Hey all,
What are the different options to do a short sale without any money of my own? Is it possible if the title company allows to do a same day double closing with buyer first then seller (as long as they don’t meet). Are there any issues with doing this, especially with the lender or other?
Also, is there any other vehicles that allow this to happen with no money of my own?
In advance, thanks for the advise.
Best Regards,
Chris
To answer you questions YES. You can do this with no money of your own. Double closing will work or Transaction funding. There is always something you can do. Why don’t you share your plan and we will lead you in the right direction.
Like Summit said, transactional funding can help (“bridge loan”) for longer-term you can try hard money ( < 90 days) but that can get expensive. If there is one thing I’ve learned it’s that you can be creative. Short sales are an awesome way to get involved in real estate investing with little $$.
Due to lack of sufficient funds to fund the deals myself (at least for now), I plan to utilize either same day double closing or transactional funding for short sales. I am new and have never done a deal of yet. I have a title company that is able to do double closings and will be meeting with them this Friday to learn more about their services. I have a good lead source for NOD’s that come once each week by county. I plan on marketing to them using varying vouchers at 30, 60, 90 about 200-300 per week all done myself. During my research I believe that pre-foreclosure/ NOD short sales is the best method for me to gain experience as well as cash to start funding my own deals at a later point in time. They are still a couple things I need to tie down before I move on this plan. They are as follows: what determines whether the numbers align in favor of a short sale? What other options are available to offer the homeowner? What is the formula for short sale? I have created an access database that uses the electronic leads I get weekly and I want to have the database do all of the math for me and effectively tell me whether or not the deals are worth pursuing before I start marketing to them. I want to market only the ones that I can actually make a profit from. Will a general sales contract suffice between the seller and me? Also, what escape clauses should I have? What questions should I ask the title company. I’m at the point where I need to start taking action instead of just analyzing everything to death, so here I go with a positive outlook and high hopes.
Anyways, thanks for the help in advance. I’ll post my entire plan later today.
Best Regards,
Chris
You can also put in the clause of your contract that it is assignable.
Always remember that short sales are contingent on when the bank gives you their approval and lots of times it can be months and even years. If this happens the end buyer, if a cash investor may move on to other deals or if a financing investor may lose the funding due to time of the essence.
Short sales are fishy in this way so try to secure yourself by having more than one buyer on the end.
Also Obama is trying to pass a law on giving the sellers $1500 cash to short sale and $1000 to both the lien holder and the end buyer’s bank.
Keep a look out for this.
Thanks naqueen,
Do you happen to know where I can obtain these clauses that I can just insert into my sales contracts? I joined up with the local REI club and will be networking myself there. Hopefully I can acquire a few buyer/ investors that will be able to purchase my deals when the time comes. I’m thinking this will be fairly easy to accomplish.
Thanks for the additional help.
Best Regards,
Chris
Yes Oregon,
I am not sure which contract you are using but if it is numbered like mine you can just add it in. It is very simple as such:
“21. ASSIGNMENTS: This contract may be assigned without the wriitten consent of the seller. This means that the buyer may transfer to anyone else his/her rights under this Agreement to buy the property.”
The problem is with a short sale the bank will most always have the approved buyer listed on the approval letter. Title co should not close with a different buyer making it very hard to assign a short sale contract in the traditional manner even with a clause in the contract.
In my five years of focusing on short sales I’ve only had two banks state on the approval that the contract is not assignable.
It is also not illegal for a title company to do a “double closing” or “simultaneous closing” which ever you call it.
There are just a lot of them who are refusing to do them because of this real estate crisis that is going on right now. But it is not illegal and some are still doing them.
Thanks for your input gentlemen,
Yesterday I spoke with the closing officer at my Title Company here in Oregon and they are able to do either (same day isolated double closing and/ or simultaneous) as long there is full disclosure to both parties. Of course, I don’t believe this will be a problem is most cases. As long as I am helping the homeowner out of his/ her situation and the buyer is getting a good deal.
Best Regards,
Chris
Exactly,
And I’m a female, lol
I’m sorry naqueen. I’ll make a note in the future.
Best Regards,
Chris
:smile it’s ok.
Then remember to disclosure the simo close to both parties but I wouldn’t tell them outright that you’re making $xx,xxx - just that you are reselling for a profit. And I would do this ON PAPER with having both the seller and buyer sign a disclosure form AGAIN at closing and have the title agent notarize it.
Having all parties in separate rooms can avoid issues with the A and C parties.
Met with the title company this afternoon to discuss my plans to do short sales with double closings. No problems with the title company - they don’t do many of them, but they can do them. One interesting point he made though about full disclosure to all parties. When disclosing to “C” party the “A” contract with “B” and vise-versa (C - gets to see what I’m paying for it and A gets to see what I’m selling their house for). He stated that what he sees is that once the lenders sees what profit is being made on the deal sometimes they pull out. Now I have heard of parties “A” and “C” pulling out once they see the profit, but not the bank especially after negotiating the price. Can this happen? Maybe its possible. but I don’t see it happening much. Maybe its just certain lenders that would rather hold onto the property longer to get back more of their losses.
Summit were you going to comment on my plan? I woud like to hear what you have to say.
Best Regards,
Chris
I went through 5 title companies to find one that would do a back to back with full disclosure using transactional funds, I haven’t found any that will do a simultaneous. I know many investors are doing simultaneous closings, perhaps it varies by State or the length of time you’ve been with the title company.
OregonREI, Great attitude. Double Closing with Transactional Funding, or your own funds, is NOT illegal and is done every day by national title companies. Simultaneous closings, on the other hand, used to be done but will not be done by any national title company. That should tell you something. A Simultaneous Closing is when you use the end buyers funds to fund your purchase - used to be, but no longer ok. Some title companies do not like to do double closings, but there are plenty that will. Some that will may also have local branches that choose not to. Try Stewart, Fidelity, and First American. Short Sales are NOT assignable.
The deals that are getting closed are the ones that fully disclose to ALL parties that you are an investor reselling for profit. HOWEVER, disclosing to the end buyer how much you are making is not a requirement; and a Double Closing prevents that, unless you opt to close both transactions in the same room. Now, why would you want to do that? My website has documents for an Option Contract and an Affadavit. Look at the disclosures in those documents then use those disclosures in your standard state contract in an Addendum. Most banks accept the Option Contract, but some are more recently wanting to see standard contracts used. :bee :bobble
Thanks for all of your feedback everyone. So what is the formula (the math) behind a good deal?
Chris
That is a harder question and there are more experienced short sale guys on here that I hope chime in. FHA loans are harder to short because they have a formula 88% of bpo w/i 30 days, 86% after 60 days, 84% after 90 days. Many choose to not work Bank of America deals for multiple reasons or Wells Fargo because they try to impose a 30 day no resell. Deals with a large 2nd are good targets. It boils down to negotiating with the bank and building a case for why your offer is good for them. I highly suggest outsourcing your negotiating to an experienced full time negotiator. I am funding deals for investors and seeing $20k on many and much larger spreads on some ($150K on a deal I am funding next week). It boils down to having a large enough pipeline, effective negotiation, and finding that buyer. Take all the $10k deals you can and hope for that occasional home run.
Thank you very much Ted. I have been told on more than one occasion that I need to find experienced negotiators to negotiate my short sale deals versus doing them yourself. I already have a meeting scheduled this Friday with someone local that has 25 years experience doing short sales that I hope can help me. At this point I would be happy with multiple $5K deals to get the ball rolling. Thanks again Ted.
Best Regards,
Chris