(1) Do you get the deed when you do short sales? Another investor I talked to says that he just records a memorandum with the county. Is there something else you do instead?
(2) Do you create an equity sharing agreement or promissory note for the profit in a short sale? I just saw Bill Twyford here in Seattle, and he mentioned using an equity partnership agreement that stipulates how much of the short sale profit he will split with the homeowner. The dollar figure is based on a percentage of the profit as opposed to a set dollar amount.
(3) What percentage of the deals you are doing involve attempting a short sale? It seems like more and more of these are being done, so I was curious to find out what some of the more experienced investors are experiencing.
A memorandum is pretty strong, it ties up the property but does not give you the authority to drive the deal. I would say that you need to play it by ear with a homeowner. I have almost lost deals pulling out a deed. The homeowner was uneasy giving up the property, so I recorded the memo. I could not believe the first time someone sighned a deed over to me (6 years ago). Every deal is different and you do not want to come off to pushy with some sellers.
I in no way will do any equity sharing, unfortunately “investors” are offering too much and spoiling it for the rest of us. I use the term investor loosely you are not investor if you are flipping or selling . You are working a job! I will leave the additional questions for someone else…
yeah I agree, if the seller has negative equity (short sale sit) then he gets nothing. There’s no equity (before the negotiated payoff you have to work your butt off to get) to share with the seller so why would they expect any.
You get ALL the equity that you create by neg’ing w/ the bank. That money belongs to YOU…that’s your fee for getting the mortgage monkey off the debtors back :smile
re the deed, if you don’t secure it first off (after they agree to proceed) then you are working for free. Do you want to work for free? Either have it transferred to you or u can have them xfer into a land trust and assign 100% ben interest to you.
If you use a land trust or just get the deed directly signed over to you or your company, what do you do if you aren’t able to execute a short sale?
How do you respond to people that call this “deed snatching”? Logically, in my opinion, if an investor is doing the right thing, they will have presented the homeowner with options, with a short sale being a last resort. I don’t know - maybe there is another angle on this that I hadn’t thought of.
Re -“(2) Do you create an equity sharing agreement or promissory note for the profit in a short sale? I just saw Bill Twyford here in Seattle, and he mentioned using an equity partnership agreement that stipulates how much of the short sale profit he will split with the homeowner. The dollar figure is based on a percentage of the profit as opposed to a set dollar amount.”
I don’t know Bill Twyford but what he is advocating sounds an awful lot like mortgage fraud to me. A short sale occurs when the owner goes to the lender and pleads that he cannot make the agreed upon payments. For the owner then to enter into an agreement to recieve any monies as a result of that sale would have to be seen as fraud.
Of course, this is just my opinion, but I know that last thing I would do is have any paper trail of the sort you are describing.
…If you use a land trust or just get the deed directly signed over to you or your company, what do you do if you aren’t able to execute a short sale?
How do you respond to people that call this “deed snatching”? Logically, in my opinion, if an investor is doing the right thing, they will have presented the homeowner with options, with a short sale being a last resort. I don’t know - maybe there is another angle on this that I hadn’t thought of.
I only market to people who are upside down. The deed is worthless. It only becomes worth something if negotiations are successful.
I agree that does sound like fraud. Stay away. You can offer to help the seller with their moving expenses etc. but from your own [ss profit] monies, after the close/fact.
Remember this, in the case of a short-sale payoff (homeowner is upside down) the lender DOES NOT want to see on the HUD-1 ANY MONEY going to the seller. This is fact. In their eyes the seller gets ZIPPO! They also DO NOT want to see on
the HUD-1 any monies going to any 2nd or 3rd mortgages, even if you discount them 90%! Can you blame them? They are discounting their loan and they certainly DO NOT want to see anyone else getting money that they could get. If you put any monies going elsewhere on the HUD-1 on the SS it will blow your SS deal with the lender.
Equity sharing is for situations where there is some equity left in the house, not the case with a SS.
Secure the deed in a land trust so no more liens can be attached to it while you negotiate and the seller can’t change their mind. Don’t work for free. This is business. The trust eliminates one of the transfer taxes and preserves chain of title (seasoning). When u flip to end buyer reassign bene interest from u to them. DO NOT record the Land Trust or Assignmnt of bene interest doc!
If the SS deal doesn’t go thru just reassign bene int back to the orig owner/seller. Simple. btw, your P&S agreemnet should state that the sale is contingent on bank accepting payoff of $xxxxx
Yeah, I think I’ll stay away from the equity partnership thing, perhaps until I understand it better. I’ll check with some of the investors at my local club that were at the Twyford seminar to get their feedback.
I’ve heard that one of the reasons for taking the deed is b/c of unscrupulous investors that may try to steal the deal from you. Anyone, please enlighten.
that’s a bummer. Yeah I’d still spend it. They go into land trusts, marketing, and stuff about mortgages and who holds vs services them and how it will affect your SS and seasoning etc. 23 is still next to nothing. Its 4 1/2 hours long.