New Investment Opportunities in Luxury Housing

It may be time to revisit your short sale business plan.  When short sales originally became a viable means to acquire investment properties, most investors budgeted acquisitions in the low to median selling price range. 


It’s no secret that times are changing and changing fast.  The recession has hit everyone.  It has been especially difficult for families who relied upon the security of big jobs and leveraged those jobs to purchase their dream homes. This high income level consumer has been burned.  They are now finding those high paying jobs are harder than ever to replace.  Very often relocation is necessary.


When driving down the street in a luxury neighborhood, keep in mind that one of every seven homes with a mortgage of $1,000,000 or more are in some stage of delinquency.  The fastest growing sector of distressed housing is in fact, high priced homes.


Luxury homes or high-end distressed housing can yield big profits.  Remember the oldest adage of the real estate market; location, location, location.  The luxury short sale can be time consuming and more complicated to finalize but there is definitely money to be made by the investor with the credit, willpower and courage to take a risk.


In addition to the sometimes complicated financing attached to these homes, there is the question of demand.  Many of today’s potential buyers in this price range have a home to sell.  Investors cannot get tied up waiting for a potential buyer’s home to sell.


Additionally, many of these luxury homes have taken big hits in the BPO. This is not an emotional judgment; it is simply the way the market is.  However, convincing the seller that the property they have dreamt of buying is not worth the amount of the mortgage is no easy task.


The lender may also be disgruntled with the magnitude of the loss.  In fact, they may make it difficult for the seller to get out without a cash contribution.  Initially all parties are likely to talk tough.  The investor is not emotionally charged and does not have to answer to a board.  At some point, the seller and the lender are likely to realize the hard reality. 


When the investor sees the door of opportunity swing slightly open, it is time to strike.  Always have a statement of funding and a carefully prepared BPO of your own.  As both the seller and the lender need to realize, sometimes it is better to take a bit of a loss and move on than it is to fight a fight that cannot be won.





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