I know what you are thinking… “The title of this article does not make sense. How can you leave a place before you ever even arrive?” Please allow me to take the next few moments to discuss how exiting before entering is not only possible but should be considered as the single most important aspect of a short sale transaction.
The motivation to write this article came from the countless amount of feedback that we have received from our students regarding Short Sale Exit Strategies. I will soon make available more detailed information on specific exit strategies. These will be methods that I strongly suggest you follow depending on your individual geographical market and more importantly your realistic goals and expectations.
For now, what I'm about to share is focused on the importance of making sure that your exit strategy is formulated before you begin the negotiation process. It is counter-productive to do it any other way. Let me explain.
1. The main reason is although your goal is to make a profit, you should always consider the fact that the homeowner is putting a part of their well being in your hands. You do have a moral requirement when doing short sales. The last thing you want to do is put an individual or family in a risky or uncompromising position. Suppose you don't close the deal? Who does it affect more? Therefore, it's extremely essential that you have a game plan before you assume that type of responsibility.
2. The next reason is that once you have the acceptance letter in your hands you will be working with a limited amount of time. You will want to spend your time working on your next deal or preparing the house for sale or rent, not putting together your exit strategy. Be proactive not reactive.
3. Lastly, if you determine what your exit strategy will be ahead of time and begin putting it together you are more likely to close your deal for maximum profit within a timely fashion (45 days max.). It's always possible that the deal falls through your hands because of lack of preparation.
All three of these reasons help to justify the importance of a well thought out plan. What's the purpose of getting the acceptance letter if you can't close?
I also want to remind you that you are not allowed to assign a short sale. So if you expect to negotiate the deal and then pass it on to another investor don't waste your time. It will always be stated on your acceptance that the agreement is not transferable or assignable, therefore you must come up with another option if you want to do a quick sale of the property. I've shared a few creative ideas related to quick sales or flips that has worked for a select few individual investors. I'll also be sharing these ideas with you in the near future.
Too many times investors make the mistake of going through the entire negotiating process without even considering what the possible options are for the property. I emphasize the “s” because one of the major benefits of exiting before entering is that you will often come up with multiple exit strategies. You increase the chances of having more than one way to profit from your hard work.
I personally feel that it gives me more of an edge as I begin my discussions with the lender. I also gain a better understanding of my earning potential because I've taken the time to estimate the numbers based on what exit strategy I'm using. All exit strategies do not breed the same amount of return. Consequently, you may find that although it is possible for you to negotiate the short sale it may not be a deal worth pursuing. There may not be enough profit on the table once you exit or the deal is just too risky for you to invest in.
Those of you who are attempting multiple short sales at a time will especially find that exiting before entering will help to ensure that all of your deals are prioritized and that your time is always spent on the deals that will close the fastest and yield the most profit. There are multiple facets to short sale exit strategies and it would be impossible to address all areas in this one article. However, we will continue to share information, strategies, and techniques that will open the door to many more discussions and helpful articles. Until next time.