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How to Flip Short Sales

Updated on January 27, 2010

Flipping short sales is a real estate strategy in which an investor purchases a property at a discounted price and then immediately sells it for a higher price and takes a profit (called double closings). With the housing market in a slump, foreclosure flipping has become more and more common.

However, the economic downturn has made it more difficult for real estate investors to get financing to flip short sales. Traditionally, investors have borrowed money for the initial purchase of a home (often in cash) and then repaid it, along with fees and interest, with the sale of the property to the end buyer. However, many money lenders have now gone out of business or have drastically reduced funds to lend. In fact, many are even charging down payments in addition to requiring good credit for investors to borrow money.

Private Financing for Short Sales

In today’s economy, flipping short sales has been made easier by companies that offer private money through the internet for investors to use in double closings. By borrowing money from these companies, you can get a drastically reduced price on a home by paying in cash. In some cases, you can purchase in this method for up to 60 percent below the market price of a property. Then you can immediately flip the house to your buyer and make a large profit.

Be careful and prudent when searching for internet companies to lend you money to flip short sales. These companies should offer you the money with no down payments and a low interest rate. Reputable companies will offer you an interest rate of about one percent in addition to administration fees deducted from your profit. You can work with multiple companies at one if there are multiple properties you are purchasing to find out which companies offer the best services.

If you are engaged in foreclosure flipping, keep in mind that you need not deal directly with the bank, but can purchase from the homeowner whose mortgage is in default if you have the funds. Purchasing a property to flip during the pre-foreclosure period is the best method and will give you the least hassle and most profit. Homeowners of foreclosed properties often prefer to sell rather than turning their property over to the bank, and so are likely to give you a good deal or waive closing costs and other traditional fees. This makes your short sale flip that much more profitable.

Image Credit: I See Modern Britain, Flickr


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