Can short sale flips be flops?
On June 10, 2010 Bloomberg Businessweek posted an interesting article about short sale fraud, short sale flips, and short sale flops. Written by John Gittlelsohn, this article discusses the fraud involved in many of the business models that involve an investor buyer and short sale flip.
I was thinking about this article just last night. Poor me. Last night, I took out my blue (interview style) business suit and was preparing for the following today. I turned on the iron because I wanted to smooth out the pants just a little bit. But, I was in a hurry. I wanted to write a blog post, to give my folks a call, and to read a magazine. I wasn’t really in the mood to be preparing for the next day. I quickly returned to the iron and set it down on my pants for a split second and singed the crap out of the side of the slacks. My lovely blue interview suit, I wear it every time we sponsor a big business event. I had to throw the slacks in the trash because now they had a big burn/melt mark in the shape of a triangle on the side. I guess it serves me right for rushing and trying to take the easy way out.
What does this have to do with John Gittelsohn’s article and short sale flips? My office gets calls all the time on our listings from investors who offer to buyer them and handle the short sale negotiations—offering the listing agent a full commission without the headache. Some agents may want to take advantage of this business model. Sounds pretty good, right? You are guaranteed your full commission and you do not have to trouble yourself with the short sale negotiations, right?
Sadly, it doesn’t always work this way. Last year my office closed well over two hundred short sale transactions. We closed so many that I lost count. What I can tell you is that the investor buyer is looking for a deal because s/he wants to flip the property for a profit. The bank, on the other hand, is looking for a good offer, one that a buyer would generally make on a retail transaction—not the price offered on a distressed property.
If the short sale listing is habitable and will get offers from retail buyers, then it is going to be tough to ‘sell’ (no pun intended) the bank on a lower offer on this property. At the end of the day, the investor may move on because s/he did not get the purchase price that they had requested and you, the listing agent, will be left holding the bag. So is it a flip or a flop?
So much for rushing and taking the easy way out. Trust me; it’s not a good idea. That’s how I ruined my pants!
(Click here to go directly to John Gittelsohn’s article.)
Miami Condo Shop
June 22, 2010 at 10:06 am
Nothing comes easy these days and some people have to learn it the hard way…
Jim Gatos
June 23, 2010 at 7:12 am
We’ve had a company like that come to my office, give us a presentation, and so on. I decided NOT to do business like that. Investors can also use buyer’s agents, and it’s the honest thing to do.
Tim
June 23, 2010 at 6:19 pm
Know this. If an agent/broker does one’s homework in using an ethical and reputable investor, NO ONE is left holding the bag, inluding the agent. Any investor worth his salt will go ahead and close A-C (seller to retail end buyer). Why would an investor do this? To preserve the relationship if they want to stay in the business. It’s all about the relationship. Quick hit, wham-bam, thank you, ma’am investors give legit ones a BAD NAME. Any good investor know that you can’t hit a home run an EVERY deal. The winners pay the losers.
Again, the key is for an agent to do their due diligence with their cash investors and make sure they use the one that sees eye-to-eye with them.
Jim Gatos
June 23, 2010 at 7:26 pm
What are you when you present this type of arrangement? Who do you work for? Is this a disclosed dual agency?