Flipping Short Sale Properties, Is It Possible?

Selling a property to another real estate investor at a discounted price is called flipping properties, or wholesaling properties. This is the easiest and fastest way to make money in real estate investing.

If you have negotiated a discount with the bank in a short sale, can you flip the property successfully to another investor?
This article explores the possibilities of wholesaling a short sale property.

In order to successfully flip properties, your selling price must be higher than your buying price in order to make a profit.

Wholesale real estate investing involves finding properties at a discount, then selling them to a real estate investor.

You sell it at a wholesale price because your buyer has to do any repair work needed.

typically you can make $3000 to over $15,000 per deal wholesaling properties.
If the equity is not enough, you can negotiate with the bank to accept less than the mortgage balance. This is called a short sale.

If you create equity through a short sale, the banks require you to close usually within 30 days.

Let us explore different scenarios:
1) Assigning a contract
You can simply assign the contract to your wholesale real estate investor buyer to wholesale a property.
In order to do this, your contract needs the buyer to have "and or assigns". Banks do not allow this clause, so this method is out if you are doing a short sale.

2) Double closing
Alternatively, you can buy and sell the property on the same table in a simultaneous closing, also called double closing.

Your profit is the difference between your buying price and your selling price.
You can use the money from your buyer to close the first transaction, then use it to close the second transaction. A lot of hard money lenders did not mind this. However lately, most of them will not accept this.

In addition, if you negotiate a short sale, the bank will not allow you to use the buyer's funds to close the first transaction. This means you have to raise the cash to close the deal.
Hard money lenders also offer transactional funding, used for just closing the first transaction, making this transaction possible.

3) Seasoning issues
Of late, lots of bank are requiring that you hold properties at least 30 days before selling.
Meaning you can finance your purchase with a hard money loan and sell the property 30 days later. Of course you must consider your closing and holding costs in this transaction.

Of course, this filters out a lot of deals that would have made you lots of money without this clause. A deal making you a profit of $3000 - $5000 is most likely eliminated. You would have to focus on higher dollar properties to make this work.

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