Short Sale Question

Ok so i am at the point in the short sale where i’m getting repair estimates from my contractors and preparing to list it with my realtor to fulfill the 30day listing requirement.

Question: If the previous owner, who has vacated the property mind you, left the home in terrible shape should i be concerned with cleaning up the property before listing it?

I mean the whole point of listing it is not to sell, but to fulfill the 30 day listing requirement for countrywide.

What are your thoughts? :help

Fixing it up means the BPO (Countrywide will order a broker price opinion) will be higher than unrepaired and thus you would seem to be working against yourself to get a deal.

Chris Smith

Yes, most homeowners will leave it dirty and rough. That is exactly how you want the house when the BPO Agent comes out. As matter of fact you want to show them all the negative attributes of the property. Remember the goal is to influence their opinion to be as low as it can possibly be. In case the home owner still lives there, instruct them to leave garbage outside and dirty laundry by the washer/dryer and dirty plates in the siink. You worry about cleaning up after getting an approval.
I am glad you know you are not listing to start showing potential buyers. Short sale on an average take so long anyway that most buyers will pull out before an approval. Because of the volume of preforeclosures, it is now taking 6 months to 1 year to complete a short sale…

John Lee

If I understand you correctly you are an investor who came upon a property where the owners were going into foreclosure and have moved out of the property.

You made an offer, put together a hardship package and have gotten estimates from your contractor for the required rehab repairs.

Countrywide said they want the property listed for 30 days minimum before they will discuss your offer.

I do not completely understand your comment “Before you list it” because it has to be listed by the current property owners and should be listed with someone other than your agent.

There is a huge conflict of interests and this could become a huge problem as Countrywide probable really wants it listed and for sale up to the trustee sale, if another offer comes in better or worse than yours it has to be presented.

If Countrywide finds out you stuck your own agent in the middle they may be upset or believe the property was marketed incorrectly or your agent said things discouraging other offers which could lead to legal action!

You can not legally touch the property prior to you owning it, it is up to the sellers to determine with there agent what should be done to make the property more presentable and more sellable!

As far as Countrywide is concerned the object of listing it is to get much better offers than yours and hopefully prompt an offer from a “End User Family” to buy and fix it up!

Don’t do things in real estate that create a conflict of interests or put you in a position to potentually be looked upon as creating conflict for the lender.

You have no authorized party status and you won’t know anything until your seller, there agent and the lender or lenders let you know there are other offers and do you want to raise your offer.

Either a short sale will be approved or it will go to trustee sale on time, it is a rarity for a lender to delay a foreclosure when the owner has already moved out!

That does make alot of sense Gold River :banghead

Now this is where im coming from and if you see any holes please fill them with your knowledge.

So i have a signed option-contract with the owner, with a clause that gives me the right to list and market the property. Now my realtor is not the one submitting my offer to the bank, iam. Now with this new found knowledge should i just swap the listing agreement and have the property listed under the actual home owner, of coarse with her permission and knowledge, and just continue to negotiate with the bank? I have an authorization form signed that i sent in already to the lender which gives me the right to talk about there loan.

I dont want to be galvanized by the ethics committee but at the same time i do want to help these folks out and make some money too.

So what do you think the next best move would be?

You can not option a Short Sale. Period.

You either make an offer when and if excepted you close in your name and then sell the property as the new legal owner any way you choose.

When the lender asks that the property be listed, your position of submitting the original hardship offer is over, and if your seller originally gave permission to talk to thier lender, that permission will be revoked by the lender in lieu of the new agent, broker and agency.

If the lender has not requested the property be listed yet, then they are considering letting you buy it for your offer.

You can not option, convey or assign a short sale purchase, if your name is on the contract offer, you have to close on it, that is federal and state law.

If they approve your short sale offer without requesting the property be listed, you are just moving to close.

You can not list the property or publicly advertise to sell or rent until you take possession and close.

You can however look at your buyers list, and see "Hey Bob and Mary are looking for a 4 bedroom, 2 bath in Your Town USA and you can call, see if there still looking to buy in that area, and you can tell them your purchasing a property that might be up there alley you would like to show them after you close.

This is where your buyers list comes in handy.

This new transaction is completely seperate from your purchase, but remember if you purchase a $200k home for $150k, you have your closing costs twice and your realtor fees if you find you need to list it.

You also have clean up, carrying costs, utilities, HOA, expenses, and repairs before you resell, just make sure you can buy right!!

[b]I’m sorry but Gold River you are giving advice that couldn’t be more wrong. Option Contract is used by thousands everyday for short sales. It does allow the investor to list and market the property for sale. Not only that but the investor also records “notice of option” which then the investor is recorded under restrictions schedule B on title. Investor list the property with there realtor. When you get an offer from the exit buyer and there lender pulls title to fund the transaction that is showing the investor on the P&S (“B” to “C” contract) they will see the Notice of option recording from the investor on title. As long as the exit lender is not FHA or has 90 day seasoning your good to go. Your then set up for a back to back closing and can use Transactional Funding to fund 100% of the deal including closing costs. I own a Transactional Funding Company and close multiple deals each and every month with investors using option contract and Land Trusts.

“A” - Distressed seller
“B” - Investor
“C” - exit buyer

“A” sells to “B” and “B” sells to “C”

Flash Funder[/b]

ok so who is right? :argue

At this point ive been following the advice of Flash to the T. Now Gold did have a point about the conflict of interest which really has me worried because i don’t want countrywide to look at me funny and then never do business with me again.

So flash, have you had any resistence with listing the property under your name when doing a short sale?

I mean it does make sense from the banks standpoint cause it doesn’t look as if the property was attempted to be sold with the banks interest in mind. It looks, since its my realtor, that the realtor will be listing it with only my interest in mind. The whole point of the short sale is so the lender can get as much as possible, and of coarse im trying to buy it for as least as possible. Thats really the only thing that has me hung up.

So how to get around this objection?

Well “Flash Funder” you got me there. So less than 1/10 of 1% of the estimated “Five Million” real estate investors in this country use this method.

In a normal short sale transaction the investor finds distressed sell A and says 'I can help you short sale your home and save you from foreclosure".
This is a good thing for distressed seller A and this family says “Thanks”.

So normally we go and prepare a “Hardship Package” highlighting why the family is having a tough time and has fallen behind on thier mortgage payments. This package includes the families bank statements, the fathers layoff pink slip, all of mom’s medical bills, the families asset and expense statement and a hardship letter.

We also have to include our contract offer to purchase the property for x amount in dollars to the “First Trust Deed Lender” and if there is a “Second Trust Deed” we also include what we are willing to pay on the second.

Normally we prepare this and we make a package that includes permission for us (The Investor) to talk to the families lender or lenders and present the package or packages depending on how many recorded trust deeds exist. We initially talk to customer service then we talk to “Loss Mitigation Department”, we talk to the “Collections Department”, and we talk to the
“Foreclosure Filing and Documents Department” and we may even talk to departments like the “Legal Department” and an “Appraisal Department”

Wow, thats a whole lot of departments, and we have to accomplish this in x number of days, although there are some states where foreclosure takes 6 months to a year, here where I am at from the point the property is posted with a “Notice of Default” to the day of the “Trustee Sale” is 105 days.

Now a Mortgage Lender (Bank) will not begin the process of reviewing a short sale offer without a Hardship Package and without a Signed Contract (Offer To Purchase) and a Loan Approval Letter.

Now the realities of a “Short Sale” are this, once the lender recieves the package and you make your first phone call on day one to customer service.
Oh, were sorry your documents have not been scanned into our system yet, it will probable be 3 to 5 days!

Five days later, oh we got your package but we need to have Mr. Smiths signature on these documents also so please re-submit please.

Two Days later, oh we recieved your documents but the new copies have not been scanned into our system yet.

Two days later, oh we got everything scanned and it is currently being reviewed. Please call back in 3 days.

Three days later, yes we have all the documents and the property has been assigned to Mr. Jones in Collections. You call and call and call, and finally get Mr. Jones who politely tells you "Your account has been transfered to Mr. Willson in our Valuation Department, you can reach him at so and so number eastern standard time.

You call and call and call, leaving message after message for Mr. Wilson, finally you get him on the phone and he says "We ordered our site appraisal and we should get some word on this in two to three weeks.

When you call back two weeks later, your told your account was transfered to Mrs. Waiting in Legal, so you call and call and call and finally get ahold of Mrs. Waiting and she says "There’s some trouble verifying some of Mr. Smiths documents, can you please re-submit your contacts sheet with revised verification phone numbers.

Finally you call back looking for Mrs. Waiting again and you are told, your account was transfered to Mr. Adams in our Loss Mitigation Department.

Now if the lender requests the property be listed for sale “They are requesting the Current Owners in Distress Mr. and Mrs. Smith List there property For Sale”

Now there is always the potential they will straight out review your offer, but we are already 6 weeks into the time line with the clock ticking, and since a short sale approval ultimately goes to committee, it will be 30 more days before a approval even if they do not ask for the property to be listed.

They could pop back and say "We need to recieve x number of dollars and request you submit a new contract or an addendum. If you still want the property at this much higher price.

Or after waiting out the 30 days they could request the owners go ahead and list it for sale. This is a sign your offer is way to low!

Now when I read “Flash Funders” input to me above, if I for go preparing a “Hardship Package”, for go preparing a “Contract for Purchase” and I for go “Submitting a Mortgage Approval Letter” and I file an option that was signed by my Distressed Sellers.

How Does My Distressed Sellers Lenders Even Know That Someone Has An Interest In The Property???

If I get my distressed sellers to sign a Option Contract and I file it, what dollar amount is on it considering it will take Two to Three Months just to know where the lenders stands if they knew I was interested in buying the property.

But they can not know I am interested in buying the property unless I present them a Contract For Purchase signed by my Distressed Seller at a minimum!!! With some amount of money for Purchase!!!

Why would I even need an Option on a short sale if I have to present a Contract and a Mortgage Approval in order to get the Short Sale Approval, I am going to have the right to close on the property anyway if my Short Sale is Approved!!!

And in a short sale, the sellers (Family in Default) has no say in the approval of a sale, and unless the lender agrees your not buying this house!

If I find out I have an approved Short Sale Agreement I can move to close, conventional, private money or hard money, and I can start working my connections and lists to come up with a buyer.

Maybe I missed something?? I’m talking double closing with none of your own money. If your looking to buy with hard money pay 5 points and 12% interest and take ownership then no the option wounln’t be used. I fund these deals nationwide to REO & short sale investors. I see the option contract in about 90% of the deals and land trusts in about 8% and a standard P & S agreement with the verbage hanwritten in that the option has in it.

Flashfunder, I think you two are likely reading in “two” different chapters??? I understand what both of you are saying, however, I hope the investor does likewise???

My only question to you Flashfunder… I understand the A-B-B-C process, however what do u recommend for us “newbies” who can perform REO’s all day long, however seem to lack an “end-buyer” or funding source (i.e., private $$$, HML)??? Pls help with some advice!!! Shalom…