In today's real estate market, investors have many discount properties at their possession.
Everywhere you turn there is another property up for sale.
Some of those properties can not be sold because of price.
A lot of those homeowners must sell at the prices they are asking because they either paid too much for the house when they bought it, or they refinanced their equity out of their home.
To add on to that problem, a lot of those homeowners took on an adjustable rate mortgage or an ARM.
An ARM is a mortgage loan where the interest rate adjusts based on the market indexes.
Some of them even took on interest only loans.
An interest only loan is a loan where a homeowner doesn't pay down the principle on their home.
They are only paying the interest.
But you can pay principle too if you send the bank extra money stating that it should go toward the principle only.
Most of these types of loans usually come with a balloon payment.
Having a balloon payment means that your loan is due in full at the end of the balloon term.
Now that the ARM is kicking in (I didn't know that arms can kick...
lol) or the balloon payment is coming due, those homeowners cannot afford to keep paying on an adjustable rate mortgage.
And they most certainly can not come up with the money to pay the mortgage in full.
So what do they do? Well they have two options, they can take a chance at refinancing their property or they can sell through a short sale.
Most people will not be able to refinance their home in today's real estate market because banks are not as lenient as they were a year or two ago.
So that leaves them the option of doing a short sale on their home.
A short sale comes about when a lender is willing to take less for a home than the amount due.
Lenders will usually do a short sale if it is more beneficial than going through the foreclosure process.
Short sales are less expensive for the lender than going through foreclosure as well.
Usually, lenders will allow a short sale to take place in the pre-foreclosure stage.
The following is a list of things that you will need to do in order to have a successful short sale transaction:

• Call the lender and ask to speak to the supervisor or the person in charge of the short sale.
  Make sure you keep their contact information because they will be the decision maker in the transaction.
  
• Get a letter of authorization to release the loan information from the homeowner.
  This will give you permission to discuss the loan with the bank on the homeowner's behalf.
  
• You will need a purchase agreement
• You will need an escrow letter
• You will need to get a 1099 for the home owner, a hardship letter which explains why the seller must sell, pay stubs, w-2's, a credit report, and bank statements
• You will also need a financial worksheet or a preliminary HUD sheet.
  This will help the lender get an idea of what to expect at the closing table.
  
• Last but not least, you will need comps for the property

Doing a short sale can help a seller to save their credit.
They won't have a foreclosure on their credit which keeps them in good standing.
This is huge when your buying short sale properties because it is a way to help the seller and create a win- win situation.
Consider doing short sales in this market and you will have much success.