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You’re right that some situations are better than others for doing this kind of deal (with larger equity in the house being better). And I see you suggesting that there are investors who take advantage of naive homeowners, which is also true.

I don’t think my friends would do what they do if they weren’t helping people in the process. They help people out of problem properties, and they help others get into the properties. They know what they’re doing, and they make sure the other parties know what’s going on as well.

Sellers that approach my friends about the property — yes, my friends are the ones that are approached, not the other way around — usually already know that foreclosure is on the horizon and are motivated to avoid it. The sellers may be uninformed or not, but in any case they want out of the property. It’s not a pleasant process for the seller, but without many other options available, it behooves the sellers to work with my friends if they want to avoid foreclosure.

Do they take advantage? Well, they’re in business to make a profit, but if they skin people word will get around and people won’t want to deal with them. They know what they’re doing and know how the systems work, so that works to their advantage, but they’re not predatory.

Knowing how the system works also lets them get to the right people to perform a short sale. (Actually, they outsource that part sometimes.) And yes, banks will do a short sale rather than go to foreclosure if they stand to lose less with the short sale. They just haven’t had to until recently, when the housing market has softened.

Anyway, long response, but there are real estate investors that are as legitimate and as over-the-table as your pastor, and I don’t find it hard at all to rationalize profiting from it as long as folks feel good about the transaction.

Most of the real deals are really taking advantage of uninformed sellers with equity and avoiding those without, if you like being in that business and can rationalize your profiting from it.

If the lender takes the loss, this tips the property toward being a deal because the owner is no longer upside down.

The lenders recently did not do short sales because the appreciation in the property gave them a cushion. But with falling prices, this cushion is going away, and lenders are warming up to short sales.

Is there a way to create win-win-win deals?