It is simply a sale of real estate in which the sale price of a property is less than the balance owed on the property's loan.
Exactly how does it happen?
Often times this occurs when a borrower fails to pay the mortgage loan on the property. At this point the lender decides that selling the property for a loss is better than trying to collect delinquent payments from the borrower.
Who decides the process?
In a short sale both parties consent, because it allows both the borrower and the lender to avoid foreclosure. This can save the lender additional fees that most likely will not get paid by the borrower. In addition to helping out the lender, the borrower may be able to avoid damages to his/her personal credit.
So what does this mean for Short Sale and Foreclosure Investors?
This means that for all short sale and REO investors who flip their deals, you're going to have to come up with your own funds. Unfortunately many investors don't have their own funds to close the A to B transaction. There are lenders out there today that are prepared to offer the transactional funding needed (also called flash cash) so that you can complete your double closes. They can provide 100% of the funds needed to close your A to B transaction so that your B to C transaction can close and you can collect your profits from the difference.
Most title companies these days no longer allow the funds from your B to C transaction to be used to close the A to B transaction (also called dry funds) and therefore require that you supply (wet funds) to close your A to B transaction. That is where transactional funding comes into play. While there are a few companies out there that offer this service, most ONLY can offer the same day close funds and several transactions require more time. If you're interested in "Transactional Funding" and other resources like these to help your real estate business, then simply fill out the form below.
In addition, Bank of America has been adding some stipulations inside the short sale approval letter which states that you as the investor may not re-sell the property for 30 days. Unless you have your own cash to take down the deal and hold for 30 days, that will kill your deal and most times, they are refusing to lift that restriction. Find out that there is an alternative so you don't lose the deal or your profits.