A little skepticism about Short Sales is a healthy thing. I understand that a lot of people out there are unfamiliar with how they work. That’s why it’s so important for real estate investors to get the right training and be able to answer questions like the ones I’ve been blogging about for the past week.
Just last week I received a letter from a lawyer who advised her client (the homeowner) against proceeding with a Short Sale with a real estate investor. I’ve been posting my point-by-point responses to the attorney.
Here’s another excerpt from the attorney’s letter, followed by my response:
The only way such a transaction could possibly be insurable is if the following requirements have been met:
1. There are no violations of any restrictions listed in the short sale payoff letter or closing instructions.
2. There have been no misrepresentations as to the value or ownership of the property to the existing lender, the new lender, or the purchaser.
3. All disbursements must be made exactly as stated on the HUD-1 settlement statement, and only to parties involved in this specific transaction.
4. Each half of the simultaneous closing must be kept separate and stand on its own. The sale from A to B must be fully funded and disburse with money coming from and going to all appropriate parties. The sale from B to C must also stand on its own. The money from C’s lender must not be used to fund any portion of the A to B transaction.
Yes, Ms. Attorney, you’re right on. Clearly you’ve read the advisory letter from your title underwriter (from where you appropriately copied these items). YES – this is how back-to-back Short Sale transactions should be structured and if the investor is appropriately trained (the way I teach it) then this is exactly how the investor will want to do it.
Like I said, a little skepticism is a healthy thing. We’re in absolutely unprecedented, historic times for the real estate market and especially for Short Sales. And yes, there are a lot of scams and bad-faith opportunists out there trying to rip people off out there.
However, when done the right way, Short Sales are win-win opportunities that only work if the deal works for all parties. If your seller is not on your side cheering for you, then I suggest you go find another house!
How do you set things up so your Seller is “cheering for you”? That’s one of the major real estate investor skills I teach!