June 26, 2012 Josh Cantwell (2) There’s been a lot of attention in the news over the last year+ about short sales and how they are nearly impossible to do anymore. Well, I’m here to tell you that in my business, short sales are thriving. Short sales always have been, and continue to be, an integral part of my investing strategy. That’s as true today as ever. Of course, I’ve had to make some adjustments and change with the market and bank regulations, but that’s a natural part of being successful at any business. The one constant is that in each short sale situation, I have a crystal clear exit strategy that drives my approach. Having an exit strategy in place prior to entering into a short sale transaction will dramatically increase your success, and your profits. Years ago we used to be able to rely on back-to-back closings with short sales. In fact, we pioneered many of the techniques used throughout that process. Today it’s different. The rules are changing every day and ultimately, are becoming more prohibitive for real estate investors. We had to change the way we approach short sales to play within the rules the banks provide. Traditional back-to-back closings are a thing of the past. Most major lenders have instituted anti-flipping language into their short sale approval letters. Now you have to hold a property for 30-90 days, depending on the lender. So what do we do? It boils down to this: You need to be able to capitalize on commissions and creative strategies to profit from short sales. Everything we do is 100% legal. We don’t use any trusts or creative techniques anymore because of the new restrictions in place. Know this: you’re going to leave a footprint with everything you do. You have to be prepared to pay the price, so with every action you have to be able to defend your decision or action. If you can’t, there are fees to pay. We didn’t want to pay fees, so we play within the rules. Today, short sales are not for the faint of heart. You need to be an experienced real estate investor to successfully negotiate and close short sale deals. But that doesn’t mean that new or inexperienced investors can’t get in on the game somehow. One of the fundamental concepts we teach to new investors is to be a bird dog – a deal acquisition specialist – for others. This is about being connected and knowing the right people. To do this, attend your local REIA club meetings and learn who the local real estate investors, attorneys, loan modification specialists, real estate agents, brokers are. Bringing those people leads can result in commissions or finder’s fees in your pocket. If you’re an experienced short sale investor, I’m going to outline the 9 short sale exit strategies that we use to exit out of short sales. Keep in mind that currently, there are over 50 short sales in our pipeline at the brokerage. Before I reveal our 9 short sale exit strategies, let me share our three favorite lists that we use for marketing for short sale leads: Notice of Default list List of Expireds – these are properties that someone has already tried to sell but are no longer on the market. These are motivated sellers. PACER (pacer.com) – to locate a list of people in Chapter 7 bankruptcy. The perfect lead for a real estate investor is someone who no longer wants the house, has tried to sell it, has filed for bankruptcy, is not responsible for the mortgage and has a vacant house. 9 Exit Strategies for Short Sales To successfully use these strategies, it’s important to have a solid network at your disposal. You need to know a licensed real estate agent, attorney, real estate investor, loss mitigation specialist r negotiator, among others. Give yourself the opportunity to monetize every lead. Marketing services agreements or PIC agreement (preferred independent contractor) – Get paid for being an acquisition specialist for others. Consult with your lawyer to understand and adhere to your local rules. Agreement for marketing, consulting fees, etc., anything you can monetize. Align yourself with others and hand leads off to them. Does involve some work but you can do this immediately. Flip back-to-back – Only works when you’re working with a short sale bank that does not have resale restriction and you have a cash buyer. This works best in middle- to lower-end properties in first tier properties, and you are selling to investors who are paying cash. Buy, Close and Wholesale – Negotiate the short sale, raise private money, partner with someone who can fund your transaction and wholesale to another investor. Buy, Close, Hold, Fix and Resell in 30-90 days – We do this frequently. Partner with other people who can close the transaction. Build up case studies to show possible ROI for potential funding partners. Buy, Close and Sell on Lease Option – Rent-to-own; Profit can be great. Buy a property, close, fix it up, wholesale to a landlord that is working with a lease option buyer, get a down payment from lease option buyer, we help find the buyer. In today’s market where many people can’t get loans. Selling properties this way can be very profitable and there are lots of people with investment capital that is not earning interest in the market, so they will put the money to work with you as an equity partner. Short Sale Processing Fee Paid by the Seller to the Attorney – Pay an attorney to negotiate the short sale. Seller pays attorney a fee, who then contracts with a short sale negotiation service; the attorney pays for the contracted service. Short Sale Processing Fee Paid by the Buyer – Buyer pays a fee to the short sale negotiation service or attorney for short sale negotiation services. Addendum is put into the MLS that the buyer must sign when they make their offer – 1-5%. No surprises on the additional fee. Listing Agent Commission Buyers Agent Commission Remember, you have to position your business so you’re ready to capitalize on these strategies. But once you understand your options, the possibility for making real, substantial profits from short sales, even in today’s challenging market, is very attainable. To learn more about how you can successfully invest in real estate with short sales, even in today’s market, visit www.acceleratedinvestor.com.