You may have noticed that I’ve been blogging all week about this letter I received. It was written by a skeptical lawyer advising her client (the homeowner) not to go ahead with a Short Sale deal with a real estate investor.
I’m worked up! I understand that this attorney is just trying to serve her client as well as possible, but there’s a lot she doesn’t understand about Short Sales. That’s why I’ve been going through the letter point-by-point explaining the REAL DEAL of Short Sales (and why you NEED to attend my Short Sale Breakthrough 09 event in Orlando, Florida July 27-29). Here’s the third excerpt from the letter:
3. This arrangement he is proposing is becoming very prevalent. Our Firm is aware of many “short sale programs” wherein an investor attempts to make lots of money with little or no work by purchasing and selling property through short sales. The programs involve the investor entering into options or similar contracts with the homeowners for the exclusive right to purchase their property for a period of time. The investor negotiates a short sale with the lender, convincing the lender that the price they are offering is the market value of the property. The investor then finds a buyer for the property at a much higher price. Once the buyer is lined up, the investor buys the property from the seller, pays off the seller’s mortgage at the higher short sale rate, and simultaneously sells the property to the buyer at the higher price, pocketing the difference. In most cases the original lender is not told the buyer is flipping the property on the same day for thousands more than the lender has been told is the market value of the property.
You’ve got it 100% correct. That is exactly what the investor is attempting to do. My only problem with this paragraph is the suggestion that it involves “little or no work.” Sure, when it is all said and done and the seller and investor reach a closing table, it looks like there was little or no work, but obviously this attorney has never negotiated or otherwise been intimately involved with Short Sales that require a tremendous amount of work and time.
Negotiating a Short Sale with a lender can often take several months of frustrating back-and-forth submittals and re-submittals of information, and rounds of negotiations. The work is so frustrating, difficult, and time consuming that many real estate agents and investors don’t want anything to do with it (usually the one’s who don’t have professionals doing the work for them).
When an investor makes it to a closing and successfully buys and sells a property and earns a profit, it is only because they have added value in structuring a transaction that would not have occurred but for their efforts, knowledge, and relationships.
And their profit – even if it, in hindsight, appears egregiously large – is well earned. In fact it is that profit motive that brings the experience, work ethic and knowledge of an experienced investor to the deal in the first place.
P.S. Ms. Attorney, if your client had the experience and knowledge to fix their situation, presumably they wouldn’t be talking to you or the investor in the first place.
P.P.S. These are EXACTLY the kinds of questions and issues I’ll be going over at Short Sale Breakthrough 09 in Orlando on July 27-29. See you there!
