With our ever changing market it is getting harder and harder to find a good buy. The trustees have been slower than usual, the REO market has dried up and now even short sale listings seem to have lines around the block to put in an offer. Now I am not saying we are headed back into a seller’s market but it certainly has felt that way this last month. This too shall change. Investors have been thinking of what to do to find property with the potential for profit. They are looking at short sales again. With the M.A.R.S. Regulation and the odd language lenders have added onto their short sale letters, (seemingly to specifically deter investors from wanting to buy), it would seem odd to look at this type of property again. For those investors who plan on buying a property that needs a bit of work the short sale is just like any other purchase. It can just take a bit longer to seal the deal. The short sale deal is also great for investors that want to buy and hold for renters. Make note not to lease and rent back to the seller on a short sale.
There are a lot of “unknowns” when it comes to buyer short sale properties. It is unknown whether or not the short sale lender would ever be able to take legal action against a buyer who violates their short sale letter requirements… do you want to be the guinea pig? I would say no. There are some attorneys who argue that the lender has rights and will sue and there are some attorney’s out there that say they have absolutely no rights at all and the contract would prevail. At this point who knows, we will not see these lawsuits for years. Until then be the same smart investor you have always been and do not violate any portion of a contract that you sign. One thing we know for sure……..in a short sale you may have to sign the short sale letter as the buyer and there may be language in that letter stating you will not sell the property in less than 90 days. If there is an arm’s length affidavit that is signed by you that says you are not related to the seller and that you do not have any side deal and that you are not even “contemplating” the sale of the property in the next 90 days then don’t even think about it….Literally do not think about it. It is much easier to figure out a way to work a short sale into your way of doing business than to force Bank of America to work its way into how you want to be investing… make sense. So don’t be shy to buy a short sale but do it right and follow the letter of the law. Do not risk your business trying to flip short sales when the short sale letter expressly prohibits it. A better idea would be to change your strategy. Buy a short sale that is older and needs work, use the 90 days to fix it up and then sell it for a profit. Or buy a short sale, fix it up and put a renter in it who may want to buy it from you on a carry back or agreement for sale. Again I cannot stress enough to not be tempted to sell, deed or rent the property back to the old owner.
There are still plenty of properties out there to invest in. Don’t be afraid of the short sale! Just figure out a way to make the short sale properties work for your business. Many investors have thought way too hard about how to “work around” the rules and regulations of short sales and are missing out on a great way to find a good investment. The “work around” for those pesky short sale letters is follow the rules as you would any other contract. Buy in the right area for the right price, watch your P&L and turn a nice profit. We have all had to work harder for less money in the last few years and the short sale is no exception. The key is at the end of the day if you can turn a profit on the property, making it a good investment.