I am contemplating doing short sales. I have several books and manuals on it and I feel as though I am somewhat prepared. I am currently a landlord of a duplex in Michigan that I bought wrong. Because I have no intentions of holding on to another property, I want to ASSIGN preforeclosure contracts to other investors. My questions are:
1). Does the lender specify that you can not ASSIGN the deal; are they expecting the person/company (wholesaler) on the purchase agreement to do the deal only?
2). How long does the lender give you to complete the deal? 30 days? Can it be extended if necessary?
3). If for some reason you don’t have a buyer or the buyer backs out at the last minute, what happens? I assume you can get out of the contract with the homeowner but what obligation do you have with the lender?
4). Do you tell the homeowner exactly what you’re doing; not personally buying but assigning to an investor?
I am all concerned about protecting myself from having to buy the property. I am well aware that the goal is to provide the best solution for the homeowner but what do I do just in case. I am aware of contingencies and losing earnest money but how else can I lose?
1). Does the lender specify that you can not ASSIGN the deal; are they expecting the person/company (wholesaler) on the purchase agreement to do the deal only?
Some lenders do some don’t. It depends on who you are dealing with and the situation.
2). How long does the lender give you to complete the deal? 30 days? Can it be extended if necessary?
Once a lender agrees to a short sale and issues you a pay off letter they want their money as soon as possible. Unless you specifically tell them you need a full 30 days to close they will more than likely give you between 5 and 10 days. They will state the exact time frame that their payoff letter is valid for in the letter itself.
Yes, if the lender believes it will still close and the circumstances warrant an extension, they will extend the dead line for you.
3). If for some reason you don't have a buyer or the buyer backs out at the last minute, what happens? I assume you can get out of the contract with the homeowner but what obligation do you have with the lender?
What contract with the homeowner??? If you are the negotiator conducting the short sale why would you put yourself under contract with the homeowner? All that does is make you liable when you don’t have to be. You as the negotiator, are trying to negotiate a payoff with lien holders for less than what they are owed. If you fail, which more of your deals will fail than will be successful, then you simply walk away. The homeowners will be in no worse condition than before they allowed you to try the short sale.
I always advise people who are wanting to begin negotiating short sales to begin building a buyers database as soon as possible. You can negotiate a successful short sale all day, but if you don’t have that end buyer lined up and ready to close once you have the payoff letter(s), then you are just negotiating for fun and not for profit. I’m against up front fees of any kind to the homeowner, which means as a negotiator, we only get paid upon successful resale of the property.
If you do not have or your buyer is not able to close for any reason your short sale deal simply dies. You will have to find another buyer and get new payoff letters for the new buyer. But as long as you keep yourself from putting any liability upon yourself you are not held liable for purchase.
4). Do you tell the homeowner exactly what you're doing; not personally buying but assigning to an investor?
Of course. Failure to disclose can easily lead to legal trouble and liability. I not only ALWAYS tell the homeowner what I am doing, but I make them feel involved. I utilize my forum system to manage my short sale deals. With the ability to create private hidden sections I am able to keep the homeowner (and other related parties, such as a Realtor) involved and informed on everything that’s going on with the short sale deal. As long as everyone is on the same page we can all be working toward the same goal.
For the “Foreclosure Negotiator”, something you asked caught my attention. You asked “what contract with the homeowner?” Maybe “contract” is not the right word but don’t you have to “tie up” the property with a purchase agreement with contingencies for your protection or do you just start off by getting their authorization to negotiate with their lender about their property. Everything I’ve read thus far tells you to tie up the property, give a small earnest money, record agreement at recorder’s office, inspect the property, get authorization, etc. Maybe not in this order but does this sound familiar?
I learned from forclosure negotiator’s ebook that a simple way to tie up the property, once you get the intial papers signed, is to let a realtor list the property. This secures you interest in the property and allows the realtor to recieve a commission when the property is sold. This may also help land a buyer, because the realtor will want to sell the home, plus the bank will want to see that the property is at least on the market before they consider a short sale.
I guess my only question now would be, What does the realtor list it for? FMV or FMV + plus all liens, fees etc…??
BTW FC how do you go about building a list of buyers? REI clubs?
Only thing I might add is that I do enter a contract to purchase with a very large if I cant perform I can walk clause…
INDEMNIFICATION: The borrower shall indemnify, defend and hold harmless the negotiator and/or buyer and all persons or assigns, regardless of responsibility, from all costs, expenses, suits, liabilities, damages, attorney fees and claims of every type, including but not limited to those arising out of injury to any person, or damage to any real or personal property to any person, including the borrower and said financial institution, for (i) any items resulting from the information furnished by the borrower, or (ii) those relating to the financial information, or ability or inability to pay for or continue to support the debt of which the negotiator and/or buyer is attempting to negotiate a short sale on the property by the negotiator and/or buyer, or any person in the negotiators and/or buyers firm, or the performance or exercise of any of the duties, powers or authorities granted to the negotiator and/or buyer by the borrower.
To the question of buyers lists… You build one the same way you find sellers… And you must be locating buyers at the same time youre locating sellers especially in a buyers market…