Because of the current downturn in the housing and mortgage market, one of the better real estate investment strategies is the short sale strategy. Quite simply, a short sale is where the bank holding a mortgage allows a real estate sale to proceed even though not enough money is generated to pay off the bank loan. In other words, the lender is taking less than what is owed in order to avoid having to foreclose on the property. With the new electronic filing system in bankruptcy, finding these opportunities is easier and more profitable.

Understanding the psychology of banks is essential. In today's market, banks cannot afford to have a large portfolio of properties with bad loans. Banks with large loan portfolios in default risk having their credit rating damaged. Then, the interest rate at which they borrow money is increased, or they may be limited in how much they can lend out. Thus, now more than ever, banks are in a position of having to get these non-performing mortgages off of their books.

Prior to the real estate bubble being deflated, many homeowners overpaid for properties. In a large percentage of these situations, homeowners received 100% financing or put next to no money down by way of deposit. Furthermore, people obtained two and three mortgages in order to fund the purchase of the property. This convergence of factors has led to many properties having mortgages higher in amount against them than they are worth.

This situation is referred to as the property being underwater, i.e., the liens exceed the market value of the property. To give a brief example, assume the property is worth $100,000 and the bank is owed $110,000. The homeowner could never sell this house without having to bring money out of pocket to closing in order to make up the difference to cover the mortgage. Further assume, however, that you convince the bank to discount its mortgage to $60,000 and you convince the homeowner to sell the house for $65,000 since it clears out the debt and covers closing costs.

In this example, you can obtain a $100,000 property for $65,000. Even better, there are strategies for you to just assign the contract once you obtain an agreement with the homeowner and the lender. So here, you assign the contract to someone else for $90,000, still under market value, and profit on the difference, namely $25,000. This way you never take title or have money out of pocket, and you just receive a check for the $25,000 once the transaction closes.

The short sale strategy benefits the homeowner in that you are helping the homeowner out of debt. Equally important, you benefit as the purchaser of the property in that you can obtain the property at a significant discount and profit immensely.

Many real estate gurus teach the short sale strategy and it is a strategy that works. What is not taught is how to use the electronic bankruptcy filing system to increase the potential of this strategy.

In the old real estate world, the only way you could determine if the liens exceeded the value of the house was to search the county records for any mortgage filings and other liens. Now with the bankruptcy court's electronic bankruptcy filing system, you can tap into the information on PACER (Public Access to Court Electronic Records) at minimum cost. This information is powerful and leads to many investment opportunities using the short sale strategy not previously available.

With PACER, you can go on the claims register of a particular case and review the lien information. The banks have to file claims with the present balances due with a detailed breakdown of all their calculations. Thus, up to date information is easily reviewed on the payoffs on a mortgage, and all this is done from your home computer in minutes. To perform this task previously would have taken hours of search time, drive time and physical effort in searching manually through the county records.

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