Buy Short Sales with Transactional Funding

About the author : Dave Dinkel

The short answer to using transactional funding to buy Short Sales is “most of the time.”


The short sale of a property requires the lender to agree to a reduced payoff from an outstanding Promissory Note to stop the property from going into foreclosure.

Typically, when a lender has a property owner go without paying on his note for 90 days, the lender does an appraisal to determine if there is equity in the property.

If there is no equity, the lender will usually try to get the owner to sign a deed in lieu of foreclosure or agree to a loan modification to keep the owner in the property.

If the homeowner won’t cooperate with either option, the lender starts the foreclosure process.

This is the time when most investors get involved because the lis pendens of court filing becomes public knowledge.

Investors can create equity in the property by getting approval from the lender to short sell the property and if the lender approves taking a discount from what they are due, the investor can then purchase the property.

When the lender does agree to the sale, he sends an “Acceptance Letter” that stipulates the amount of money he is to receive and any other stipulations for the sale of the property.

Unfortunately, the lender can require a “resale restriction” which will not allow the investor to resell the property for a specific time – usually 30 or 90 days.

I have seen this period up to 180 days, but usually, it is 30 days.

Too often this deed restriction isn’t known to the listing or closing agents, so the investor can get a terrible surprise a day before the closing.

The investor does have the right to cancel his contract if this happens or he can use a hard money lender to fund his purchase and hold the property until resale.

This restriction is literally stamped on the deed from the lender that will be recorded in the public record.

If there is no deed restriction, the investor can resell the property on the same day he purchases it.

This resale restriction is not the same as a seasoning period that lenders require for buyers of investment properties that were purchased and presumably rehabbed in the previous 90 days.


If you have any additional questions, contact me directly at

If you need hard money instead of transactional funding, contact me for referrals to private hard money lenders.

Be sure to check out for all your same-day double closing needs, including a list of Investor-Friendly Closing Agents in various states.

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About the author : Dave Dinkel