Here below is an interesting recent Q&A exchange between a Harris Real Estate University Student and Coach Jon Harris:

Student:

We have been approached by investors who will purchase our short sale listings on an “option” contract. They have devised the wording (in Arizona, we have boiler plate short sale addendums which their “option contact” does not use and has different wording)

Their main points are:

1. They have a right to market the property while it is in the short sale process and secure an “exit buyer” who is any subsequent back up buyer to our short sale listing (and we would not present to the bank)
2. They give full disclosure to the seller about marketing and selling to a “back up buyer” for a profit
3. They will close on the sale, even if there is no back up/exit buyer, and continue to market and sell the property. The listing agent would re-sell at a discount listing commission.

I have not heard of this option contract or investor in any of your webinars. During the “flipping” market this was done, but we did not have the bank involved, and it was cleaner as we used our Purchase Contracts.

I can see where this would be very inviting for an investor as they would get the first chance at the short sale, and resell at a higher price. It would be attractive to the listing agent, as they would have a sale immediately, cash.

I am hesitant with some pitfalls that this may incur (we do not have attorney’s involved with our sales, therefore, our Purchase Contracts are boiler plate, and if there arfe counteroffers we stay within the wording of the contract. This is their own contract.

Do you have “option” contracts in your HRUE packages, or any experience with these type of deals, or have the other short sale agents experienced this type of transaction.

Coach Jon:

Most banks will not accept option contract in short sales. However, if you have no other contracts, it might be worth presenting anyways. If the property has been for sale a long time, or in poor condition- it may be considered.

This is typical investor purchase option strategy. You will see it often. It is legal and ethical as long as everything is above board, disclosed in writing and on the HUD statement. There’s nothing wrong with an investor making a profit, provided no one is misled.

I would hesitate to use any custom contracts or forms. They are ALWAYS written against your favor. Insist on using Board contracts, with a customer addendum that you write up.

Good luck!

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