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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.
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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.
