dim outlook, it's the huge volume of investment opportunities available to real estate buyers. And, happily enough, one of the best investment arrangements for savvy investors can simultaneously save at-risk homeowners from worst-case scenarios. This pre-foreclosure tactic is called the short sale.

A short sale is accomplished when a bank accepts an offer lower than the amount actually owed by the homeowner. This pre-foreclosure strategy can earn investors a lot more money, rescue foreclosure-bound homeowners before the foreclosure goes on their credit reports and help banks avoid dreaded property ownership.

Before you consider purchasing a short sale property, read on for some tips.