I know everyone has heard all of this talk about investors making thousands and thousands of dollars on short sales.  Well I can stand here today and tell you, from my own experiences, that it’s true.  Just from the last 30 days, we have been able to amass over $10,000 in profits from two short sale deals. 

Marketing for short sale leads and negotiating short sales are beyond the scope of this post.  But I will give you a few resources that I’m sure you will find beneficial in your efforts to find leads and get them negotiated.  My preferred method of generating leads is marketing to homeowners who are 60 days late on their mortgage.  You can obtain this list from a reputable company named Yellow Letter.  They sell Pre-NOD leads to investors and can also mail out letters to these individuals for you for a fee.   

As for short sale negotiations, I would recommend using First Choice Loss Mitigation.  They negotiate short sales for buyers, sellers, Realtors, investors, attorneys, and lenders.  You can also partner up with them and not only will they negotiate the deal for you, but they will assist in bringing in a buyer to buy the property.  The wonderful part about their service is, you don’t pay them anything upfront and they are only paid if they negotiate the deal and it is closed.  Your only concern would be bringing them the lead and collecting your check. 

Now, how to make $10,000 or more on your next quick turn short sale, your exit strategy.  Of course you can’t negotiate a short sale without having an offer on the property.  Once your company has submitted an offer and the lender has ordered and completed the BPO, you want to have the seller cancel the listing with the Realtor.    Now the contracted buyer can re-list the property with the same agent at a price higher then his/her short sale offer amount but lower then the original seller’s list price.  The listing should state in the listing remarks “owner by contract”.  Disclosing to the potential buyer that you haven’t actually closed the deal with the original seller yet is an important aspect of the deal.  Also the listing remarks should state that this is an all “cash purchase, no financing”.  In order to quickly turn the real estate for a profit, the end buyer must use cash or a lender that’s on board and won’t have title insurance issues. 

Using this method will allow the MLS to bring you a buyer quickly.  Your listing should have an addendum attached that discloses to the potential buyer the entire process of the closing.  This includes how you will be using their funds to close on the A to B transaction and then closing the B to C transaction.  With ”A” being the original homeowner, “B” being you the investor, and “C” being the end buyer.  Be sure that your spread from your purchase price and your sale price are enough for you to pay some closing cost and agent commissions.  Also your short sale offer should be low enough so that you have room to increase/negotiate your offer amount and still make a decent profit. 

The list price should be higher then your minimum sale price.  If the least you will accept for a property is $100K, then you want to list it around $110K.  This will give you some negotiating power. 

Once you receive the short sale acceptance letter and an acceptable offer on the property, you can proceed with your exit strategy and schedule a closing.  By this time you should have secured a closing agent and performed a title search.  A number of closing agents won’t touch these type of closings because they don’t understand them.  But as long as your end buyer is using cash and you fully disclose all aspects of the deal, you are protected from fraudulent actions.  We are closing deals like this all the time and have attorneys that we use in Greensboro and Charlotte, NC that we can refer to you if needed. 

At the closing, there are two HUDs for two separate closings.  The first HUD is the closing with the original seller, the short sale.  This closing is executed with the end buyers funds.  The second closing is the closing with the end buyer.  The great part about this is that you really never take title to the property, but you get a pass through title.  Also if the short sale is negotiated well, the original seller/bank will pay for some of the closing cost while your end buyer pays for the remaining cost. 

Your profit is the spread of the A to B purchase and the B to C sell.  You can easily quick turn a short sale for $10K to $20K+ profit on each deal.  The key is to use a good loss mitigator, have a well educated listing agent, and influencing the BPO. Once these factors are met, you can create great spreads on all of your short sale deals and make boatloads of cash.