How to Flip a Short Sale

The way real estate investors dispose of their investment properties has changed Flip a Short Saledramatically over the past few months. Laws and accepted closing practices are changing all the time. What was perfectly acceptable a week ago, may be considered unacceptable for today’s planned closing.

“This happened in our real estate investing business, concerning the use of land trusts,” says, Brian Ellstrom, a real estate investor from Gold Star Homes in Hudson, Wisconsin. “We had 7 properties ready to close, but our title company’s underwriters decided that they would not close any transactions involving land trusts.”

Ellstrom’s team had to go back a re-negotiate all 7 properties with the foreclosing lenders to take the land trusts out of the transaction. Subsequently 6 off the 7 transactions did eventually close successfully.

This is just one example of how quickly and dramatically practices change in the industry. A few months ago, it was common practice for real estate investors to buy and sell a property on the same day. This was often called flipping–the buying and quickly re-selling of a property (usually for a profit). The ability to buy and sell a property on the same day has been virtually shut down by the title insurance companies today.

There is nothing wrong, fraudulent or illegal about the same day close. “We have not done a same day close transactions since April 2010,” adds Ellstrom. “It just is not worth the hassle or trouble to convince all the parties involved in a real estate transactions that what we are doing is ok.”

Most real estate investors are now separating their transactions by at least one week. For example, one real estate trainer teaches his students to buy on Monday, then sell the following Monday.

Many lenders are also adding their own resale timelines to their short sale approval letters. Wells Fargo and Bank of America, for example have a 30-day no resale clause in their short sale approval instruction letters. That means any property purchased from these lenders must be held for at least 30 days. Other lenders have a 90 day resale requirement. This is more common with foreclosed properties that are lender owned and have already been through the entire foreclosure process (REOs). These lenders are causing real estate investors to move back to buying and holding, leasing, rent-to-own or rehabbing property strategies.

In addition to separating the buying and selling of the properties by at least a week, most real estate investors are using one attorney or closing company to buy their properties and a second attorney or closing agency to handle the selling.

Another thing real estate investors should do to make sure there is no question about their transactions, is to make their short sale offer to the foreclosing lender before going out and finding a new end buyer. This practice will eliminate any possible appearance of impropriety.

So, today, here are some key suggestions for “How to flip a short sale”

  1. Find a property that needs a short sale in order to sell in today’s market
  2. Analyze the property/deal and make a short sale offer to the foreclosing lender(s)
  3. Secure financing and determine how you will close the transaction (when accepted)
  4. Determine whether you want to hold or dispose of the property.
  5. Market the property fo find a buyer.
  6. Negotiate the short sale with the foreclosing lenders.
  7. Day 1: Buy the property (Close the buying transaction) at Attorney 1 or Closing Company 1
  8. Day 7 or Beyond: Sell the property to your new buyer at Attorney 2 or Closing Company 2

Like all businesses, the environment and markets in the real estate industry, is always changing. To be successful, you need to adapt and change accordingly.

To learn how to successfully close short sales, get this free tutorial from Click now to start learning what other successful real estate investors and Realtors are doing to close more deals and get paid! Go to:

Article Source:


Comments are closed.