In a real estate market with so many deals lying on the market, most real estate investors get confused where to get the best investment deals.

Do you get foreclosed REOs from the bank? Should you do short sales to get a discount on the mrotgage from the bank? Or should you buy directly from the motivated sellers?

This article sheds some light into these 3 situations.

Each method has its good and bad sides; let's look at each one:

1) Buying bank foreclosed REOs

Banks have too many foreclosed properties and they increase in number every day. As soon as they acquire them, they then try to sell them quickly.

Buyers are few and these properties can take a long time to sell.

Banks are therefore willing to sell them less than their market value, even more so if they need repairs.

Real estate investors should shop carefully because not all of them are profitable.

2)Short Sales

Banks foreclose on houses where the mortgage is in default. Before they foreclose, they are often willing to take less than the mortgage balance. This is called a short sale.

First a bank has to do an appraisal to find out the true market value. Then they can give you a discount on the mortgage based on their numbers.

A bank that holds a first mortgage is likely to offer very little discount on the mortgage, usually not more than 20% especially if it does not need major repairs.

A bank that holds a second mortgage can lose 100% of their investment in a foreclosure, so they are more willing to negotiate much lower. It is not unusual to get 80-90% discount on a second mortgage.

It therefore makes a lot of sense to do a short sale on a property with more than one mortgage.

Short sales can take 4-6 months. You must therefore have enough patience and capital to last you through such long waiting periods.

Banks can reject your short sale application even when all numbers look good. Be prepared for rejection.

If your short sale is approved, you must close fast. Banks will not accept creative financing on short sales.

When all is said and done, you can create a lot of equity and profits as long as you select the right deals, have patience to wait for a long time, can take rejection, and you can close fast.

3)Motivated sellers

You can employ a wide variety of techniques to buy houses from motivated sellers.

This includes creative financing.

If the mortgage balance allows, you can also negotiate with flexibility directly with the motivated seller. And you can be as flexible as you need when closing, e.g. you can wholesale a deal right from a motivated seller to a wholesale buyer.

This is always the best way to buy investment houses as long as you can target people in need of selling their houses.

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