I would like to get into investing in homes by doing short sales but am a little apprehensive. What is the best way to learn enough about this process to get started? I recently attended a seminar given by Nouveau Riche, a real estate education/mentoring company, and wanted to hear from anyone who has had any exposure to them.
Thanks
<<I recently attended a seminar given by Nouveau Riche, a real estate education/mentoring company, and wanted to hear from anyone who has had any exposure to them.>>
You didn’t drink the free Kool-Aid, did you?
Keith
No, I didn’t.
Good…just checking…we’ve had some of their “disciples” here before and the deprogramming phase can be lengthy.
Keith
Keith, would you mind sharing a little bit of what you have seen and why you don’t think it is worth while? I have not done anything with them, but the seminar was all about signing up new cronies and making money that way. I hoped they were going to sell me on why their real estate mentoring was a good product.
Thanks
Only problem is when you talk about the best way to learn is gets removed.
So don’t talk about who’s seminar you have been too, oh I see yours hasn’t been removed yet.
ok It must just be mine.
No Green Queen,
Its not just your post that get removed. I get mine taken off too. This is one of the most restrictive sites I have been on. Set up to provide a forum for “Learning”.
Well thats great but the bottom line is most of us are trying to learn the who, how, where and whens of making money and asking questions and networking is a part of that.
If you spamming you advertisements to do loans or to sell your Kool Aid, yeah those post should come off.
Ny Guy, what is is that you want to know about short sales?
Here is the basic information about a Short-Sale:
What is a Short-Sale? Do all banks call it a “Short-Sale”?
A “Short-Sale” is where the bank is taking a lesser-amount than what is due. Most banks understand what a Short-Sale is by name, but other names that the banks might use are, Compromise, Offer & Compromise, and most Lenders will make you go through the “Loss-Mitigation” Department to get the Short-Sale approved. It’s like buying a Mortgage, except for a few changes. You are NOT buying a mortgage, but “paying it off”. You are asking the bank to accept less than the full amount due, and then to release the Mortgage. Your offer is similar, you’ll get an agreement from the bank (similar to buying a Mortgage) and you’ll wire funds to the bank like you were buying a Mortgage. The biggest difference is that the loan is just paid-off, and the Mortgage is released.
Obviously you would never want to do this, unless you either:
Is doing a Short-Sale the same thing as buying a Mortgage?
No. The biggest difference is when you buy a Note/Mortgage, you will receive the original Note & Mortgage, along with an Assignment (which assigns the Note from the bank to you, as the new note holder). If you are doing a Short-Sale, the money you give the bank pays off the loan and the bank is releasing the mortgage as if paid in full. So know this one rule, Never give the bank money for a Short-Sale until you have a Deed from the owner, or a new mortgage signed and recorded.
What are all the Different Departments at Banks that I can work with either a Note-Purchase or a Short-Sale?
Foreclosure Department
Loss Mitigation Department
Bankruptcy Department
Recovery Department
Legal Department (very few Banks have a legal department, but those that do, handle many of
the Short-Sales)
What are the best departments to work with at the Banks?
Banks & Lenders work their ‘non-performing’ Notes in many ways. Some banks allow each department to make their own decisions. Others send most ‘discounted’ actions (Note-Buying or Short-Sales) to the Loss Mitigation Department. And yet, there are still some Lenders that don’t even have a “Loss Mitigation” Department. The best advice is to simple ask “who” is working this specific file, and to ask them if they would handle the Note Purchase/Short-Sale or is it handled by another department. About half the Banks will have work through the Loss Mitigation or Foreclosure Department.
Is doing a Short-Sale hard?
In the beginning, the answer is Yes (until you understand how the system works, and you get to the point where getting everything accomplished to complete a Short-Sale is just a routine, and not a major event in your life. Once you’ve completed the steps a few times, you’ll see that the long-term answer is No.
More info on Short Sales:
What is the greatest problem in doing a Short Sale?
All the information and paperwork the banks want to approve a Short Sale. The list can be very long, and require a lot of legwork to acquire. This is a list of what the banks want as a minimum from the homeowner:
New Financial Application with Assets listed
Last 2 year Taxes
Current Pay stubs
2 months Bank Statements
Homeowners Counseling Certificate from the Forbearance Department
Copy of the Listing with a Realtor
Copy of the Sales Contract
Copy of the Closing Settlement Statement
Loan Denial Letter from another Lender
As you can see, this list can stop many investors in their tracks. And for many banks, they want more than just this basic list. The list is too intimidating and requires too much work. Learning how to get all these done easily and quickly is a vital key in the process.
Other items which also might be required are:
Hardship Letter
Real Estate Sales Contract
HUD – Closing Settlement Statement
BPO – Broker’s Price Opinion
As you can see, doing a Short-Sale is no walk-in-the-park.
That is why I suggest flipping a few deals, finding someone to partner with, be a brid-dog for a deal or 5 while you are learning the ropes.
It isn’t as easy as this list I’ve provided. There are many secrets and tricks of the trade to get each step done correctly, or it won’t fly with the bank. Such as:
Knowing how to influence the BPO.
Having the Home Owner write the correct kind of Hardship letter.
What items do you need for contractor repair quotes.
These and many more are the reasons you need to learn the lessons the hard way, killing 10-30 deals while you are figuring it out, or simply be a bird-dog for a few deals, learn some steps, partner on some more deals, and learn some steps, then you are ready to do some simple ones on your own.
This is a learning curve. Either way you’ll pay the price for learning the steps. You can screw up 10 deals, losing all that money, or find someone, anyone, that can help you get through the first set of deals.
More info:
Q. Do I need the Home-Owner on-board to do a Short-Sale?
A. Yes, because you will need several items from a Home-Owner to do a Short-Sale with their bank.
Q. What if the Home-Owner won’t work with me? Is the deal now a dead-deal?
A. No, the deal isn’t dead. You can still do a deal by “Buying” the Mortgage from the Bank (which now makes you the Bank).
Q. So, to be good at this business, do I need to be good at doing both Short-Sales and Buying Discounted Bank-Notes (Mortgages)?
A. Yes, Congratulations, you get it!
Q. So what is Buying Discounted Bank-Notes?
A. Buying Bank-Notes means you are purchasing the Mortgage from the Bank rather than paying them off (you become the bank).
Q. How do I do a Short-Sale? What are the Basic Steps?
A.
• We put together items required by the Bank:
The Home-Owner will provide some items, and we will be providing other items
• Make a written offer to the Bank.
• Negotiate with the Bank for a Pay-off amount & they will prepare a contract.
• Get a loan, close the deal and pay-off the bank.
Q. How do I buy a Note/Mortgage?
A.
• Same beginning process as completing a Short-Sale (homeowner connection & Signature Authorization).
• Make a written offer to ‘purchase’ the Note.
• Provide other items needed for a bank to approve your offer.
• Negotiate and close deal.
• Wire funds and receive paperwork from bank.
Doing short sales is does not involve alot of legwork if you do everything you need to on the first visit.
should I get a quit claim deed from the homeowner before my offer to the bank?
Will bank consider offers with contingencies?
Dhard,
I normally won’t make a written offer without having a deed first. I would encourage you to get the deed first. Now, I’d suggest not getting a Quit Claim but whatever is the normal transfer deed in your State. It might be a Warranty Deed, Grant Deed (CA), Bargain and Sale Deed, etc. Those are more powerful deeds than a Quit Claim. When you go to close Escrow, the Attorney or Title Company may not like a Quit Claim, and going back to get another one can be really difficult.
The banks don’t like contingenies. You should be pretty clear about your offer before you make it. It’s not like buying a house or land. You should know whether you want the house or not. I would encourage you to do your homework well at the beginning. Be clear about FMV (Fair Market Value) - knowing what the house is worth in an as-is condition. Most beginners make this mistake, we all did it. We are too excited about getting into a deal, we see our first deal with rosey-colored-glasses and we are too high on our FMV, and then we pay too much for the house. You can make it contingent that it will appraise for that much, but that’s about it. If you want the “Loan denial” clause, the bank will be upset because either you should know what you qualify for, or not. Having a bunch of escape clauses hurts you.
We had a hot property and the bank was taking sealed offers on the property for 5 days and I found out later my bid was for the lowest amount, so you’d think the bank would have accepted the highest offer or any other offer other than mine, but they accepted my low offer because mine was without any contingencies and close in a few days. Every other offer had contingencies. The bank knew if someone grabbed a contingency, they’d have to start all over again. Banks like to deal with people that have done their homework, know what they want and can do, and get the deal done fast.
Good luck.
Hi, I signed up for the same company as you and I am located in California. Although I find the information useful, there are a couple areas of concern that didn’t sit well with me. One was getting a blank purchase contract signed by the owner. I am a licensed real estate broker in California and I would lose my license soo fast if I did that. The other issue was the double escrow, from what I understand, when you negotiate with the lenders to pay off the notes at a discount, they are not willing to allow you to bring another buyer into the picture.
Also, I find more useful information at my local bookstore than watching or listening to their stuff. However, I still pay every month to get an idea to know what to look for and research upon.
Anyway, check out this book for great info: ISBN 0-471-76084-6
Regards
You are misinformed. 
Charlotte is correct. You can bring in another Buyer. You just have to careful about trying to do a double closing. Each closing must stand on it’s own account. Borrowing money from a future closing to payoff your closing is illegal in most States. It’s called an illegal flip. You have to let the buyer (being you in most cases), buy the property for the Short amount. If you bring in another buyer AND want to profit being the middle man, you have to bring in cash/hard money to close your transaction, and then close the 2nd transaction, so you need to borrow funds for about 3 days.
Yes, I understand that. However, in the learning material presented, they state that you don’t need to bring money to the table. They say you just negotiate the short sale deal with the bank and bring another buyer at closing. Which was OK before 2005.
Thanks for the input and the help you provided earlier today.
Satarnag,
You are correct, we used to be able to do that, just be the middle guy and get a check. Most States don’t allow it anymore.
It really only creates 1 more step for all of us. You just need relationships with Hard Money Lenders that won’t charge much for 3 days use of their money that never leaves escrow.
I don’t have my Hard Money Lender put money into Escrow until the Buyer’s bank does too, that way I know I’m closing.
If people are still teaching those methods, they are outdated for sure.
As long as the end lender doesn’t require, seasoning, and it is disclosed to the buyer of the property that they are funding your deal. Then double closing is not a problem.
What you are saying doesn’t make sense, and it is being done all the time. Not many hard money lenders will loan money for 3 days. They want to have their money tied up for 6 months. Or else they will charge a prepayment penalty.
Double closing are legal, just inflating prices is what is illegal.
Don’t use FHA lenders if you plan on double closing.