Hi guys, i am a newbie and i just received a call from someone with a short sale deal. The agent has it listed for 230k and balanced owed is 300k,i have a negotiator,what would i need from the agent to send to my negotiator to start working on it. As for the foreclosure,i am finding deals,but i am afraid to make offers because i am not sure,for example a property 3/2 for 56,000 and comps are 135,000. Agent even told me i can get it for a lower price than that,and assign it if i want or double close since you can’t assign. I am going to offer 45,000. Can anyone help me please, i find these deals all the time, but i am just afraid they are not right,repairs in this property is some TLC and that’s it. What should i do with both opportunities and how can i succeed down the road,because i keep finding them and not know what to do. Fear of a newbie.Please help, thank you
The deals sound good, but there are some things you should know. First, The short sale must be approved by the entity that owns the note. That entity is usually a secondary market investor (SMI), such as Fannie Mae or Freddie Mac, both of which are now owned by the government. The servicing lender usually has no authority to approve the short sale, merely to process the proposal and serve as an intermediary between the SMI and whoever is submitting the short sale proposal. If a private mortgage insurance carrier has paid a claim, then the MI carrier either now owns the note, or at least must also be given opportunity to approve the short sale proposal.
Although it used to be that that the SMI would merely evaluate the short sale by whether it is better for them than an REO (bank owned property), most of the SMI’s are now using a minimum threshold net percentage of the fair market value. HUD’s thresholds (Fannie Mae FHA/VA loans) is 88% if the house sold in 30 days, 86% if sold between 30 and 60 days, and 84% if it sells later than 60 days.
Most investors and real estate agents make a lot of errors in submitting short sale proposals, so the likelihood of success is only about 50% or less. The minimum threshold is the first important consideration.
It is important to learn more about short sales before proceeding. Although same day closings are the big IN thing right now, both Fannie & Freddie are moving to prevent them. I noticed last week the new requirement for the SMI to be informed in advance if there is going to be a double closing, and the condition in the bank release document prohibiting a subsequent transaction within 30 days. This raises additional legal issues and it is possible that a title company may refuse to close with that language. It will be interesting to see how the legal issue gets resolved.
Short sales are a great opportunity, but remember there are many issues that you may encounter and it is important to learn how to resolve those issues in advance and as they occur.
I am a licensed real estate broker specializing in short sales. First off, you shouldn’t be afraid. If you can’t find your retail buyer, you have nothing to lose, you just walk away from the deal.
Also, short sale flips are becomming more difficult with the new approval letters. You need to send the negotiator a letter stating that the title company won’t insure title with the no flip cause as they can’t control what happens after they issue a title policy.
If you are good at finding sellers, I suggest you just get licensed and earn money through commissions and “short sale processing fees”.
I make less than an investor, but I don’t have to jump through hoops either! However, I do make more than an agent! If there is a 100k spread, I make 20k, my seller makes 20k and I make my 3% commission on top of the deal.
what is a reasonable price for a buyer to pay for a courtesy closing?
Bringing this old thread back to life… :cool
How do you make $20k as a broker on top of the 3% commission? And how are you able to pay the seller $20k on a short sale??
First off, I didn’t realize Ken Lawson was participating at the time. Very smart attorney who knows short sales inside and out. One of the very few that actually gets it!
The way you do it is that you have a listing agreement with the seller for like a high percentage or number greater than 6%. For example purposes only, if you have a listing agreement for 10% and the bank approves only 6%, you put the cost onto the seller. The seller then puts the cost onto the buyer. So the buyer comes in with the 4%.
What makes this work is that you find a retail buyer who is willing to pay the most and has cash beyond what is needed for their loan. For example, if they were willing to pay 400k and you know that you can get the short sale approved at 345k, then you tell the buyer and/or their agent to write the offer for 345k and ask for closing cost. If it gets approved, now the buyer is getting this 55k under expectations. So you can pocket $13,800k extra as an agent (the 4%) on top of the other 3.5% you have from the bank (assuming you pay a cobroke to the buyer’s agent of 2.5%). The seller can sell their after market fixtures and personal property at 20k and the buyer is still getting the property 21k under expectations when it all said and done. A win win win situation for all parties.
The numbers for commissions are for example only and do not reflect my brokerage practices nor is it an attempt to set commissions with other brokers.
Customer Service at its finest! Nothing says I am working in the best interests of my client like Just walking away if you can’t find a retail buyer!
SS are very easy to get done with Bank of American and Wells Fargo. Our turn around time for approval is within 7 days or less if we have a cash buyer ready to go.
Context is a wonderful thing, don’t you think?
As an investor, you have zero risk and you owe nothing to no one. All you have wasted is your time. If the numbers don’t match, you just bail.
So as a Broker are you allowing the Investor to go A to B B to C on your listings??
In instances that I need an investor, I will represent the seller (A) only and let the investor come in with their own agent and I do not get involved with the B to C side. Any offers that I get after submitting the short sale package, I then give those offers to the seller. If the seller wants to share that info with the investor buyer, than that is his/her business.
Alot of agents/brokers make the mistake of getting involved in the B to C transaction. It’s bad enough that they involve themselves in a dual agency with seller and investor, but then they represent the investor in an agency capacity in the B to C transaction, which violates their fiduciary towards the original seller. In California, we have a fiduciary relationship with our clients. In other states, like Florida, which is a transaction broker state, it might be OK. I have no idea.
Good deal I like the way you think… So many times we are seeing the Broker be part of all sides of the Transaction and this will cause the Fiduciary Responsibility to be breached in my honest opinion. I do business with the theory that if you give enough people what they want you will get what you want. And to be candid it works out amazing. Last month we were able to turn just over 200k in profit without a ton of effort. I will tell ya I have been doing this for 19 years now and the only thing that I have really learned is that I have a lot to learn.
And that is the crux of a transaction. I have done over 175 short sales since 2005 and I haven’t been sued by the seller or the buyer. The reason is that the way I do short sales is that everyone wins and everything is disclosed.
If that is all you done in 7 years you are new to the business.
Seems negative comments on REIclub isn’t all that you’re tied to:
http://sfbay.craigslist.org/pen/fns/3141494266.html
http://places.blumenthals.com/thread9fc2.html
Who is Jessie Gomez?
You got me mix up with someone else.
justin0419 who are you referring the links to?
I don’t know who Jessie Gomez is either. I just Googled hardmoneyloan@yahoo.com (which was the email listed in your profile) and those two links showed up. Maybe it’s all just a weird coincidence, but the craigslist post with that same email address is only a few days old and now your profile has been updated where your email address is hidden and you are now the short sale king.
http://sfbay.craigslist.org/pen/fns/3141494266.html
http://places.blumenthals.com/thread9fc2.html
Hmmmmm… :huh
rather interesting