Short Sale Exit Risks

[Daniel Cook]

Hello all,

I've been reading here for several weeks but haven't posted yet (obviously) so greetings from Bishop / Mammoth Lakes, CA.

I've been studying short sales and feel mostly competent in discussing them with sellers. I recently became interested in doing short sale wholesaling as a means of side income. As an insurance agent, I have to deal with painfully detail-oriented paper work, underwriters, bureaucracies, and bank mortgage departments. So when I learned the short sale negotiation process with banks I thought, 'hey, I can do that!' I have total confidence that I can get through the nitty gritty bank process easier than the average person starting out because I'm used that "devil in the details" type work. I also have the right title company lined up, transactional funding, marketing experience, etc. I should be good to go soon.

But here's the part that none of the courses I've taken have been clear on: If I were a seller speaking to a wholesaler about allowing him to do a short sale negotiation and signing an option with him, I would want to be reasonably sure that he would be able to get my house sold to the end buyer in time. I read on this forum that a bank's acceptance of a short sale offer is good for only 30 days.

So what happens if for some reason I as party "B" am unable to close with party "C" (end buyer) by the end of that period? I mean there are complications with party "C" funding all the time right? What happens after the acceptance expires and there is no sale to party "C"? Does property just continue through the foreclosure process? Or is there a way to extend the timing?

One other question, assuming you find a seller who has not yet stopped making payments but wants to do a short sale, by what criteria do you recommend that he either stop making payments or continue?

I'd also be interested in reading anything regarding the risks to the seller in short sales and how to help them understand them in this process. In my business experience, communication is key with both clients and vendors. Even though the seller is not our "client" we do have to engender their trust and get a lot of cooperation from them in short sales.

Also, I'd be interested to hear what some of you really experienced short sale folks have most often encountered as the sort of, 'uncontrollable variables' that threaten a deal. I'm not talking about something you did carelessly or a paper you forgot to complete, I'm talking about things that threatened deals despite your best efforts to be professional.

If this is too much to answer, perhaps someone could just point me to some appropriate reading material. I've been left with too many gaps in my understanding even though the courses I bought were actually pretty good.

Thanks in advance.
-DC