When people flip houses, do they ever buy short-sale homes? Or are they almost always bank-owned or HUD?

Asked by Jordanna Bentley, Livonia, MI Fri Oct 1, 2010

I realize that most homes that people buy to renovate and re-sell are bank-owned or HUD. But is there any chance of successfully purchasing a short-sale house for the same purpose, and for an amount that allows a worthwhile profit to be made? Even with a short-sale expert, does it always take 3-4 months to close such a sale?

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17
Dwellings by…, Agent, Plymouth, MI
Fri Oct 1, 2010
Jordanna- Like I said, you need to find one that is pre-approved/ the buyer backed out. They are a few banks out there that wil respond quicker than others and get you an answer back within 1-2 weeks, but they are few and far between. With the pre-approved/ buyer backed out scenerio you are bypassing the usual 3-4 months for an answer. When these situations occur, it is usually stated right in the listing remarks.
Web Reference:  http://www.realtorboyd.com
1 vote
Tim Krukowski, , Northville, MI
Fri Oct 1, 2010
Short sales have very little to do, in fact, with buying or selling a home. They are more an exercise in mental and physical torture. None of my investors have made short sales work in their strategies.
1 vote
Bob Jakowini…, Agent, Livonia, MI
Sun Oct 21, 2012
Yes they do. From my experience they make the offer and do fully know their local market (value of homes). Then they do not really count on it until it closes and is in their hands. None of my investors have done flips with shortsales but I have seen others in the area do it several times. As far as profit to be made that is very easily done sitting down with your real estate agent and going over the details. Profit really has nothing to do with the type of purchase it is
0 votes
Andy Hargrea…, Agent, Plymouth, MI
Fri Oct 1, 2010
Some smaller banks will issue a amount to minimally be accepted, but even then, it is not accepted until they approve that final HUD and amount.

Let's say Bank A says minimal proceeds to be $100k. Appraisal comes in at $90k. Bank will then need to issue another approval based on the appraisal.

I think he was suggesting that it's never final until the actual approval letter and HUD are to the title co. and we're sitting at closing.
0 votes
Dwellings by…, Agent, Plymouth, MI
Fri Oct 1, 2010
Andy makes several valid points. Investing is not for the faint hearted and you are not going to find the answers on any forums. Best bet is to find someone you trust who has had success in doing it and learn as much as you can from them and let them guide you along the way.
Web Reference:  http://www.realtboyd.com
0 votes
Dwellings by…, Agent, Plymouth, MI
Fri Oct 1, 2010
No such thing as a pre-approved short sale? Funny, I 've got one listed right now where the bank already told me what they wanted before I even had a purchase agreement to submit to them. Sounds pre-approved to me. Not the first one either. Yes, when the buyer backs out some banks will start the process over from the beginning, but not all.

Not making assumptions, basing on experience.
Web Reference:  http://www.realtorboyd.com
0 votes
Andy Hargrea…, Agent, Plymouth, MI
Fri Oct 1, 2010
Well we're pretty sure you've made up your mind to do this, but in all reality, you need to pick one person who you trust and not seek advice from online forums, in my opinion.

In certain circumstances, HUD and bank owned homes will make you sign forms which state you intend on using the home as your primary residence. If you sign that form and then "flip" the house, you're going to find yourself in a lot of trouble for making a purchase under false pretense, as many banks have investor only bids after owner occupants.

Like many have said, there is no such thing as a short sale expert. Each bank, each seller, each situation and circumstance are different and cannot be generalized. One bank and loan could take 2 weeks, whereas I had one last week close after 9 months and 21 days.

You also need to define "worthwhile" as what may be so to you may not be to another.

As I have said before, set your sights low -- buy something solid, which needs low out of pocket expenses and try to sell that for a MODEST profit.

Any investor (especially on their first try) has MANY things to learn and more often that not, they're painful experiences. I'd advise take whatever amount you think it will cost and DOUBLE it. Then, take any profit you thought and REDUCE it by half.

If you can stomach what is left after this, then welcome to the world of investing.
0 votes
Derek Bauer, Agent, South Lyon, MI
Fri Oct 1, 2010
There is really no such thing as a, "pre-approved," short sale. When a short sale approval is generated, it is specific to that particular purchaser and those specific terms. The process may be shorter for the next buyer that comes around, but that is not a given.

I've seen a bank approval a short sale, the buyer couldn't perform, and when another buyer surfaced less than 1 month later, the process started again and because a different BPO was ordered, they required MORE money than they approved in the previous offer.

So, don't make assumptions when it comes to short sales.

Derek Bauer, SFR and Advanced CDPE
Web Reference:  http://DoorToDreams.com
0 votes
Kevin Olson,…, Agent, Colorado Springs, CO
Fri Oct 1, 2010
It depends a lot on the area. Colorado Springs has plenty of short sales that are bought specifically to be flipped. The wait period is still typically at least 2 months at best, but they aren't wasting time or money during this period. Typically they are working on one or more houses while waiting for the next one, so it really doesn't hamper the process at all.

Short-sale experts don't exist in real life, only in writing and biographies. If you've done several short sales, you may be experienced, but you are not an expert. No two deals are alike, and learning from one doesn't make the next one go faster... unless you messed up or didn't communicate properly on the first one. You as a "short sale" expert have no impact on how long the bank chooses to take in a short sale.
0 votes
Pam Bava, Agent, Rochester, MI
Fri Oct 1, 2010
Jordanna, if you are working with a buyers agent have them find out how far along in the short sale process the seller is. I have had short sales close in two weeks and others in 3 months. Boyd is correct in telling you to find the ones where the buyer backed out, but beware that they are not starting the process all over again with a new buyer. I have to laugh at Tim's reply, sometimes it is like an exercise in mental and physical torture. We as agents are always at the mercy of the banks. I hope you are working with a buyers agent or an attorney that can help you with the details.

Good luck
0 votes
Jordanna Ben…, , Livonia, MI
Fri Oct 1, 2010
Ok, thanks, Boyd. I know they can take 3-4 months to close, but how long would it take to receive a counteroffer with their rock-bottom? It would be helpful if it was within a week or two, so I don't have to waste time on trying to buy a property for more than I'm willing to pay.
0 votes
Dwellings by…, Agent, Plymouth, MI
Fri Oct 1, 2010
Jordanna- I assume you are talking about short sales. 9 times out of 10 with a short sale a buyer makes an offer and the bank either accepts it or they counter back with what they are willing to take. They usually won't budge from this number. I have seen them come down a little bit more, usually a 1000 or 2 to make the deal work but that is rare.
Web Reference:  http://www.realtorboyd.com
0 votes
Jordanna Ben…, , Livonia, MI
Fri Oct 1, 2010
Boyd: Is there any way to know the exact lowest amount that the bank will take for the property?
0 votes
Dwellings by…, Agent, Plymouth, MI
Fri Oct 1, 2010
I have investors that have bought, renovated, and sold many short sale houses. Once again, the key is to know what homes in the area are worth, be realistic on your rehab costs, and if the numbers make sense, than make an offer. Your best bet if you do not want to wait is to find a pre-approved short sale that the buyer has backed out on and/or the bank has already said what they are willing to take for the home. This will cut out a huge chunk of time getting to the closing table.
Web Reference:  http://www.realtorboyd.com
0 votes
Derek Bauer, Agent, South Lyon, MI
Fri Oct 1, 2010
certainly carrying cost should be factored into any real estate investment being considered.

Point is ... there is no absolute must that it must be bank-owned, or must be a short sale, etc.
Web Reference:  http://DoorToDreams.com
0 votes
Tim Krukowski, , Northville, MI
Fri Oct 1, 2010
Derek, is length of time to reach market factored in to your selection of a target property?
0 votes
Derek Bauer, Agent, South Lyon, MI
Fri Oct 1, 2010
The premise behind flipping is obviously to make a margin between acquisition cost (purchase, costs, improvements, etc.) and after selling (sales price, commission, taxes, etc.). Thus, as long as the numbers make sense, this can be any home ... bank owned, short sale, or even a regular transaction.
Web Reference:  http://DoorToDreams.com
0 votes
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