60 to 90 days -- that’s how long it will take the bank to work on approving a short sale that’s not even theirs in the first place. They have a stake on it though because the bank is the lender and you are the seller. So when you have a buyer and the lender won’t budge for the transaction to push through, your buyer won’t wait and just move on to another property and much worse, another realtor. You would want to avoid this situation, right? There’s a way to do it. Offer a Short Sale Option Contract. This kind of contract will give you the room that you need to close the deal without waiting for a bank to get a move on and green light a short sale.
How does this work?
A Short Sale Option Contract gives you the choice to place a very modest sum of money on a real estate property. This is like marking your territory. You have now opted-in on the property. Then once you have a buyer, you will inform the buyer to pay a non-refundable security deposit. By the way, the security deposit is standard when buying property. Once the transaction pushes through, the property may become your “option- to-own” or the buyer’s—whichever way the pendulum swings. This deposit goes to the payment of the foreclosure fees for Housing and Urban Development or HUD in case the transaction is completed but if and when the buyer decides to change his mind, the deposit becomes yours to keep. Don’t be shocked. This is above board.
If you haven’t tried this yet, here’s how to write one such contract:
- Do your homework. The first thing you want to find out is where the available properties are and if these are on short-sale.
- Prepare an option contract instead of the standard contract in owning property. To repeat, this is perfectly legal.
- State your intention to pay for the option. This option fee is minimal and will expire within a stated period. The amount is decided on by the U.S. Department of Housing & Urban Development (U.S. HUD). Keep in mind that your option payment is clearly what it says, “payment.” You are paying for the option to buy the property but your intention is to have a buyer complete the transaction with you as the “closer.”
- Have the contract recorded immediately after paying the option. This makes the transaction official.
- Get cracking on finding a buyer. Do this soon and do not wait until the expiration date stated in your contract.
- Negotiate the transactional funding. This will cover all the paperwork necessary to push things along until the sale in completed by you on behalf of your buyer.
- Close the deal. Finalize everything and make sure all the paperwork and requirements are filed to 100% satisfaction.
- Collect the payment. Congratulations! You have just completed a short sale using an option contract!
Do not be surprised if some of your colleagues refuse to do this to close a sale. There is a bit of discomfort on the matter but for as long as you play by the rules and make sure that all the parties are informed about your intentions, you don’t have to worry about shortchanging some poor buyer on a short sale.