Short sale/ Flip

I am looking for a way to save my home, and am looking for options. I am currently underwater in my home and am in a 3yr arm which will be adjusting in January. Here is what I would like to do:

  1. Negotiate with my conventional lender to do a short sale for “x” amount of dollars below appraised value of home.
  2. Obtain a pre-approved letter for a FHA loan (enough to cover appraised value of home)
  3. Use a private investor (cash buyer) to purchase home from me to pay off bank for negotiated short sale amount.
  4. Purchase home back from private investor at appraised value using my new FHA loan (they make a nice small profit).
    4)Steps 2 and 3 are done doing a simultaneous close.
    5)Now I own my home and am no longer underwater, and in a 30 yr fixed loan.

Any of you seasoned investors think this will work? I would appreciate any advice given.


It really never ceases to amaze me how many people think it's ok to defraud your mortgage lender.

If you are in foreclosure the law say’s that the owner in foreclosure can not make a profit from a short sale and the transaction must be at arms length.

It is illegal for a real estate buyer to sell a short sale property back to the original owner.

FHA is going to see your name on title showing a short sale weeks or months earlier and refuse the loan as it is illegal for you to buy back your own property.

So your looking for someone to conspire to commit fraud who wants a felony on there criminal record, huge legal fees and a few months to a few years in prison.

Hm, not!!!

Please do not conspire to do things which are illegal, immoral and unethical!

Now go do the right thing.


Gold River

If you are in foreclosure the law say’s that the owner in foreclosure can not make a profit from a short sale and the transaction must be at arms length.

I agree with your sentiments however I am not certain it is illegal… Huge difference between illegal and the lender wont allow it and will ask you to sign documents saying you’re not doing it.

Heck this type of thing goes on all of the time and when it doesn’t work out for the buyer they claim foul and everyone looks at the investor as the bad guy…

Lately and maybe I am the only one frustrated at this point… But the friggin lenders are bending over for we Investors but not giving the time of day to the borrower… When in reality the borrower may be the best option for the lender. If they would just reduce principle balances… Rather then just an interest reduction…

Maybe they’re afraid John Locke will buy them all up as subject to investments if they lower the principle balance… lol

Ive never heard of anyone doing this succesfully. I would think it may work as long as the bank never found out your intention was to buy it back. Its worth a shot I would think.


Give it ago… I have done this a few times for people and friends of mine…
It has worked everytime but once.
I would recommend contracting someone to deal with the bank and not you (the home owner), You can still be incontrol of everything and totaly conduct the entire operation but let the bank think that someone is buying off of you and that is the only way out for you and the bank…
But even though this is done all the time be prepared for a few things first:
i) the deal could go sour
ii) the investor might want to make a profit off of you
iii) you might have to move and the shortsale might not happen
iv) could trash your credit and owe for the balance amount of the deal

regarless of what takes place just be aware of what “could happen”…
But I would certainly Give it ago!!!
besides what is the option here anyways. Do nothing??? that is even worse;-)

Good luck!!!

I appreciate all the feedback. The lenders are very stubborn. They are not doing anything for people who are doing there best to remain current on their payments. The only time they are willing to help is when a homeowner is in default. I have a 3yr arm that is maturing this year, and have been very good with my payments and know that when this happens will only cause problems on top of my house being in the negative. So I tried to be proactive and try to get a loan mod, with no success. That is why I am looking for creative alternatives. If you ask me the only people that are committing fraud are the lender themselves. They took our government money in exchange to help homeowners, but I have yet to see it happen. They took the money and ran and never looked back.

Frauding or not frauding depends on how you percieve and how you’d like to bend the law by faciing some situational factors. Maybe it’s one thing to me whereas it’s different to everybody else. Option or no option doesn’t matter. This is just my personal opinion. Nothing else.