Question:
Tony,
What is the best way for me to learn shorts? There are many in my area—some on mkt for LOTS of days. 😮
I would like to flip them to an investor but am clueless how that all would work—margins, time of assignment—bird dog it. Totally clueless.
Thanks!
ML
Answer:
The short answer is… by doing them.
The long answer is for the most part, Short Sales, are simple if you plan on holding them as long-term rentals and complicated if you want to do anything else (i.e. wholesaling them to other investors.) This is actually a very loaded question because there are too many directions you could go with Short Sales. (Too many moving parts!) Some may end up being profitable in the short run, but problematic in the long run. The problematic part is that if you are hoping to tie up Short Sales without initially closing the purchase escrow and then wholesaling them to other investors (again without closing the initial purchase escrow) you may find yourself being interviewed by an FBI agent about the fact they may consider your actions to be a fraudulent transaction where you are intending to defraud a federally insured lender. Some investors ignore this issue and deal with Short Sales as if they were an REO, and wholesale them without question. Some believe that if they disclose that they are purchasing the property with the intent of re-selling it with a profit that this is sufficient and absolves them from future legal consequences. Keep in mind that we are not talking about what’s fair or about your actual intent, we are simply discussing the possibility of your actions being interpreted by the Feds as fraud. Now, I’m sure there are many investors involved in flipping (wholesaling) as well as retailing Short Sales that have not (to date) experienced any problems whatsoever, however, I took the time to call the FBI and personally interview two agents. After spending two hours with them, the bottom line was when I posed the question, “if I purchase a Short Sale and re-sell it immediately to another investor for a profit, could that be construed as fraud?” Their response, was “absolutely, yes.” So therefore, as I previously mentioned, I only buy Short Sales to hold as rentals for at least 12 months before re-selling them to anyone. Although you may find on the internet plenty of information/advice/suggestions from “investors” on how to flip or wholesale Short Sales, I strongly caution you to do your own due diligence so that you are aware of the potential risk you might be taking which could come back to you bite you years after you’ve spent your Short Sale profit. Keep in mind we pursue Short Sales on a daily basis and buy them often. Many can be negotiated profitably without much trouble. The easiest way to learn and understand what’s involved in the complete process of a Short Sale (from beginning to end) is easily and accurately learned by taking a class offered by a local title company which are typically offered almost every month to Real Estate Agents and anyone else who wants to attend, typically for free or for a nominal fee.
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Thank you for your question.