What I really like about investing in short sales is you will not risk ANY of your money and have virtually zero liability. That's because you can use the the Option paperwork. You simply secure the option to buy the property sometime in future (usually 6-12 months) and you only risk a non-refundable deposit that is usually about $10. You need to see what is considered "consideration" in your state. This is usually less than $100 for almost all states.
You don't need to worry about this deposit because your end-buyer is also going to pay you a non-refundable deposit that is at LEAST equal to the amount you gave the homeowner for your option agreement. The option money can be used toward closing costs. It's a way of making sure the end-buyer is serious and won't bail once the property is under contract with them. I still recommend you take back up offers too.
Once you get the Option paperwork signed you now have an equitable interest in the property. That means you can sell the property outright or even list it on the MLS with a Realtor. You need to make sure you file the "Notice of Option Agreement" at the county courthouse where the property presides. Once you do this you now have put the world on notice that you have equitable interest in the property. Your next step is going to be marketing to find an end-buyer. This is going to be the person that you sell the property to after you exercise your option to purchase it at closing.
You can sell the property after you negotiate a short sale on it without even buying it. Actually you do buy it AT CLOSING, but that NEVER happens unless you can find an end-buyer to buy it from you. You want to make sure you are within the option time frame you agreed with the homeowner to do this.
Basically the magic on how this works is very simple.
1. You get the option paperwork signed with the homeowner
2. You file the Notice of Option at the county courthouse
3. You negotiate and get a short sale approved
4. You find an end-buyer to buy the property by listing it on MLS or Craigslist, for example.
5. You go to closing and use 1DayFunds money to purchase the short sale for your Option price and then immediately sell the property to your end-buyer by exercising your option.
6. The lender gets paid the agreed short sale price and the end-buyer gets a discounted property.
7. You get paid the difference between the short sale price and what you sold the house to your end-buyer.
The homeowner will not have any issue with the fact you are making a profit and here's why. The property did NOT have any equity when you began short sale negotiations. Only from you applying your specialized knowledge to get a short sale completed did you help the homeowner avoid a foreclosure. You created equity out of thin air from your negotiation skills. The end-buyer is aware the property is being sold after it was involved in a short sale transaction so everything is on the "up-and-up", legal and fully disclosed.
When you use the option agreement for a short sale everything is going to happen on the same day. This is if you are flipping it via a double closing. Here is quick breakdown on the process.
A- B - C (where "A" is the homeowner "B" is you the Investor and "C" is the end-buyer
Here is what's happening.
First Closing A - B (the homeowner is providing you the Investor with an Option Agreement)
B - C (you the Investor are using your equitable interest and marketing the property for sale. You find an end-buyer and exercise your option)
The end-buyer may be using a lender to pay for the property. If that is the case the lenders underwriter for the end-buyer will request a title commitment. On the title commitment it will show you the Investor as an exception on title from the Notice of Option. In other words, the end-buyer will not be able to get clear and marketable title unless the title company allows you the Investor to exercise your option agreement. Once you do that that is how you get paid. You get paid the difference between what you got the short sale accepted (hence your option "strike" price) and how much you sold the property to the end-buyer.
And if an end-buyer is using cash it makes everything even easier because they probably won't even care about a title commitment. It's a nearly an error-proof way of making HUGE BIG PAYCHECKS in real estate investing without risking ANY of your own MONEY while serving the homeowner, the lender and your end-buyer too.
"THE ARCHITECT OF YOUR DESTINY IS YOURSELF"
"SUCCESS WALKS HAND IN HAND WITH FAILURE"