When it comes to doing real estate short selling, especially commercial ones, one might wonder how to sell it safely on their end. This is significantly the case for those doing this kind of sale for the first time around. How do you exactly do a real estate short sale without any hiccups at all, if possible?
Real Estate Short Sale - A Way of Selling
When it comes to selling any kind of real estate property, especially ones involving commercial real estate properties, one can opt for a short sale of it. A short sale is a way of selling a real estate property wherein the selling price is less if there is still an amount left owned to a mortgage. However, this kind of sale must be approved first by the mortgage lender beforehand.
In this way, investors can put in small investments in real estate properties they think will lose value over time but ultimately will bounce back up, wherein they can buy it for a lower price and sell it back to other entities such as banks for a profit. Furthermore, several groups help many investors on what to do with their REIT (Real Estate Investment Trust) ETF (Exchange Trade Funds) in the investment process.
According to ABC News, there are several forms of ETF investments that investors can choose to use as their REIT, such as the following:
- Vanguard ETF
- DJ Willshire REIT rwr
- First Trust S&P REIT
- iShares' Cohen & Steers Realty Majors icf
Investors can contact their corresponding brokerage firm of choice and ask for assistance on which form of ETF they can avail for shorting.
Experts Believe That Real Estate Will Shorten Up
One Carl Icahn, a well-known investor of billions in the real estate industry, sees the possible collapse of the whole real estate market, akin to the devastating collapse of the housing market that did collapse on itself in 2008, according to an interview by CNBC.
He said that making a short sale, whether it would be stocks or real estate, is a huge bet itself. Therefore, investors doing this kind of sale must be sure of their decision to make real estate short sales.
Tips on Doing Real Estate Short Sales
Although making a real estate short sale can be challenging, it doesn't mean that it is an unconquerable one. Below are some of the well-known tips and pieces of advice when it comes to real estate short sale, according to SFGate:
- Before proceeding with the short sale, make sure to contact both the lender and the mortgage. Advise both parties that you want to do a short sale of a real estate property.
- Having approval from the lender is the most crucial part. You cannot proceed with making a short sale without the lender's approval.
- Once approved by the lender, provide them with a provision wherein they (the lender) would not seek deficiency collections from your end.
- You may then put the real estate property for sale in the market once everything has been settled and approved by your lender.
- Once a potential buyer shows up, make sure to enter a contract with the said potential buyer, wherein the buyer makes their offer through the said contract. Show this contract to the lender then, ensuring that he agrees to the buyer's offer.
- Once all parties have agreed on the sale, make sure to sign the contract in order to convey the deed of sale to the buyer. At this point, the lender will take over, handling the remaining sale process.
Now you are all set for making a real estate short sale on your end. However, you might want to learn other real estate sale processes and terms, such as Days on Market (DOM), to ensure that you will have a successful sale on your end.
ALSO READ: Is Bitcoin Becoming More Popular for Real Estate Sales?
