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What a disaster the foreclosure crisis in the US is, and not a great amount can be done for the home owners who are in the process already. Foreclosure is much like a giant snowball rolling down a hill, once it gets going, there is not stopping it. However that being said, there are some ways a home owner can prevent the foreclosure process from going ahead in the pre-foreclosure phase and this is by means of a short sale. So if you want to know how to buy a foreclosure, perhaps you need to understand a little about short sales first, before you take on all the other investment opportunities Available in the foreclosure marketplace.

The short sale is not legislated, but it is an acceptable business practice. What the home owner does, is ask for permission from his lender to sell the property at less than the amount owed on the mortgage. Hence the name short-sale!

There are three phases at which foreclosure offers the investor an opportunity to buy a property. The kindest phase and also the phase in which and investor is able to help a home owner who is in trouble. The Pre-foreclosure! At this point in time the home owner has received a notice of default, he is getting worried about how he is going to keep a roof over the head of his family. He is often looking at ways out of a mortgage he can’t afford as well as avoiding the foreclosure process.

If one lender in New York alone has 50 foreclosures going through every month, and they are taking as long as this to be completed and costing this much money, they are losing a great deal of money on their investments. A bank is in the lending business not the real estate business and their assets are loans, not property.

Ok, so the home owner is in default over his mortgage payments, the foreclosure is impending and they have proven to the bank that they are unable to meet this financial obligation, neither in the short, nor long-term. The lender then gives them permission to sell the property as a short sale.

Potential investors contact banks, home owners and realtors to find out about short sales, and there are many of these. They find out if this deal would be profitable for them, if it is and they can create a win-win situation for all parties involved, the deal goes through.

The investor wins if he can make a profit, the lender wins if they can get as much of the debt owed on the property sooner than later, and the home owner wins too. They are released from paying a mortgage they can no longer afford in a property with little or no equity and they salvage some of their credit record. Not all of it, but every little bit helps.

Law is being put into place under the new “Obama Plan” which will ensure that approval for short sales is even faster than it has ever been, as this is being seen as a way to improve the foreclosure crisis. How, or whether this will have an affect on this market remains to be seen. The fact of the matter is that it is too late for many home owners to sell, even in a short-sale scenario, and homes as well as credit ratings are being lots right left and center. The input which investors makes into this market, is a very good thing, as at least it sees some turnover happening in the real estate industry.