Hello,
I was wondering if anyone out there has partnered up with a real estate agent ( a friend) to do short sales? if so, can you tell me how you worked out the profit (commissions).
thanks tim
I haven’t yet come across any Realtors who have a great hold on the SS process and have a decent acceptance percentage. Also, they usually are not negotiating deep discounts as they are selling to the conventional market…the most I’ve seen a Realtor discount in my area is for ex. 400k home offered at 320k “as is” and it must state that the sale is contingent on the bank’s approval. I do not see a profit in that! But the conventional market views that as a deal in some cases. Also, I have heard of the lenders really getting greedy with the Realtor’s commissions…I mean when the property is about to close and the bank cuts their commisions in half in some cases. I say do them yourself, but use Realtors for leads they cannot work with. Good Luck!
I use a Realtor for each of my short sales. If you go HERE you can read through all the posts I have made on the REI Club. There are several that I discuss my relationship with Realtors pertaining to short sales.
In short, I use the Realtor’s listing agreement, a legal binding contract, to secure the property and a negotiating tool with the lenders. I always put in a 6% commission, but usually end up negotiating it down.
Every single bank I have ever done short sales with, or attempted to, has required that the property be listed on the market. They want to see that an effort is being put forth to repay the mortgage loan prior to them accepting a discount. It’s a way for the lenders to see how marketable the property is to help determine if they would be better off, that is to make more money, accepting the short sale, or foreclosing on the property and selling as an REO.
Yes, it is true that most Realtors don’t know anything, or very little, about short sales. That’s why you don’t allow them to do anything other than list the property and help you find buyers. YOU are the negotiator and they are the Realtor. Each of you should play your part accordingly to maintain a positive and lucrative relationship.
Foreclosure Negotiator is giving you good advice. We have been doing short sales for over five years. One of the partners is a Realtor and when we started using him to submit our deals business started getting better. The banks like to see things submitted by Realtors and if you can make the deal look like it is going to an end buyer rather than an investor so much the better.
Was going to post some thoughts but the previous two posts already nailed it! Good luck…
So, guys I am about anything that is going to make business boom! Do you have the Realtor work the short or do you guys handle all of the tideous activities still and just have him list and market the property?? Also, I have a friend who is a broker here in San Diego and after reading your advice, I asked him about it and guess what he said? He told me that he does the same thing and acts like the investor and does the negotiations and only presents the low ball offers. The lenders have recently been telling him(but not publicly)that any offers that come in at 60% on the shorts to send them over and they will close the deal asap…and this is in SD…so it is about to start getting interesting! One more question, if you are acting as the investor and have the Realtor list it, when you present the low ball offers…are they from your end buyers that the Realtor is finding or your investors making low ball offers and how exactly do you structure the sale so you still get that fat paycheck?? I am really excited about this new technique and am working 5 currently, I am going to put it to work on all of them! So, please help me fill in the blanks. Thanks!
Can anyone some this up for me please?
DealMakr,
First, I don’t think that I’d be saying too much more about your Broker friend on the public forum. From what you’ve said, he’s acting illegally. The less said, the better.
Second, using an agent to close your short sales is the BEST way to get them accepted. All short sales before had to show that they were actively marketed. However, more and more are now requiring that they be actively marketed on the local MLS system. Additionally, even in those few situations that don’t require marketing time, sending in offers through an agent gets a “neutral” third party involved. It’s not you, as the investor-buyer, now trying to convince the bank that this is the best offer. It’s an agent telling them “this is it.” It works.
NOTE FOR AGENTS: Check your state laws! Most states require the agents to represent the SELLERS or offer some form of counsel. You may be representing the investor/buyer BUT you also have a duty to the seller as well.
If you are an experienced shortsale investor, you don’t need an agent that “does” shortsales. You need an agent to “do” YOUR shortsales (ie act as the go-between). As stated above, the agent does their job, you do yours.
This should be a win-win for you and the agent. You bring deals to the agent for the to close. Short sales generally will close fast and the agent has to lay little cash to get the sale. However, alot of shortsale potentials will not get accepted at your price. No biggie. Those are the deals that the agent can now list on the open market with the shortsale package in place for what the bank WILL accept. Good option for the agent and the seller. You should still be able to get a referal “gift” out of it (most, if not all, states do not allow an agent to give cash referrals to non-licensed people). You still get something.
Raj
Appreciate it Raj!
I am a broker in California. I personally do short sales in Orange, Riverside and San Diego County and refer the ones out of my area to other brokers.
You will need to structure a way that the broker can rebate a portion of their commission back to you without violating RESPA.
Regards
You will need to structure a way that the broker can rebate a portion of their commission back to you without violating RESPA
Again, you have to check state laws, but most allow a principle in a transaction (ie a buyer or seller) to actually collect a commission. So, if you happen to be a principle, then the broker should be able to “rebate” you some of the commission.
Now, if you need a referral fee for those deals that don’t work out for you but become a listing for the agent, that’s a little harder. Again, state laws and all, but here in NC for example, an agent can get a gift as a referral appreciation (ie NO cash). Visa “GIFT” prepaid cards work well.
Raj
We have started to provide a short sale outsourcing service for Realtors as many of them do not know how to really negotiate a short sale. Our little wrinkle is that we utilize option agreements to get into the deal and make our money from the spread between a negotiated price and a sale to an end buyer using a fully funded simultaneous closing. We are able to preserve chain of title and resale by filing a Memorandum of Option which gives us an equitable interest in the property. So far this has worked well and we are considering taking outside of Florida.
FYI all…
RESPA is Federal, not state. So checking your state laws as recommended above will be a waste of your time.
I haven’t incorporated the use of Realtors in my short sales for the simple fact i like to be the numero uno. I will give you an opinion about how things are working for me.
My last 6 short sales have been homeruns. What i mean by that is they all have been at a low value so i had enough in the deal to wholesale and make some really quick cash.
My typical short sale takes me around 10 hours and my average profit is around 5000 dollars. It took awhile to become efficient at getting the numbers i needed to make the deal. The key is to build a rapport with the LM and stay on top of your negotiations. If they counter you today, send in another offer tomorrow. Don’t wait weeks to respond.
If they take the time to respond in a day or two pay them the same respect. I did have a problem a while back when i first got started. Once i leaked out all of the green and closed my first short sale, things have gotten alot more easier.
Hummm… I am a Broker in California and can say that most agents are unaware of the itty bitty law we have here called CC1695…
Short Sales are easy if you have the tools to make them that way…
I’m unaware of a CC169 law in my neck of the woods. Not that I would recognize it by that name anyway. What does it cover in Cali?
Basically its a civil code which doesn’t allow an agent to represent an equity buyer of a property in foreclosure…
An equity buyer is defined as a buyer who buys a property of 1-4 units, which the seller is, occupying one of the units and the buyer isn’t planning on residing there.
The equity buyer agents or representatives must be California real estate licensee and that licensee must give notification of their license and a bond equal to two times fair market value on the property.
ISSUE: Bond is not available to purchase.
Therefore an agent cannot represent the buyer only the seller. So why would a buyer pay for representation that can not use ?
I created a completely automated short sale utility to make it easy.
I am of the opinion that we need a Re Agent to list short sales as much as they need us to negotiate. However, I have had two problems with this - 1) most homeowners only want to work with an Agent. The homeowner assumes the Agent is fluent in short sales just for the simple fact that, well they are Agents; Real Estate is what they do, right. 2) Realtors want to work the deals on their own - most Agents I talk with don’t want to deal with a third party - they choose to handle the whole short sale process on their own, funny thing is that I usually hear back from them a few weeks later that they can’t handle the time and energy the short sales require so they end up working with us anyway. I too feel we all have a part in the short sale process. Agents list; we negotiate. However, I’m seeing too many Agents just listing homes to increase their numbers but in the end not work to help the homeowner in selling the home. I’ve heard the same excuse over and over that the market is just bad, there are no buyers, an agent sold the house down the street but mine just isn’t selling or I have buyers but they can’t qualify for financing. I have had enough of that. Don’t list a house if you don’t plan to do something to sell it. I have two Agents that are awesome and I will give them any of my new clients in an instant. They do what it takes to get the job done and that’s that. We all understand each others role and make things happen. A lot of Agents I spoke to in the past wouldn’t even take my clients - they either weren’t comfortable because they didn’t understand short sales or they heard to much bad press that they could make nothing in the end. At least I was getting honesty out of these Agents. All in all, we all know it’s a bad market - too much inventory - builder competition, too many foreclosures plus other homeowners just wanting to sell to move. I just think we should be working as a team and just help these homeowners get out of their situation as best we can. If you aren’t finding the right people, keep talking to people until you do.
I was probably venting there a bit :anon
Good luck