The Short Sale lenders are getting crazier and crazier. That is why you need to stay current with the short sale changes. Approximately 3 years ago, Bank of America was the first short sale lender to start requesting that the new buyer of the property consent to not resell the property for less than 30 days. This statement was included in their short sale approval letter. This statement alone caused a lot of challenges to investors who were still looking to close back to back on transactions. A few short sale lenders thereafter, such as GMAC and Wells Fargo, started adding 60 to 90 day resale clauses on their Arm’s Length Affidavits, but not their short sale approval letters.

Recently, I was in the process of purchasing a property where I needed to get an extension on the short sale approval letter. The reason was that the Homeowner Association advised us that, pursuant to their by-laws, their 35% ownership of investment properties had been reached and only homeowner occupants can purchase the property. The servicer for the lender was Seterus. I received a brand new approval letter for the same exact buyer as before, but with a few different statements:

1. The purchaser cannot resell the property within 30 days of the short sale settlement date. The purchaser cannot resell the property for greater than 120 percent of the short sale price within 90 days of the short sale settlement date.

2. The deed conveying the property to the purchaser should be amended, in compliance with applicable state law, to include the following provision: “Grantee herein is prohibited from conveying captioned property for any sales price for a period of 30 days from the date of this deed. After this 30 day period, Grantee is further prohibited from conveying the property for a sales price greater than $88,800.00 until 90 days from the date of this deed. These restrictions shall run with the land are not personal to the Grantee.”

WOW! Now the short sale lenders are really placing a deed restriction on the property, as it is being included with the recorded deed because previously the purchaser or seller would have to sign a document either a short sale approval letter and/or arms length affidavit acknowledging this agreement. This allowed many investors to do two closings using two different title companies and literally ignoring the deed restriction thinking that no one would know about the deed restriction since nothing was filed in public records. Well, the game is over ladies and gents, if you played that game, which I never recommended. Some of the lenders are now requiring it on the deed which also controls your profit. This particular loan was an FHA loan.
Am I saying that all lenders are going to follow suit with these new restrictions? I would assume a few will jump on board, such as Bank of America, Wells Fargo and GMAC. You will need to be sure on your short sale deals that you know how long you will have to hold the property and make sure you have enough profit there to hold it. Please take the time to read every lender document thoroughly and if there is wording that you would like removed, ask them to remove it. I can’t guarantee you that they will, as they did not do so on my transaction, but you won’t know if you don’t ask.
What this really means is that you will need to buy at the right price and hold for the right number of days in order to profit BIG in the short sale arena! However, there are ways around getting your buyer in at the time of closing, which I will share in my next article. Until then … read your paperwork!!

Kimberlee Frank

Turn TRASH deals into CA$H deals!!!

Now is the perfect time to purchase and resell short sale properties.  Why do you ask?  Our market is filled with many homes in which the Lenders are willing to accept short sales, due to all of their major mistakes made at the time the Homeowner obtained financing.   Homeowners that financed homes from Lenders such as Bank of America, Wells Fargo, GMAC, CitiMortgage and Chase from 2006 to 2008, have major mistakes in their Lender’s paperwork.  Lenders are reaching out to Homeowners asking them to do a Short Sale or a Deed-in-Lieu.  However, many of the Homeowners aren’t aware of the fact that they can’t do a Deed-in-Lieu if they have a second lien, and if they owe Homeowners Association dues, they may still be liable for the difference.  Homeowners Association dues are a personal debt against the Homeowner that need to be satisfied in full so that if a house is deeded back to the Lender the Homeowners are no longer responsible for any more dues.  There is a statute which states that the Lender that forecloses on the property will be responsible to pay only 1 year of Homeowners Association dues.  When conducting a short sale, this statute has little or no meaning to the short sale Lenders, meaning they may not agree to even pay a full year.  I have seen Homeowners deed their property back to the Lender only later to find out that they are still liable for the difference owed on the Homeowner Association dues.

TRUE STORY: On one of my deals, Nationstar would not agree to pay the full year of past HOA dues, even though the statute states they are responsible for that.  To add to that, the A/C didn’t pass inspection and needed repairs.  Deal killers?  If you aren’t experienced…..yes.  And I wasn’t about to give over $500 from my profit.  When you know what you are doing, you can even get the sellers to help close your deals.  Yes, the sellers who have NO MONEY.  Well, I closed this deal on Friday, August 31st!

Having the Homeowner take control of their property is the best thing that they can do, versus letting it just go to foreclosure.  They can decide whether they want to short sale the property, make sure that all liens are paid off, and confirm that there is no one able to come back after them, versus letting the Lender and/or Homeowners Association chase them for up to 25 years.  Yes, I said 25 years!  The lien holder has the right to file a Complaint in order to obtain a Judgment for the balance still owed to them plus interest and attorney fees for up to 5 years from the initial foreclosure action.  Once a Judgment is obtained, then it is valid for 10 years and after the 10 years, they can re-certify the Judgment for another 10 years.

TRUE STORY: An Investor friend from out of state had her Agent negotiate her short sale instead of using me.  Her Agent negotiated a lien release only for her 2nd lien.  Now Chase Bank has been calling her every day for the last 21 months.  Yes, she closed in December of 2010 and they are still pursuing her.

This leads me to my next point.  Many Homeowners are downright tired.  They are tired of being taken advantage of; it has affected their health, confidence, financial situation and their family.  Investors and Realtors need to learn how they can help the Homeowner by either purchasing or selling their home and obtaining a full satisfaction of all liens.  I’ve heard many Investors and Realtors say that they do not want to negotiate a short sale.  I believe everyone should know the tricks that each Lender plays and understand the negotiating processes whether they choose to negotiate the transaction personally or have someone else negotiate.  Having someone else negotiate a transaction without your full understanding of the entire process and the tricks the Lenders play is like handing your checkbook to someone you don’t know and letting them write whatever check they want.  If you want, you can make the check payable to me!

Understanding the Homeowner’s financial situation and hardship will help you obtain a short sale.  Lenders believe that all Homeowners are bad people when, in fact, bad things happen to good people.  Homeowners decide to hide money, hide their IRA’s and 401ks, or not disclose ownership on secondary properties.  They don’t understand that the lender can pull their credit report reflecting mortgages on other properties and showing minimum payment amounts on their debts.  They don’t understand that their pay stubs reflect money being placed into their 401k and their tax returns may reflect dividends paid out to them on their investments.  Having a Homeowner who is honest about their financial situation will help you get your deal done with less bumps, bruises and denial.

As Investors, it is important to know your exit strategy.  The Lenders have started to include deed restrictions from 30 to 120 days to the new buyer wherein they are not allowed to resell the property to another individual.  So, what do you do?  Investors are purchasing the property and lease-optioning to their end buyer during this time frame.  This process can be very tricky and Investors should be reading all the terms written on their Arm’s Length Affidavit and Short Sale Approval letter to make sure that they are complying with the terms of the short sale.  Should the Buyer/Investor not comply with the terms of the Arm’s Length Affidavit and Short Sale Approval letter, the Lender has the right to cancel the short sale terms in the future and continue to pursue the Seller.  In addition, lease-optioning to your end buyer may work as long as your terms, dates, and compliance with your Arm’s Length Affidavit and Short Sale Approval letter are all in coordination with each other.   I call these the “moving parts” of the transactions.  Just like a car, if any part doesn’t fit properly with another, or if you put diesel fuel in a BMW, the car dies.  I have reviewed some of these “deadly” transactions and saved many students from making major mistakes due to lack of knowledge and lack of compliance.  Had they closed their deals as they originally structured them, they (and their Sellers) would have been seriously affected financially and legally in the future.  Another reason that it is a perfect time to do short sales is because competition has decreased.  Investors and Realtors are shying away from short sales due to the ever changing requirements.  Good money isn’t easy, in any business, but hard work definitely pays off!

TRUE STORY: An Investor friend brought me a disaster deal that she had structured and she was in way over her head.  The property was in a trust, there were two wholesalers involved with no clear understanding about how they were each getting paid, and the purchase agreement was written up with a cash buyer who was actually getting a hard money loan.  If I hadn’t stepped in, restructured the whole deal and funded it for her, she would have been facing serious legal ramifications in which she was totally clueless.  She didn’t have a Seasoned Mentor and she was using an old program from last year that was missing the crucial pieces of how to structure a complete transaction.  This left her guessing and taking advice from some wholesalers who were only in it for the money and not even on title…..scary!

There are 14 steps to a successful short sale.  Missing any one of these steps will turn your deal into a trash deal costing you time and/or money!

Step 1: Having a complete Short Sale Package per each mortgage company’s requirements

Step 2: Knowing the real reason why the Seller is behind on the payments

Step 3: Understanding the true and accurate financial status of the Seller

Step 4: “Successfully” meeting the BPO/Appraiser

Step 5: Knowing the Investor (Lender), the type of loan and the specific requirements

Step 6: Knowing if there is Private Mortgage Insurance (PMI) on the loan and the name of the company

Step 7: Asking the right questions to the negotiator to get the response you need

Step 8: Knowing the experience of the negotiator

Step 9: Knowing the procedure of each mortgage company for the short sale

Step 10: Knowing if the negotiator receives a bonus for the short sale

Step 11: Understanding every single line of the HUD and what items must be included at first submission

Step 12: Determining if the negotiator is lying or telling you the truth

Step 13: Keeping a list of names, numbers, email addresses of the Negotiators and if they are Good, Ugly or Helpful.

Step 14: Comparing the approval letter with your HUD for accuracy and understanding terms

Learning all the tricks of the Lenders by having the right Mentor, whether you are an Investor or a Realtor, will put CA$H in your pocket without having mistakes.  Short Sales are changing on a weekly basis and Investors are trying to keep up.  What was acceptable last week is longer applicable this week!  Many Investors are using old techniques that use to work that are no longer working.  They are not reading or understanding the documents that they are signing which is resulting in dangerous consequences.  I provide you with a step-by-step process that fully discloses your intent.  I teach you the “Ah-ha’s” and the “Ouches” on short sale transactions.  Join me at this month’s meeting at IRC and find out how you can avoid some of the major mistakes that other Investors are making when it comes to purchasing and reselling short sales.  This will be a night of teaching and sharing.  Please be sure to bring all your questions, as I will answer them all!  Of course, those who want to take their real estate career to the next level, you will have a chance to partner with me!  How would you like to have my office do all the master negotiating and funding of your transactions?  Come and spend 8 hours with me for a ONE Day Training Event on Saturday, September 29th, where I will take you step by step from A – Z through a short sale and how to turn Trash deals into CA$H deals!  I look forward to seeing you all there!

I have been doing short sales for a long time and I have watched the industry change regarding Trusts, Options and Arm’s Length Affidavits.  Recently, I read that effective January 1, 2012 Freddie Mac is not allowing flipping on short sales and is looking to hold all parties liable if they are aware of reselling the property for a higher price.  The funniest thing is they call it “flopping” which I believe was a typo from a secretary that just carried on and on throughout their paperwork.  In addition, they don’t specify the time line in which you can resell the property for property.  The purpose of the Arm’s Length Affidavit has always been that the seller is not getting the discount for their benefit and staying in the house.  “Make sure you read your Arm’s Length Affidavits and check your sellers loans at to see if it is a Freddie Mac Loan.

Bank of America approximately 2 years ago had placed a requirement on the new buyer that they were to hold the property for 30 days before being able to sell the property again.  GMAC and Wells Fargo has placed a requirement on the new buyer to hold the property for 90 days before reselling the property.   Remember, it is the investor underneath the mortgage companies guidelines not always the mortgage company.  However, I have found that the mortgage companies are starting to adapt these requirements in their own company policies.

When BOA included the 30 day hold provision in a payoff letter, I argued the fact that they are trying to put a deed restriction on the property.  However, they never put that wording in the deed so how in the world would anyone ie.  the new second buyer know that there was a requirement of the first buyer to hold the property for a time period.  They wouldn’t but the first buyer does know and has signed an Arm’s Length Affidavit stating the terms for the purchase.

I have always taken the stand that the Banks/Mortgage companies are the ones who send out their bpo agents/appraisers to advise the companies the value of the properties.  So even as an investor if you made an offer at $100,000 because that is your MAO “Maximum Allowable Offer”, they had determined based on market value provided by their eyes and ears (bpo agents/appraisers) how much they would be willing to sell the property for.

Therefore, if an investor got a good deal and all your paperwork submitted to the short sale lender says you intend to resell the property for profit then you are “ok”.  Until, these Arm’s Length Affidavits are adding additional wording.

NOW, the Arm’s Length Affidavit forms that they are having everyone sign ie:  Seller, Buyer, and Realtors all state the following on Freddie Mac deals even before January 1, 2012:

1.  Each signatory to this Affidavit expressly acknowledges that the Lender is relying upon the representations made herein as consideration for discounting the payoff on the Loan(s) which is secured by a deed of trust or mortgage encumbering the property.

2.  Each signatory to this Affidavit expressly acknowledges that any misrepresentation made by him or her may subject him or her to civil liability.

I/We declare under penalty of perjury under the laws of the State of whatever that all statements made in this Affidavit are true and correct.

Additionally, I/we fully understand that it is a federal crime punishable by fine or imprisonment, or both, to knowingly and willfully make any false statements concerning any of the above facts as applicable under the provisions of Title 18, United States Code, Section 1001, et seq.

I have also seen certain wording in the Arm’s Length Affidavits that you are NOT aware of another contract whether it is verbal or written to sell the property for a higher price.

I am just saying be careful when you are acting as an Investor and a Realtor as the big bad Banks are looking to blame someone for their mistakes.  Don’t stop buying real estate, learn the changes that the Banks/Mortgage Companies “INVESTORS – ie Freddie Mac” are starting to require so you don’t get to the Title Company and sign something that you didn’t understand that can hurt you later.  You just hold the property for the time frame necessary to make a profit!

I will be writing you a lot during this December and will be converting a lot of my email and video contact with you to different programs ie. infusionsoft and talkfusion so … make sure you look for me and opt in.  My goal to you is to send you out at least 2 great tips a week!  I know this is a lot of tips, however, I know you all need to make a change in 2012 so I am going to help you get there.  I have so much planned for you it is going to blow your socks off.

So … stay tuned!

TIPS WHEN DEALING WITH SHORT SALE SELLERS – How do you know it is a short sale deal?

  1. When they are willing to sell the house for what they owe.
  2. When the house is upside down and you can’t pay as much as they owe on it.
  3. When they are too far behind on their payments that you can’t make it up and keep it as a rental or subject to deal.
  4. When the monthly payment amount is more than you can get for rent.
  5. When the house is trashed and the cost to rehab it is too high for the return investment.



  1. Know how much is owed for Homeowners Association Dues – banks only like to pay up to 12 months on HOA LIENS not balances
  2. Know if the home will have to be sold Cash or can go FHA – Repairs are important if the house can only be sold as a cash deal then you are able to use this during your negotiations.
  3. If your offer is denied, ask them where the offer has to be?  If that is too high, split the difference in the middle and see if they think they can get this approved based on that price.
  4. Knowing what type of loan you are dealing with ie. Fannie Mae (90-92%) , Freddie Mac (90-92%) doesn’t like investor buyers, FHA (88%), PMI (may require a promissory note) on the property – being knowledgeable as to the percentage that they are willing to take as a net on the deal and/or purchase price along with if they will even consider an investor as a buyer in a corporation name.
  5. If there are repairs needed on the home – you will need to have a repair bid estimate to send in to the negotiator to dispute the repairs that the BPO Agent/Appraiser did not include on their value.



You can close your Short Sales with only ONE WEEK of work!

Ever wonder how much you earn per hour by the time you close a short sale deal? The industry has transformed from being extremely difficult without standardization to becoming streamlined with a specific system per lender. Many investors hate the idea of doing short sales because of the fallacy that they are so time consuming. Is this true…literally? Have you ever broken it down per deal? The time you actually spend on 1 deal versus the cash you earn is really quite exciting!

The market got tighter with fewer houses for sale, making it a Seller’s market. The Lenders slowed down their foreclosure processes, in my opinion, due to the Presidential Election. Now that the election is over, the lenders are going to be pushing really hard to get the foreclosures through.

I want to teach you a step by step process of how my students and I buy and sell short sales and the true time involved to make a profit of not less than $20,000.00. In this article, I am not withholding any secrets to my or their success.

Let’s Break It Down:

Step One: Find a Seller. Mail letters to a pre-foreclosure address list from a list provider TIME: 4 HOURS

Step Two: Seller calls Student/You. Complete my Seller Information Sheet. Each question on my Sheet is crafted to pull specific information from the Seller that will allow us to creatively construct multiple offers (not just short sales). TIME: 3 HOURS

Step Three: Prepare Seller Paperwork. Go to your county website for ownership and correct legal description of the property from the deed on record. TIME: 1 HOUR

Step Four: Meet the Seller at the House. Be sure you take pictures, do an inspection on the property for repairs, have Seller sign paperwork and collect their financial information. TIME: 3 HOURS

Step Five: Send Seller Packet to Kimberlee Frank’s office. My office will process, submit and negotiate your short sale for you. TIME: 1 ½ HOURS

Step Six: Lender orders BPO (broker price opinion) or appraisal. Prepare BPO Package in advance, including repair bid, comparables, crime reports and articles. TIME: 2 HOURS

Step Seven: Meet BPO Agent. Be sure you arrive early and follow my 13 steps For a Successful BPO, as this is where many short sales blow up. TIME: 1 ½ HOURS

Step Eight: Call Lender for Short Sale Status. Receive counteroffers and reply back to bank with buyer’s highest and best offer. TIME: 3 HOURS

Step Nine: Short Sale Approved. Match approval letter with HUD Settlement Statement. Many costly mistakes occur because HOA dues and code violations are not approved or bank allowance is decreased on the short sale approval letter. TIME: ½ HOUR

Step Ten: Exit Strategy. As my Partner, we flip it to an end buyer or buy and rehab it. You will need to market the house for an end buyer based on your desired profit. You will hold an open house auction providing you with 30 to 50 buyers. TIME: 12 HOURS

Step Eleven: Prepare Purchase Agreement for cash end buyer. TIME: 1 HOUR

Step Twelve: Attend Both Closings. At the A to B closing, you purchase property from Seller, then at the B to C closing you sell property to end buyer. TIME: 2 HOURS

An average deal profit is $20,000 with 34 ½ hours invested, equaling a $579.71 hourly wage. So, completion of one short sale takes less than 1 week at a full-time job. Can you handle that? Just think if you pass the negotiating off to someone else like a title company who does the negotiating for free, what your hourly rate will be. Now just fill the pipeline and do it over and over again and just think how much money you will make. You tell me, should you be closing on short sales?

Come join me on December 13, 2012 at 6:00 p.m. to learn how I will give you a Power Push into 2013 allowing you to make a boatload of money with short sales!

Kimberlee Frank