How to Close Your Short Sale Deals
Understanding the Short Sale Closing
Once the short sale has been accepted, it will be time to close the transaction at the title company or closing agent's office. There are several different ways that a short sale may be closed when it's time. When reading this list, remember that "A" is referring to the property owner; "B" is referring the investor; "C" is referring to to the end user.
- Real Estate Investor Buying the Property (A to B Closing). This is when the real estate investor is buying the property to hold for themselves. They may be using it in their portfolio as a rental or a lease option. They may also plan on rehabbing the property and then selling it at a later date for a higher price. They could also be buying the property with the intent of wholesaling it.
- Real Estate Investor Buying The Property, Then Immediately Selling it to an End User (A to B, then B to C Closing) - This is when the real estate investor has contacted the seller, handled the short sale negotiations, and then sold the property at a higher price before the closing is scheduled to take place.
- End User Buying the Property - This is when the person buying the short sale property is going to live in the house as their primary residence.
How to Ensure That The Closing Goes Smoothly
Any time there is a real estate transaction nearing the closing date, everything and everybody gets sent into a whirlwind. I don't know what it is, but it seems like noone realizes that the deal is supposed to close until about 3 or 4 days prior. You'll need to do your part and make preparations in advance to make sure that the closing goes smoothly and you get paid on all of your hard work.
First, it's essential that you choose to do business with a closing agent who understands the short sale process, and more importantly, the role that you play in the transaction. Especially if you are an investor doing a double closing. Some title companies just aren't familiar with short sales, and really get confused when the transaction starts to unfold and there are new people (buyers) involved. So be sure to pre-screen your title company/closing agent to make sure they're competent.
Full disclosure will prevent surprises. Communication is the key to success here. Make 100% sure that your seller, any Realtors that are involved, the title company, and the lenders know exactly what is going on with the trasnaction. If you're using the proper paperwork, then it should already be disclosed in writing. But just in case you're dealing with people that don't read before they sign on the dotted line (about 90% of people) - make sure you are communicating effectively. There is nothing unethical about doing short sales unless you are trying to conceal or hide something.
Make sure that you're available by phone and email when closing time is near. This is the time when the heat will rise and everyone will be scrambling around to get the final documents in line. Make courtesy calls to the title company, the short sale bank, the buyer (or their Realtor) , and the seller to see if they need any assistance with anything before closing. Be the one who can keep it together and be productive. Even if you're a newbie, fake it till you make it!
Another good suggestion is to have a closing checklist. Go through the checklist and make sure that everything has been done, or is being done by someone. Did we get the approval letter? Did we get payoffs from any other lien hoders? Was the title work ordered? Have any title issues been resolved? Have you confirmed the closing date with the seller? Have a checklist in every file to make sure you don't forget anything!!
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