Potential Deal of some sort?

[dthmiser 0]

I need some help trying to figure out what way to take this scenario (this is a friend of a close friend who needs help & good advice at the least):

 

Comps: 290k

Loan: 318k (June 2006) 1 Loan, HSBC

60 days late currently (2500/month)

Cooperative Divorcing Couple, wants rid of the property but absolutely zero $$ to contribute to anything

Homes in the area are taking about 120-150 days to sell at "comp price"

 

Am I missing something here or is the bank going to need to take a haircut of around 90k in order to make this deal profitable? I'm an agent so I could list the property and get an offer for a short sale, but I'm a bit nervous about the liabilities incured during this because of the potential of no sale by the time a foreclosure may happen - unless the price is low.

 

I am looking for some quick input, need to get back with them ASAP.

[MichaelC 160]

Hello dt, and welcome to The Naked Investor.

Based on what you wrote, it would seem the only solution is a short sale. Not being a Realtor, I am not familiar with all the terms and regulations you operate under. But what liability would you face if you listed this property and it didn't sell? Isn't there a clause in place for just such an event? What about your Broker? Have you run this by him/her?

[dthmiser 0]

Thanks for replying.

 

There is a danger of liability problems if the home doesn't sell before any foreclosure. However, this is a Deed of Trust so we know that there is at least 30 more days before the foreclosure process starts, and then the period of time between notice and actual foreclosure itself. If priced below FMV but still allows them to get out of the house without a big deficiancy then the lender may not attach one. The main thing I'm trying to figure out is what price the market will take QUICKLY without being too low.

 

I'm also concerned that I've never done a short sale, and don't really have a good reference for them at this point. Is there an agreed upon program or person to consult about this?

[BigBenRE 0]

Hey dt,

 

Okay here's my two cents on short sales. First you need a "Authorization to Release Info" from the home owner in order to talk to the bank. Second as far as the deficieny judgement goes, you can ask the bank to waive the judgment, and in many cases they will and 1099 the home owner for however much was discounted to the investor/buyer. Also Creonline.com has some good info on short sales and many people on the site are very knowleable on the subject. Hope this help a little.

 

-BEN

[Craig 0]

I need some help trying to figure out what way to take this scenario (this is a friend of a close friend who needs help & good advice at the least):

 

Comps: 290k

Loan: 318k (June 2006) 1 Loan, HSBC

60 days late currently (2500/month)

Cooperative Divorcing Couple, wants rid of the property but absolutely zero $$ to contribute to anything

Homes in the area are taking about 120-150 days to sell at "comp price"

 

Am I missing something here or is the bank going to need to take a haircut of around 90k in order to make this deal profitable? I'm an agent so I could list the property and get an offer for a short sale, but I'm a bit nervous about the liabilities incured during this because of the potential of no sale by the time a foreclosure may happen - unless the price is low.

 

I am looking for some quick input, need to get back with them ASAP.

 

You really can't do anything here without risk. In a divorce and foreclosure you better have your ducks in order when doing any Lease/Option it could bite you. Michael is correct if you got a short sale from the bank is better without risk just the time it might take.

[dthmiser 0]

I've done some research and the short sale is definitely the way to go here. Is anyone here experienced (or at least done 1 short sale)? I've seen on some other places that doing the listing and having someone do a ghost offer on the property (meaning that the offer isn't serious - say 100k below). This will get the ball rolling at the lender faster by having them get a Broker Price Opinion and doing the math on what kind of offer they are realistically going to accept. That way when a "serious" offer comes across, the procedure will go quicker for the potential buyer. I don't know if that violates any code of ethics, but it seems like it would be great for my client.

 

Has anyone done that before?

[MichaelC 160]

I've done some research and the short sale is definitely the way to go here. Is anyone here experienced (or at least done 1 short sale)? I've seen on some other places that doing the listing and having someone do a ghost offer on the property (meaning that the offer isn't serious - say 100k below). This will get the ball rolling at the lender faster by having them get a Broker Price Opinion and doing the math on what kind of offer they are realistically going to accept. That way when a "serious" offer comes across, the procedure will go quicker for the potential buyer. I don't know if that violates any code of ethics, but it seems like it would be great for my client.

 

Has anyone done that before?

dt, shoot a line over to fellow board member Ji Woslager. He is in Nebraska and, like you, is also a Realtor in addition to being an investor. He's into short sales and can probably offer some advice.

[realestateremedies 0]

I've done some research and the short sale is definitely the way to go here. Is anyone here experienced (or at least done 1 short sale)? I've seen on some other places that doing the listing and having someone do a ghost offer on the property (meaning that the offer isn't serious - say 100k below). This will get the ball rolling at the lender faster by having them get a Broker Price Opinion and doing the math on what kind of offer they are realistically going to accept. That way when a "serious" offer comes across, the procedure will go quicker for the potential buyer. I don't know if that violates any code of ethics, but it seems like it would be great for my client.

 

Has anyone done that before?

dt, shoot a line over to fellow board member Ji Woslager. He is in Nebraska and, like you, is also a Realtor in addition to being an investor. He's into short sales and can probably offer some advice.

 

 

DT - as far as the ghost offer is concerned, I am familiar with them although have never used them. They have recently been brought to my attention from one of my partners and sounds like a feasible idea. However, they arent necessary and I believe your getting ahead of yourself.

 

A ghost offer is not a necessary part of a short sale, just a tactic to get the bank to take more of a discount or accept your offer with less resistance then they might otherwise. As far as violation of any ethics codes ... I cant tell you. I know it is definately a grey area approach that Im not comfortable with at this point in time ... I need to do some more research before I would risk my butt by trying something like this, since I am licensed as you are.

 

Whats wrong with just doing a bread and butter short sale .... and being done with it? K.I.S.S. here .. no reason to get fancy if you dont need to; dont fix it if it isnt broken. A properly presented and submitted short sale will work just fine without all the risky antics.

 

You will need the following:

 

- Contract for sale between yourself and the homeowner

- authorization of release

- opening letter from you to the lending institution explaining the homeowners situation, market conditions, property specifics ... anything that helps you justify your position.

- hardship letter

- mortgagor survey

- income/expense/asset/liability sheet

- financial statement sheet

- HUD-1

- a monthly statment from the homeowners lending institution

- the last two paycheck stubbs, last three months of bank statements on all accounts, and the last two years tax returns

- a repair list with pics (not only general pics, pics of items needing repair/damaged structures, ect, ect - anything that will help 'prove' to the lending institution your offer is an acceptable one)

 

when all of this is collected and properly compiled the shortsale package that I fax off to the bank is USUALLY in the 40 - 55 page range.

 

I dont know why but it seems like every lending institution needs everything faxed TWICE before they receive it.

 

Start by getting the lenders customer service number off the homeowners monthly billing statement. Call the number and ask for the direct phone number for loss mitigation. Its not always called loss mit, sometimes its the loan resolution department (ocwen), loss mitigation, non-performing assets dept., ect, ect. Just tell the rep you have a authorization of release along with a shortsale package for the property. They will ask you for the loan number and the homeonwers social security numbers (last four digits).

 

Once you get the direct number to the appropriate department call that number and sit on hold again =)

 

when you get ahold of someone simply state that you have a shortsale package with authorization and you would like to know the direct fax number that they want you to send it to. Fax off the offer, check back in 3 - 5 days to see if they received it and have entered your name into the system and granted you authorization on the account. Like I said, be prepared to have them say they didnt receive it and go and re-fax the entire 50 page short sale package again (I dont know why but it seems like EVERY time this happens). Wait another 3 days or so and call back and they should have you entered in the system.

 

At that point they should send out an agent or appraiser to do a market anaylisis on the property. You are the contact person so you need to meet them there. The bank will have them contact you to make arrangements. Have the homeowners NOT be around if possible. Dont be pushy with the person doing the BPO. Many times they will ask you what you are trying to do. Be honest and tell them a short sale and tell them what your offer is. They will tell you at that time if they think they can do it or not ... many times anyway. Its curious to me because they are actually working for the bank and not you but many seem to try to help you. If they say your to low just casually mention any justification you might have.

 

"I might be a little low but the market is really soft right now and with the repair list, and after I pay closing costs both when I buy it and then when I sell it, factor in potential holding costs, and in looking at these comps that I drew up (get the lowest possible) ... this is just really where I have to be so I dont get burnt"

 

Something like that ... dont be obvious and try to influence the agent/apraiser .. but if they ask .. tell them.

 

Once the bank gets the appraisal bank by that time the file is usually assigned to a negotiator and you can get a direct phone number to that person. Then things move along rather quickly. Negotiate and see what you can get it bought for!

 

If you need the forms I have copies I can send ... just shoot me an email at realestateremedies@cox.net

[Craig 0]

Great article. thanks for spending the time explaining.

 

JI How close are you to Chadron NE? I have a 15 unit apartment which I would love to turn over. Its directly across from Chadron State College and great for students because of location. I could put it into a Land Trust if I could find a good property management company. It has management issues which need addressing soon.

[realestateremedies 0]

Great article. thanks for spending the time explaining.

 

JI How close are you to Chadron NE? I have a 15 unit apartment which I would love to turn over. Its directly across from Chadron State College and great for students because of location. I could put it into a Land Trust if I could find a good property management company. It has management issues which need addressing soon.

 

Hi Craig, Im about 5 hours from there. Im in Omaha, Chadron is on the opposite North end of the state.

 

I think I might have actually contacted you about that property 4 or 5 months ago. At this time it doesnt look like anything I want to jump on but it did perk my interest. I believe you sent me all the income information and so on??

[realestateremedies 0]

You responded on my post on naked-investor and I greatly appreciate that. Of course this potential client still hasn’t returned my phone once the serious information started to be needed. Any of those forms that you have would be fantastic!!

 

Well, first of all I forgot the most important sheet of the entire shortsale package in my list above! LOL .. the hud-1 - I have edited my above post to include that and I have sent the required forms to your email addy John.

 

As for the returning of your phone calls ... thats just the way it goes sometimes, but it all starts with prepping the homeowner when they initially call.

 

I usually ask what I can do for them and they will respond that they called off of one of my flyers or letters, At that point I tell them that as the flyer/letter states I can buy their house directly from them, stop their foreclosure, and then negotiate with the bank to get their lender to call their loan paid in full.

 

Then I move right into getting some info from them. I initially verify that they are indeed behind at least ONE payment. If so or if they are already in foreclosure I tell them there are some things they need to know. Firstly that IF the bank does foreclose on their property not only will their credit be hurt but there is a possibility that the bank will hold them liable for the deficiency if the house is taken to the auction and sold. Lets say they owe 176K on the property and it has an appraisal at 185. Well if the property goes to auction after foreclosure and gets sold for say 130 or so.... THEY can be held liable for the deficiency. Its at that time I try to build a relationship as a good guy and I say something like "I personally think its ridiculous, the bank takes your property and then tries to slap you with a $30K bill or more. Not that they will get it from you .. but it still attaches to your person and can cause problems. They can even garnish wages if they like down the road if your not paying. When I go in and purchase the property from you I write in all my contracts that the seller will NOT be held liable for the deficiency. I make sure that you will not be liable for that and you are out free and clear with no judgement. So whether you work with me or another investor, just make sure that they are aware of this pitfall, as well as several others that pop up."

 

I also inform them that even if a deficiency gets waived, the lending institution will send out a 1099 and report that as income to them and they will be liable for taxes on that $$ amount. I then mention that they can contact an accountant and file IRS form 982 and claim that they are insolvent. By successfully doing this they will not be held liable for the debt forgiveness. I quickly mention that Im not an accountant however so you would need to contact one to see if this is possible in your situation. But regardless the same thing can happen if the bank takes the property through the foreclosure process. This way, I am buying the property, they have no foreclosure on record, are protected from the deficiency judgement, have help with relocation, and I can direct them to the appropriate tax proffesionals to help them iron out the 1099 issues. Worst case scenario 4 out of 5 isnt bad

 

I always mention that since I am a licensed agent I can help in relocating them as well. I mention that my associates and I have rentals and houses we can sell on rent to own agreements if they are interested. Most of the time I end up helping them get into a rental but I do go above and beyond what most people do and help them locate and secure a place to live. If they have ZERO money, I will pay first months rent and security deposit for them to help .... assuming of course they have a job and can afford to pay the rent.

 

At this point they see that you know what your talking about and have a little more trust in you. Now that Ive shown that I know what Im doing, and shown them the value in what I can do for them ...above and beyond just stopping their foreclosure, I assumptively ask for the address, their name, and other information .... then I ask them when they would like me to come over and take a look at the house. I dont ask IF they want me to come, just when. I do my research, check the assessors website, run my comps and see what I could genuinely sell the property within a week or two for. Then I take ALL the required forms with me, but dont always expect them to have all the info on hand. At the appointment my main goal is to get the contract for sale signed, the authorization, and a memo of agreement which I file at the courthouse for my protection. If they have the other stuff great, if not I tell them that I have to get the payoff from the bank and will contact them after I do so. In the meantime I have them gather all the financial info and anything else necessary.

 

 

Thats a little bit on how I do things ... hope it helps ....