Hi All. This is my first time posting here. I am relatively new to REI. I have done a few rehabs in the past, but want to become a more active investor. In particular, I want to focus on flipping short sales and I have a few questions about this.
To me, short sales seems like one of the best opportunities out there right now. There is certainly an abundance of deals available and will coninue to be for the forseeable future. With the use of transactional funding and back to back closings, it seems easy enough do a deal with little to none of your own money and little to no risk.
Obviously, negotiating with the banks to accept your deals is a stumbling block that takes time, but once you have figured this out (or have teamed up with someone who has already had success at it) then it just becomes another step in the process. Finding an end buyer to buy your deal and have their financing in place in the required timeframe to close once the short sale is approved seems like it could also present a challenge (maybe the biggest challenge of the entire transaction).
However, once you understand the mechanics of the short sale transaction from start to finish, and have a “system” to carry out the appropriate steps, it seems like there is no shortage of deals and one could get many deals under contract in a very short time, and potentially make very substantial profits, while also helping homeowners to avoid foreclosure. Obviously, there is more to it and a lot has to happen to accomplish a successful short sale, but in general it seems like once you “figure it out” you can replicate it over and over.
So my questions - Is it really as simple as it seems or am I missing something? What are the major pitfalls to watch out for? What has been the experience of others that are doing this?
Thanks, and I look forward to your input.
You have a clear picture, and short sales are going to dominate the market I believe through early 2012. I strongly suggest outsourcing the negotiation to an experienced negotiator. I provide transactional funding so see alot of deals. An experienced negotiator is more likely to get better spread and negotiate away or down any deficiency. If acting as an investor you definately do not want to have the homeowner participate in the HAFA program.
The end buyer can be the challenge. To use transactional funding most are cash buyers, using hard money, or now FHA is an option. If you can find a portfolio lender without title seasoning requirements in your area you will be far ahead of your competition. Some convntional lenders will lend back-to-back when the buyer has 20% down. I may have a national lender without seasoning within a week.
Ted, Thanks for the heads up on the extended term transactional funding, I will sign up for your mailing list.
Ted, Thanks for the insight and the info. I will be sure to check out your website.
Does anybody else have any comments or suggestions? What is working and what isn’t.
i would like to know what to do when you made an offer on a short sale and the bank takes forever to send a letter of acceptance?
Banks take forever and that is a blessing most of the time… Don’t get in too much of a rush… Use the time to eliminate the DOM…
To Carol: I agree with Michael. Sometimes it may take a bank years to get you an approval (Indie Mac, although they are out of business).
To GP: Unfortunately you are correct in that finding an end buyer who can get approved not too early for your short sale approval and not too late is the most difficult task.
This has always been an issue for me as well. I don’t know how many times I had to ask for an extension from the bank because I didn’t have a buyer in place or their loan wasn’t approved yet.
Just roll with the punches and get your feet wet. Find a good system to get your buyers in place and make yourself some money.