BiggerPockets

Once a house is under Option to buy, does an investor have the exclusive rights to that home?

Only if you record the Notice of Option.

The short sale process, in my mind, does not start until you send everything to the bank.

The option is just what it states, an option to purchase the property. You can also sell that option to the property. The short sale essentially has nothing to do with the option. A short sale occurs when the lender agrees to take less than the existing loan balance on the property. The short sale process begins by getting a release signed by the property owner which authorizes you to discuss the loan/property with the lender. In addition, the short sale package must be submitted which includes W-2s, bank statements, financials, hardship letter and HUD-1. It is then assigned to a loss mitigator.

The option is a great tool. I have actually cut down on FHA deed seasoning by filing the notice of option 45 days before I closed the short sale. I only had to wait another 46 days for my end buyer's lender to fund.

However, it doesn't always work that way...depends on the FHA underwriter...i have also had them tell me they didn't care about my recorded option and wouldn't fund my end buyer's loan until 91 days after i officially took title.

So for that it is hit and miss...but it ultimately protects your right to the house during short sale negotiations.