Short Sales: My First Four Lessons

Short Sales are an interesting phenomenon.  In a Short Sale, a property is discounted such that, with lender’s approval, an owner sells a property for less than what is owed.  This is hard to believe. However, these days, this phenomenon is commonplace.  This is how I got hooked on short sales.

Lesson #1:

To me it still feels like yesterday.  Time flies.  This happened in 2004.  After studying as much as possible about short sales, I decided to go out into the market, search for properties and actually do flips.  After a couple of months, I learned my first lesson:  Only work with motivated clients, who I can help and who appreciate my efforts.

Lesson #2:

So I got my chance.  This is how it happened.  I was driving through a neighborhood which I was considering for my marketing efforts.  As I was driving by, I noted several properties which I though would be worthwhile making offers on.  I even jotted down some addresses.  That same afternoon, a Friday, I got my weekly NOD list.  To my surprise, one of the properties on my list was in default.  I located the homeowner’s number.  To my even bigger surprise, the owners were friendly to me, and better yet, open to my proposal.  They had just being discharged for bankruptcy chapter seven.  Mistakenly thinking they no longer owned the property, they had moved out.  They made it clear that they wanted to save as much of their credit as possible.  They wanted to avoid foreclosure.  Here I learned my second lesson:  Clients need to be open to being helped.

Lesson #3:

I made an offer for $160K.  That meant that the first mortgage would get paid in full and the second only would get $1000.  The second mortgage holder made a BPO and the property came out at $200K.  This was almost $100K less than a similar property a block away that had just been restored.  As such, there was around $30K of equity.   Not bad, but not good enough for a flip.  So I asked the bank rep the following:  If I buy the property now, without an agent, would they discount the cost of an agent’s commission and closing costs at a total of 7%?   They said yes.  That gave me an additional $14K to play with.  That same afternoon I placed a sign at the property for $224K.  The next morning, a Sunday, I had a cash offer for $220K. 

Monday morning I met the end buyer.  He was fresh out of college, but was well coached by his sister, a mortgage broker, and his dad, a real estate attorney.  I could have been greedy and asked for more.  But here’s the third lesson:  Greed kills deals.  Cash closes deals!

Lesson #4:

It felt like an eternity, but it only took two weeks to get the settlement letters.  I closed the transaction in a double escrow.  Without any cash down, I made around $24K!  Not only that: The end buyer got a great deal.  The homeowner avoided foreclosure and bought another property a year later!  This taught me my fourth lesson: Happy clients give great testimonials!

Short Sales have been good to me.  Sure they are a bit of work.  But what isn’t?  Today, as an agent, investor and trainer, I entirely make my living out of short sales.  Presently, and for the next several years, short sales will be over 40% of the residential real estate sales.  That is a huge percentage.  Basically, the short sale flood has no end in sight.  Go with the flow: learn how to do short sales!

My Proposal

I would like the opportunity and privilege to be your short sale trainer.  Get Short Sales A-Z.  This will be one of the best real estate investments you will ever make.  Whether you are an agent or investor, you will learn all the ropes of the business.  All this can be done in one afternoon.  So in a few hours, you will be good to go.  After that, all you need to do is start taking action.  Deals are abundant, so there is no lack of business.

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