Paying too much for real estate is not investing it is speculating, and investing using the "Greater Fool " theory will get you into trouble. I am of course assuming that I know what you mean when you say that your fellow investor is upside down on a property.
Your friend has a few options. If the property hasn't closed yet, it might be better for them to walk away, and say good bye to the earnest money that they've got invested at this point.
If it's gone past that stage, your friend may have to sell at a loss if they can't wait this out until the property is worth more than they owe. If the property will rent, or lease/purchase for the payments, plus expenses, this does not have to be a bad thing. Hopefully they wan't have to wait too long to recoup their expenses on this property. I'd also recommend to your fellow investor to have their exit strategy planned, BEFORE they make any more offers. That will help them to analyze the numbers and know what their maximum Offer should be before they make it. Buying right is a very important step to a successful career in REI.
Good Luck,
Jeff
I infer from your post that the Investor owes more on a property than it is worth.
If that is correct, and he wants to sell, he should consider a short sale. Provided there was no origination fraud when he acquired the property... he may qualify for short sale consideration and relief.
64 Ford: I would never had thought it possible that a lender would approve a short sale if the loan were current, but I actually did one. I wrote about it in A Short Sale Primer in a section called, Never Say Never.
The Borrowers had never missed a payment. The house was in excellent condition. I was reluctant to take on this particular case (because I really didn't think it would work), but, I accepted the
consulting assignment.
Long story short, the Sellers sold their home via a mortgagee approved short sale for about $30,000(?) less than they owed. The Buyer, who made a lowball offer, got a terrific deal and flipped the property for a profit.
The Sellers were advised that they would get an IRS form 1099 and have an exposure to an income tax liability, but the tax liability was substantially less than they would have had to pay to sell their home.
Paying too much for real estate is not investing it is speculating, and investing using the "Greater Fool " theory will get you into trouble. I am of course assuming that I know what you mean when you say that your fellow investor is upside down on a property.
Your friend has a few options. If the property hasn't closed yet, it might be better for them to walk away, and say good bye to the earnest money that they've got invested at this point.
If it's gone past that stage, your friend may have to sell at a loss if they can't wait this out until the property is worth more than they owe. If the property will rent, or lease/purchase for the payments, plus expenses, this does not have to be a bad thing. Hopefully they wan't have to wait too long to recoup their expenses on this property. I'd also recommend to your fellow investor to have their exit strategy planned, BEFORE they make any more offers. That will help them to analyze the numbers and know what their maximum Offer should be before they make it. Buying right is a very important step to a successful career in REI.
Good Luck,
Jeff
I infer from your post that the Investor owes more on a property than it is worth.
If that is correct, and he wants to sell, he should consider a short sale. Provided there was no origination fraud when he acquired the property... he may qualify for short sale consideration and relief.
Doesn't one have to be behind in payments to qualify for a short sale?
64 Ford: I would never had thought it possible that a lender would approve a short sale if the loan were current, but I actually did one. I wrote about it in A Short Sale Primer in a section called, Never Say Never.
The Borrowers had never missed a payment. The house was in excellent condition. I was reluctant to take on this particular case (because I really didn't think it would work), but, I accepted the
consulting assignment.
Long story short, the Sellers sold their home via a mortgagee approved short sale for about $30,000(?) less than they owed. The Buyer, who made a lowball offer, got a terrific deal and flipped the property for a profit.
The Sellers were advised that they would get an IRS form 1099 and have an exposure to an income tax liability, but the tax liability was substantially less than they would have had to pay to sell their home.
WOW...
fantastic story! You realy are a "Short Sale Pro"!!