Using options in short sales

Hi all…

I’ve read now a few times where investors are using options in their short sales. What exactly are you doing here?

Are you placing a monetary value on the option? Typically, when I do options, we have the option to buy at a set price. Would you do this in a short sale when you don’t always know the final price until approval?

I can see how this would avoid seasoning issues, as you ahve a vested interest in the property, especially if you record a Memorandum of Option with the county. Are lenders requiring any seasoning on those options before being able to sell to your end buyer? How is title being shown on the commitment? Seller in title with the interest of ABC Corporation as Optionee??

You would still need to do two closings though correct? Once to payoff the shorting lender and one to your end buyer. You could use the funds from the second to pay for the 1st as well in this case correct? Do the same issues of funding lender disclosure apply?

Thanks in advance guys!