Today’s REI Classroom Lesson
Today, Jacci Konkle answers how to get started in short sales without experience.
REI Classroom Summary
Discover how placing an offer for a short sale not only gives you the chance to get a deal but also helps the realtor for the short sale get the ball rolling and get a price from the bank.
Listen to this REI Classroom Lesson
Real Estate Investing Classroom Show Transcripts:
Mike: Welcome back to the FlipNerd.com REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Jacci: Hi. My name is Jacci Konkle, and I’ll be your host today for the REI Classroom. I am the owner and founder of the Appleton REIA, which is the Real Estate Investors Club in Wisconsin. My topic today is buying short sales without short sale experience.
Mike: This REI Classroom real estate lesson is sponsored by UglyOpportunities.com.
Jacci: I know today a lot of people are still working with short sales, and there are yet others that are thinking, “Gosh, I really wish I could tap into the short sale market. But I don’t want to take all the time to learn how to do it.” Or, “I know how to do it and I just don’t want to take the time to do the process.” But I’m here to tell you that there are a lot of people out there that are in the trenches on a regular basis and they are working these short sales.
They are negotiators. They have the experience. They’re willing to do the paperwork, but they’re not buyers. A little known fact, which I’m really surprised more people don’t know, is that when a realtor lists a property and it’s listed as a short sale, that short sale cannot be started, it can’t be negotiated until there’s an offer. Even if it’s a crappy offer, at least that starts the ball rolling and that realtor can start negotiating with the bank just to find out where the bank is at.
For example, a lot of you are making offers on HUDs. I know a lot of people just shoot out some low-ball offer on a HUD property without even looking at it. Just to receive the counter to kind of feel them out and figure out where HUD is thinking they are on price before they waste any time on it. It’s kind of the same thing. You can do the same thing with short sales.
Whether you’re working with an agent or you have access to the MLS, or whatever it is, just do a search for all of the short sales in your area and just make offers on them. They don’t necessarily need to be blind offers. You can go and visit the property and make an offer that you’re comfortable with. But that gives that agent the opportunity to start negotiating with the bank and see where it is.
What do you care about time line? You’re not buying it to move your family in. You’re buying it to flip or wholesale, or rent, or whatever your endgame is. But just making that offer on it will get that ball rolling and so you’ll be a favorite with that realtor as well. Because they want to get to the point where they know what that advertised price is.
So even if they don’t like your offer or they feel like your offer is not realistic, we hear all of it as investors, especially from the realtor pool. It doesn’t really matter, because it gives them the opportunity to have the bank come out, do their appraisal or BPO, whatever they’re going to do, and come back with a price. So even if they don’t accept your offer, you didn’t put a lot of time in it, but that agent is now able to go and market that property with an acceptable offer.
They already know it’s pre-negotiated and now maybe they sell it to an owner occupant, or whatever. But you just made the favorite on their list. Let them know to contact you every time they have another short sale lead. A lot of these agents are actually marketing to short sale clients. They’re marketing to list short sales. This saves you the time and money in marketing to them. Let them do it.
A short sale has to be listed anyways. So let that agent take it, let them do all the paperwork, the negotiating, and you just make the offers. When it comes close and that counter-offer is worth looking at you can go and maybe nail a deal down. If it does get to the point where it goes to sheriff sale, here’s the hidden bonus. You’ve been inside. You’ve run your numbers. You’ve run your comps. You know what your offer is and you can now go to sheriff sale not blind.
I actually have a student that did this last year. It’s really crazy, because her offer was $89,000 to the bank and they said they were going to accept it. And it ran down to the wire and they said, “You know what? Forget it. We’re out of time. We’re going to sheriff sale,” and they didn’t want to postpone the sheriff sale. So they went to sheriff sale, she showed up, and paid $76,000 at the sheriff sale. Her offer was $89,000 to the bank just the week before.
So it’s really kind of crazy how it happens sometimes. But she knew that she was confident with the ability to pay $76,000 and she was able to get that deal. She flipped it and made a really nice profit on that sale, obviously, because she was able to buy it for a whole lot less than what she was willing to in the first place. So that was a wonderful flip.
Another thing you can do if you don’t have short sale experience but you would like to, do some short sales as you can JV with somebody who does have short sale experience. Maybe they just do the negotiating and you’re the one that runs out, looks at all the properties, figures out the numbers. Maybe you’re funding the deal. Whatever it is, there’s great opportunities to joint venture with other investors.
Of course, I’m going to put in a plug for your local REIA. Because a great way to connect with those people is to get to your REIA meetings and network, and meet other investors and find somebody who would be willing to JV with you. It’s also a really good place to find money, of course.
But connect with an agent. If you can connect with an agent that already works with short sales that’s just going to help you. If you want to do your own marketing to the lis pendens and things like that, the pre-foreclosure lists that are out there, you can do the marketing. You can have that agent do the listings. You guys can kind of work together to beat up the price and get that short sale to a price that will work for you, letting that agent do the negotiating. Of course, they collect their commission.
So any agent would love you. Because they’re able to get an offer, get it negotiated, try to get that property sold, whether it’s to you or to someone else so that it doesn’t go to foreclosure.
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