NJbird_dog,
I don’t know your state laws concerning RE agents, nor whether or not you’re also a Realtor, but let me suggest that you simply stop talking, as in every state that I am aware of the laws/codes, you’ve already violated more than enough to have your licensed pulled/suspended.
Raj
box2good,
I’ve used a Warranty Deed and have them deed the property to me or my corporation. Once it’s recorded with the county, for there to be clear title for the next buyer, you have to Warranty Deed it to the next person. As far as I know, there is nothing stating who you must choose to Warranty Deed to. Thus, unless someone compensates you as you want, you don’t have to transfer Title. However, be aware, that once you have title, you have full ownership in the property. That ownership could include leins, judgements and foreclosures which will soon go to auction. As far as I understand, one of the purposes of a foreclosure/auction is for the mortgagor to get Title in their name so they can legally sell the property. Thus, a Deed/Title can be taken from you.
NOTE As always, I am not a lawyer nor giving legal advice. Consulty with you own attorney to fully verifiy everything I said.
Actually, I did stop talking about this post a few months ago. Let me suggest that not everyone on this forum always knows exactly what they’re doing, like you do Raj.
Anyhow, for those that brought this post back to life, needless to say, this deal was a dud. It never closed.
However, I did refine my “illegal” technique and I know I’ll have some disagreements with it, but basically, there are plenty of agents that work with investors who submit the first offer low offer on their short sale listings. This investor is capable of closing, no mortgage contingencies, no nonsense… if his offer gets approved, the deal closes within the 15-30 period that the bank gives us.
So this low offer is presented to the seller and the seller agrees and signs off. It’s then submitted to the bank. ANY offer that comes in after this initial offer, is now a backup offer even if it’s at a higher price. The seller can’t go along signing and agreeing to multiple contracts if he/she has one actively submitted.
Is this unfair? No, it would be unfair only if it was a REO and then you’d have to submit all offers to the bank (not the homeowner).
Yes, the agent’s fiduciary responsibility belongs to the seller during a short sale. And that responsibility is to help them avoid foreclosure and a deficiency judgment. This doesn’t necessarily mean you have to get them to sign the highest offer. I’d much rather have a low offer that’s sure to close then a high offer from a first time homeowner who will never understand the property will be sold as-is.
If the lowest offer gets accepted, the investor is happy. He’s able to meet the 15-30 day deadline that the bank has us scrambling to meet, and he closes and everyone is happy, including the bank because they did their due diligence in accepting the offer.
Now if his lowest offer was $220k and there’s backup offers at $300k, well the investor now has the chance to resell to the back up offers.
Now the gray area: If I’m the agent, guess what, I’ll connect the investor with the other offers if he wants to flip the property. At this point I can make a second commission on the 2nd separate closing OR I can just step out of the picture and let the investor sell it FSBO.
Either way, this is an approach that I don’t have a problem accepting. The way to avoid the gray area is to not be a licensed real estate agent and have a 3rd party buddy of yours handle the short sale and use you as the listing agent. Then you can do exactly what I explained because your buddy won’t have any type of fiduciary responsibility that agents have.
In fact, I know some agents that have sellers sign disclosures saying something similar to “I am a licensed agent, but I’m not acting as an agent in any manner for your transaction.” Then they handle the short sales and have another full-time agent list the property.
dr_white, the problem with this approach is like you stated, you take responsibility for the property along with all liens against it. I would never record the deed on a property that I plan to flip, because in most cases it’s not worth it. And I’ve decided that if the seller’s ever give me such a huge problem like my initial post explains, then I’ll just walk away from the deal. I can’t imagine recording the deed for that deal, and then having it all fall apart, yet not being able to walk away because the deed is recorded.
How funny.
Yes, NJBD, I did see where you had stopped. Sorry. A late night hyped up on caffine, made me miss that and probably can across a little strong, too. However, this is still a learning/research forum, so I’d think you’d still want the response. If not, let me know. I won’t post.
Until then:
The “plenty” of agents theory isn’t a good argument. Same as the old “if they jump of a ledge” theory.
Here’s the problem(s), as I see it and for my state (and Realtor’s COE).
First, if you are the listing agent and you do not list the property UNTIL you have an offer from your buyer/investor AND submitted that offer, you are likely in violation of a number of listing rules/regs, not to mention that the bank usually likes to see a house on the open market BEFORE offers are presented. Not listing the house is also probably not in the best interest of the client either.
Second, your fiduciary responsibility is actually to get the property sold, in whatever way the seller wishes you to do so within the bounds of the law. While in a foreclosure situation, that is most likely to get the property sold the fastest and without a judgement, that may not be the case. Either way, you are legally bound to present ALL offers that come through on the property. At that point, you can educate the sellers (and the bank) on the best one, but you CANNOT simply not present other offers until the one you want accepted IS accepted.
Third, if you are truly a neutral party, as in only the agent, even if you’re the agent for both parties, no problem. However, you mentioned that the “investor” was a partner, ie, that you will profit from this shortsale with more than just a commission. In short, you are a hidden principle. If that is the case, then that is not only a major code violation, but illegal, plain and simple.
Fourth, just to be clear. If you’ve acted in accord up to this point, there isn’t a “gray” area with letting the buyer of the shortsale know of other offers AFTER he buys it.
There is no reason to enter any gray areas when dealing with shortsales as an agent. If you ARE the principle in the transaction, then let the seller know upfront that you are a potential buyer. List the property on the market as a shortsale and present your buyer’s offer. If it’s all cash, no contingencies, unless an offer that is significantly higher comes along, then in all likelihood, that will be the BEST offer and you can say so. In the current situation, most banks will agree.
If higher offers come in, either before or after the contract is accepted, then after the sale, inform the buyer/investor that you have people that may be interested in the property. Resell as necessary.
As to getting paid. If you want more than the “standard” commission presented, write it up with your buyer/partner in a buyer’s agreement. For example, most shortsales only pay a max of 4% commission. If you want 10%, the the buyer agent agreement says that 10% is required. If the bank only pays 4%, the buyer knows that he has to come up with the other 6% at closing and allows for that in the negotations. Same way on the resell as well. That way, you can still get your profit as a “partner” without actually being “under the table” and without being in any “gray” area.
Hope it helps.
Raj
I will list the property for at least 45 days before I submit an offer. The investor will always get priority and he will always submit a low offer.
I will present offers to the homeowner and influence the homeowner to accept the investor’s offer because we want to close the deal, not waste time working with people who will withdraw offers if they can’t have the house cleaned with all appliances included. Since the homeowner isn’t making profit, I’ll make sure they don’t care what offer gets accepted. I won’t present all offers to the bank. I don’t work for them and as much as they’d like me to think that I have a fiduciary responsibility toward them, I don’t.
I guess I am a hidden principal. If I’m feeding an investor deals and he wants to give me a bonus or a “bird dog referral fee” (which is also illegal, plain and simple)… then I guess that makes me a crook. I’m willing to accept that. I’m sure you’ve also paid referral fees to non-licensed people just like the 100s of posts in the marketing forum of this site recommend doing.
This is an interesting approach, but I don’t think it’s necessary. The investor would incur more out of pocket expenses upfront and then assume that the property can be flipped right away for a profit. I prefer the other approach; utilize the investor’s ability to close quickly with certainty and make the process easy for him. He’s always taking the risk that the property won’t be sold to the the next end buyer. And I’m willing to wait until it’s sold so I can be paid.
I’m a realtor, so I can list the property myself. If you’re not a realtor, it would help to team up with one so he can list properties for you. I wouldn’t get into the deed recording business. It seems like a major pitfall just waiting to happen.
box2good:
If you list with a RE agent/Realtor, you’re going to standard agent/Realtor forms that every agent uses in your state.
NJBD, you know your state laws and RE agent codes, so I’ll leave it at that. Just offering some possible solutions to do the same thing without getting in any danger of losing your license (however small a chance that may actually be).
As to the commission thing, I did make some assumptions on your partnership with the investor. Sounds like my assumptions weren’t correct. However, it’s still a better way than taking cash under the table, IMHO. But to each there own.
And no, sense I’ve become an agent, I do not give cash referral fees to any non-licensed agent. While birddogs are great, I don’t like to risk my license for them. I’ll give visa gift cards, thank you gifts, etc, all of which are legal and valid here (to a point), but not cash.
Raj
Hello !! Thanks for all the info. I have a short sale that is supposed to close on the 25th. auction is on the 2nd. I just got the short sale approval. I have an end buyer who is trying hard to close by the 25th. I dont trust teh seller right now. Any hints on protecting the seller from trying to sell from under me or asking for cash on the side. I have a purchase and sale agreement signed and ashortsale approbval by the bank.Do you the seller could still file for bankruptcy or back out of contract.Auction is in less than 2 weeks. Thankd for your help/