Mansions Ripe for Short Sales?
The noise is getting louder every week. While entry level homes seem to have leveled off after a steep price drop, it looks like higher and homes are the next wave in foreclosures.
The Orange County Register reports that foreclosures in the high-value County has passed a record 8,800 for the month of September 2009. And the media blogs are of course all over the “bad news“!
The question is if these foreclosures are good short sale candidates for investors, or if we should let the banks deal with their losses and go the route of bank owned listings?
There are two criteria that make for great short sale deals.
One: The lenders’ motivation. On larger properties, lenders have to deal with larger loan amounts. A short sale on a larger loan removes a larger non-performing asset from their books. Lenders know that and act like it.
I was recently tracking a foreclosure on a $1.4MM loan. Unfortunately I got on the case too late and wasn’t able to prevent the trustee sale. However, the trustee told me that they had permission to take a bid of $765,000 at the sale. (Of course, the opening bid was advertised as $1,375,000, so nobody showed up…)
Two: Buyers willing and able to buy. Well, that’s a different story altogether. There are buyers with a lot of cash on the side, looking to put it into great deals. In the current lending environment there is no 100% financing for jumbo loan amounts. But that’s OK.
There is money for cash down payments and some buyers who can qualify. Most likely these sales will happen through buyer’s agents anyway, so it’s just a matter of how you structure your deals and setup your team.
On question that you have to keep a close eye on is what will happen with buyer confidence once a significant drop in prices is evident in areas that are now still hyped up as “recession proof”. You definitely don’t want to get in a position where you spin a lot of wheels on your short sales and can’t find a buyer in the end because your accepted offer is not good enough after the time it takes to get accepted.
Summary: Short sales for high-end properties and mansions are comming and are a very viable and lucrative foreclosure niche business. Leave a comment here if you want to hear more about our “Syndicated Short Sales” program! (And if you have any other questions or comments as well…)
