how are you guys explaining to agents how the shortsale process will work? i’m coming across various agents who deal with shortsales and could use the help of an investor to help get these closed and so they don’t have to be bothered with the negotiating & paperwork.
i’m referring to the typical A-B B-C transactions.
how are you guys conveying the process so that the agent understands, feels comfortable, and is able to convey it to potential end buyers?
This is the third time I have spoke about just this topic on REI Club!!
If you write a contract for a “Short Sale” property and have complied with an approved mortgage certificate with an approved lender, then you need to
CLOSE ESCROW IN YOUR NAME. (PERIOD)
The four stages of Foreclosure:
Pre-Foreclosure is a property where current owner has missed one or more payments but has not been served a “Notice of Default”.
Short Sale or Modification is the time from the serving of the “Notice of Default” through to the day of the “Trustee Sale”.
Trustee Sale is the potential to purchase the property for the amount of money owed on the First Trust Deed. If the property does not sell to the public the property is bought by the lender and becomes a REO (Real Estate Owned" property.
The bank or lender may sell the property:
a. By selling directly from the bank or lender to an investor or end user!
b. By listing with a real estate agency and looking at all offers!
c. By placing the property with an auction agency and disposing by bid!
There are very few if any restrictions on buying a pre-foreclosure, buying at the trustee sale or buying the property as an REO.
There are however a number of banking and lending statutes (Regulations)that require a short sale buyer to contract and close in there own name!
You can not assign, option, double close, collect a retainer, be a consultant or buy under an LLC, a Corporation or a Trust during a short sale!!!
If you are in the position to buy the property either by:
You as an investor can make an offer for a short sale to any bank or lender which will include your hardship package and the contract with a promissary note “exchangeable to cash to escrow with lender short sale approval”.
Hardship Package: Includes sellers (Property Owners) bank statements, financial statements, lay off notice, Dr.'s letter, judgement, levy, lien, or any other legal letter in support of the situation along with a hardship letter and any other supporting documents, and permissions to discuss account.
When you make a short sale offer it is between you as the investor and the bank (lender). When your talking back and forth it is only you and the lenders agent.
If they reject your offer and request the property owners get a real estate agent, your basically out of it, your permissions will be revoked and the realtor becomes the authorized party with the bank.
You can never have two (2) real estate listing contracts on the same property, you can not list a property for sale you do not own or have legal entitlement too.
When you buy a “Short Sale” you close to your name in your loan. (Period)
A realtor or agency has a legal fudiciary responsibility to the seller and lender in a short sale, an agent can not market, sell, option, lease or otherwise move for a better price without presenting it to the lender and selling party.
You are continueing to try to think you can publicly sell a short sale to someone else before you close on it, you can not!!
You can only call your buyer off your personal buyers list who is also looking for the same type, size, ammenities and area and tell them you will be closing on such and such date on this property (4 Bdrm / 2 Bth 1500 sq.ft. 3 car garage, pool, fire pit, in great _________ neighborhood) and see if they would be interested in taking a look after you close.
Your trying to convince a realtor to do something that is illegal, and I am sure his or her broker will not let that happen.
Gold River,
I will be the first to admit that I am not the sharpest tool in the shed, I am confused. You say that you can’t use a double close with a short sale-does that include if you are using a realtor as part of the “team”.
I have been thinking about talking to Realtors about taking over the leg work on their short sales (leaving them as the listing agent), using my negotiator, collecting the seller’s info, etc. and closing with transactional funding to resell to an end buyer. Essentially, the Realtor would only have to keep marketing the property and doing the traditional things that Realtors do. Except that they would be looking for my end buyer instead of the current homeowners.
If I am understanding right, you are saying I can’t do this?
What you describe you might be able to do as a business serving realtors, however you would not be the buyer, and you would be doing it for a contingent fee paid by realtor at closing.
But I hardly want to tie up my time processing short sales for 1/4 to 1%.
I also am not positive whether state by state a service like this would be legal.
You can get a bunch of investors together as a group and buy short sales for cash then sell them.
You can buy a short sale and talk privately to anyone about buying it after you close.
You can not use a realtor to buy a short sale and expect that realtor to find an end buyer, the realtor is paid by sellers and is expected by law to submit any offers to sellers lender until escrow closes.
You can buy REO’S, double close if your state allows it, you can assign the contract if seller allows it, you can use flash funding for temporary buy (B) to buyer (C).
The reason “Short Sales” are so restrictive is you have a property owner (seller) who is missing payments, served with a “Notice of Default” and foreclosure is looming.
This “Parties” credit is on the line, if the state allows a judgement to be sought for “Mortgage Shortfalls” this “Party” could end up paying for years to come, if a foreclosure happens it will follow them for 7 years.
The lender is not entitled to the property until a foreclosure occurs, when a lender agrees to a short sale, there doing it by permission of the selling “Party”, the Hud, FHA, Fannie, Freddie, State and Federal Banking Laws, Securities Laws (If the loan was sold in pieces) all apply.
For the sake of transfer and to ensure a straight transaction all these laws apply, the liabilities could be huge if protections of the lender and seller (Original Borrower) are not followed.
Gold River,
I think you went off on a tangent and addressed the foeclosure process, reos’ etc.
I will address you cannot “buy under an LLC”. Where did you get this information from? Furthermore, why would that even make sense to restrict a buyer from purchasing under and LLC?
You mention “A realtor or agency has a legal fudiciary responsibility to the seller and lender”. I would like to see where this is documented as well. The lender is the lien holder. The realtors responsibility is to the seller.
You also mention the realor cannot list a property in which you do not own. If this is an issue for agents, you can simply obtain the deed if need be.
Lastly, you mentioned these shortsales are illegal. They are being done every day throughout the country. If they are really “illegal” how is this type of transaction slowly becoming the standard?
Good Luck!!!
Gold River, I’m challenging you because I would like to see references to those statements.
Many people (I’m not pointing a finger at you) are quick to say something is illegal or fraud just because they heard through the grape vine. I would like to see documentation and the actual laws which prove such statements.
Ignorance of the law is neither excuseable nor my responsibility!
Every US State has Laws about Foreclosures and what can and can not happen during the process! The Law say’s that the transaction must be an “Arms Length Transaction”.
This prescribes that any lender must verify the buyer of a “Foreclosure” during the prescribed period between service of the “Notice of Default” and between the “Trustee Sale”
This transaction is known as a “Short Sale”!
A contract must be in a name of a buyer! It can NOT include “And / Or Assigns” in the contract. It must have an initial “Closing Date”.
Fannie Mae / Fredie Mac / Ginnie Mae / HUD and VA have very specific regulations (Statutes) about the arms length transaction and specific requirements by federal mortgage laws!
Specifically the statute (regulation) prohibits sales to a Corporation, Trust or LLC because it can not verify that the seller does not have a benificial interest in the buying entity entitling seller to fractional or whole ownership interests after the transaction. (Circumventing the foreclosure process)
It is illegal for a seller (defaulting Party) to have a benificial interest in a property foreclosed on or short saled during a specific time period. (The time period varies state by state)
Washington States Statute is “Laws of 2008 Chapter 278”!
Every US State has very specific laws in writing concerning "Arms Length Transactions. (I do not have the time to write the other 49 states specific ruling, year of update and specific statutes or chapters)
A realtor representing the seller of a foreclosure property during the period between the “Notice of Default” and the “Trustee’s Sale” represent the lawful interests of both the seller and lender. (Prescribed by Law)
US State & Federal Jurisprudence: Find a law library and find the State and Federal Statutes. Also state agency law regarding real estate prescribes the relationship between the seller, lender and realtor during the foreclosure process. (Short Sale)
State and Federal law prohibits a real estate agency from contracting to sell a property not owned or legally entitled to the seller.
There is absolutely nothing illegal about buying a “Short Sale” they benefit the seller (Party in Default), it benefits the lender and it benefits the community.
A properly done “Short Sale” is great, if your an investor capable of doing these transactions legally by all means do “Hundreds a Month”!!!
I see tons of real estate agents (agencies) that list a property on there web site that do not have deed to that property and who are a different entity than the listing agent.
I also have a transactional funding company that will ONLy fund the A-B transaction of the short sale if one has a Trust, LLC, or corporation, they do it all day every day and have been doing it for some time.
This is NOT true. You can buy a short sale in the name of an LLC, Corporation, Individual Person. I have done it and have proof to back it up. It is NOT illegal, immoral, or fattening. 
An arms length transaction is from seller to a non related party or business partner. It has nothing to do with an investor, UNLESS that investor is friends with the seller or something along those lines.
It is illegal for a seller (defaulting Party) to have a benificial interest in a property foreclosed on or short saled during a specific time period. (The time period varies state by state)Washington States Statute is “Laws of 2008 Chapter 278”!
Every US State has very specific laws in writing concerning "Arms Length Transactions. (I do not have the time to write the other 49 states specific ruling, year of update and specific statutes or chapters)
I’m not in Washington State, I’m in Michigan, and that doesn’t apply to me. You probably shouldn’t quote 1 state’s laws to a national forum. You have a 1 in 50 shot of it being accurate.
A realtor representing the seller of a foreclosure property during the period between the "Notice of Default" and the "Trustee's Sale" represent the lawful interests of both the seller and lender. (Prescribed by Law)US State & Federal Jurisprudence: Find a law library and find the State and Federal Statutes. Also state agency law regarding real estate prescribes the relationship between the seller, lender and realtor during the foreclosure process. (Short Sale)
State and Federal law prohibits a real estate agency from contracting to sell a property not owned or legally entitled to the seller.
There is absolutely nothing illegal about buying a “Short Sale” they benefit the seller (Party in Default), it benefits the lender and it benefits the community.
A properly done “Short Sale” is great, if your an investor capable of doing these transactions legally by all means do “Hundreds a Month”!!!
That is WHOLLY incorrect. The Realtor works for the SELLER, NOT the lender. Also, we get an EQUITABLE title interest in the property, and are therefore allowed to market, list, sell the property, so that agent’s fiduciary responsibility then transfers to US as the sellers.
I know you’re trying to help, but its my opinion that you are providing false and/or incomplete information based on 1 state’s laws and regulations and probably confusing more people than you are helping. This is a forum to share information and exchange ideas, and you’re telling people that short sales and buying and selling them are basically illegal, immoral, and fattening! Please stop, and either check your facts, or at least provide a disclaimer that you are only speaking of Washington State or wherever you are.
I stand corrected.
In certain states it appears state laws circumvent federal to allow discretion on behalf of the lender selling a short sale.
It would appear that a lender (bank) can in a number of states anyway verify parties in a Corporation or LLC through the states “Secretary of States” office to satisfy the “Arms Length Transaction” mandate and ensure that the corporate entity is not a front for the selling (in default) party!
If these regulations did not exist however, it would allow every person who wants to circumvent there mortgage to create a corporate entity and make an offer to buy there own property citing a seperate entity.
Who say’s you can’t teach an old dog new tricks!!!
OK let me see if I have this straight. I will use a deal I’m currently working as an example.
I have a Washington, DC pre-foreclosure property under contract In my LLC and a short sale package submitted to the bank. We are waiting for the drive-by BPO. My contract price for the short sale is $208,000. I paid a flat fee FSBO listing service to put it on the MLS last week for $259,900 with the “price pending short sale approval” (so I can wiggle the price if need be). The house is worth about $265-275k; it was recently fully remodeled and would be considered superior to most comps in the area (which are closer to $230-250k). Already getting quite a bit of interest.
So what I’m reading here is when the short sale is approved, I will need to use transactional funding to close in my LLC’s name (A to B) then turn right around and close with the end buyer (B to C) making sure they are NOT going FHA and they ARE using a lender that has no title seasoning requirements.
Did I get this right?
I’m willing to offer a 6% seller concession if need be, and will pay a Realtor a full 3% commission. Then I have the transactional funding points, let’s say that’s 3% as well. That’s a max of 12% out of my pocket. Assuming I can get full listing price, the way I see it, if my math is correct anything below a $228,712 short sale approval is money in my pocket.
Am I missing anything here?
nsu1997,
you may want to start a new thread for your question to get a better response.