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!