Need advise on assignment of contract involving a short sale deal with the bank

The easiest way to close on a assignment deal on a short sale through the bank.


You can not do an assignment of contract on a property being sold as a short sale! Federal law prohibits selling a short sale to an investor and requires a short sale be to an owner user as "Owner Occupied" sale at arms length.

This is because the seller “Owner in Default” will be assessed the short fall and be required to pay earned income tax on the shortfall.

Federal law also says and buyer of a VA, FHA or Farm Bureau property must hold the property for 90 days before they can resell the property so buying one of these properties to wholesale / flip does not work!

The contract for one of these properties must close in the contract parties name, it can not be assigned and close!


There are ways to get around this, but it’s much more tricky. Brainstorm with your closing attorney and see what you can come up with. If I were doing this, I’d ask my attorney questions like: can I buy it in a LLC and then sell the LLC? Can I do a double close? I personally don’t like dealing with banks, so I’d go with the easier deals that don’t involve the tricky business like this… but if it’s a hot deal, it might be worth the extra work. Best wishes!


 It's not attorney, it's federal law. You lie, you go to jail do not pass go do not collect $200 dollars!

You have to be a owner occupied buyer to purchase a short sale!

You can not lie on your HUD1 period! You can not lie in your contract! You can not double close! It is against the law for a title company to double close (Transactional Funding) a short sale home as it can not transfer by law for a minimum of 90 days!

Please don’t encourage your fellow investors to break the law!


So what idiot made up that law that short sale buyers have to be occupants. Many of the short-sales that I’ve seen are distressed needing repairs and upgrades. The vast majority of buyers want a turnkey property.
It’s Investors that will buy and rehab and update these properties and keep this economy cooking.
It’s a fact that some investors skirt this law, because, it’s ridiculous, and I’m sure the penalties are minor.
Personally I don’t deal with REO’s, life is much easier dealing directly with homeowners.

Occupancy is not required in effect. Just the intention. It can take 90 days to resell a house anyway, and by that time, any restrictions are gone.

I know at least three investors that prospect for short sales on dog houses, and there’s no way, they’re able, much less willing to move into these hell holes. They buy them, and resell them as fixers after the allotted time passes, and move on. Or they fix them, and rent them.

One of these investors personally trained me on how to flip these deals without getting in trouble with the law. First thing, don’t plan on an immediate flip. Second thing, stick with dog houses. Nobody pays attention to what happens after a sale. The bank sure doesn’t.

It’s the same with securing FHA owner occupied financing. It’s not unusual for an investor to apply for an o/o loan, and fail to move into the house. Unless you’re just a gross offender, no judge is going to rule in favor of the FHA, if an investor gets o/o financing and them rents out the house. Same with short sales. Any number of things can happen that the investor cannot practically move in, and must rent to cover the mortgage. And covering the mortgage is the major issue in favor of the investor.

I know of a lady that was a serial o/o loan abuser, and the worst she got was having to sell her houses. In her case, she made money. However, she was hard-pressed to try that twice.

****EDIT The lady in question was forced to refinance out of the o/o loans, not sell the houses.

I’m not saying it’s OK to break the rules. I’m just saying the rules are breakable in many circumstances.