Where Do Short Sale Investors Blow it?

by Tom Farwell
Miss Short Sale expert

After more than 120 concluded (i.e., property shorted AND re-sold) short sales, it is easy to understand why most investors fail to make a short sale business a "business." The culprit is simple: We simply trade in our current full time job for a full time job of doing short sales. The first thing that happens with the normal business model is that the investor simply runs out of time. And once the time is tapped out, the income is tapped out too.

What is a "Short Sale?"

A short sale is a process, whereby the lien holder(s) accept(s) "less than what's owed" to release their lien(s). A lien is a charge (or encumbrance) against a property making it security for the payment of a debt, judgment, mortgage, or taxes. This process is normally facilitated between lien holders of notes and a third party--called a debt negotiator--and us the real estate investor.

The Big picture

Most short sale transactions involve the investor finding a motivated seller, engaging the seller, negotiating an offer with the lien holder(s), and hopefully selling the property to an end-buyer for a nice profit. The steps can look something like:

1. Find prospects, through marketing, networking, etc

2. Talk to a homeowner-via phone

3. Analyze the deal (pull comps, etc) and guess if "big" enough to not lose money

4. Drive to the property

5. Inspect the property

6. Expend time to "sign them up" and maybe "get the deed" and maybe "record the deed"

7. Gather bank required short sale documents-via email or snail mail

8. Negotiate short sale debt with bank-via phone, fax, email, etc.

9. Stage the property (if vacant) and sweat until offer is presented

10. Attend closing

The problem

I used to run my short sale business in a manner similar to the steps outlined above. However, as my volume began to grow, I fell into a time trap: I could no longer work new deals because I was too busy working the deals that I already had.

Then I would make a very bad business decision and slow down the marketing process to limit new deals. I would then work all of the current deals and find out that my incoming pipeline was empty. At that point, I was the "proud owner" of a feast or famine short sale business.

The Tip

Then I read "The E-Myth" by Michael Gerber. It's a great book, and it basically changed the way I think about my business: I needed to work ON my business, not IN my business. The model is to create systems to run the business, then I run the systems.

A short sale business is one of the easiest businesses to systematize because it involves doing the same basic steps over and over.

The Reality

Most people look at me sort of funny when I tell them we normally have 70-100 deals in the pipeline at any given time. Building a structured business model is easier than you think!

Go to http://www.MissShortSaleExpert.com, the premiere on-line community for foreclosure real estate investors, for more information.

Article submitted Sunday, April 05, 2009 & read 100 times.

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