After being on the fence for quite some time, I finally decided to head up to Vegas for SREC's short sale event. Even though much of the information may not be new, I think it's always good to hear quality information a second and third time and I'm sure there will be some new stuff as well.
I want to also invite more investors to join the blog and participate in our discussions. I think this can only help all of us become better, smarter investors. And when I'm there, I'll try and report some info back to this blog if I'm not exhausted.
Best,
Jordan
Friday, March 20, 2009
Credit Damage of Foreclosure: Today & In the Past
Does a foreclosure in today's economy damage your credit as much as a foreclosure when the economy was good? Here's an article from the NY Times last week that discusses how some lenders are starting to offer loan programs to those with a foreclosure on their record.
How Will Foreclosure Effect Credit Scores?
The amount of damage to a credit score caused by foreclosure, deed in lieu or a short sale during 2008 and 2009 may be mitigated by the slower economic times, say some credit and legal experts.
FICO may have to adjust its credit scores to lessen the impact of a foreclosure in the last two years, says Todd J. Zywicki, a professor of law at George Mason University.
''It just seems obvious that a foreclosure in 2008 or 2009 doesn't have as much information value as a foreclosure five years ago,'' he says. ''To the extent that foreclosure doesn't predict future behavior as much as it did in the past, you'd expect that the FICO algorithm would change to adjust for that.''
One of the country’s largest credit unions Golden 1 has already figured out a way to lend to people with a foreclosure on their record by offering a mortgage repair loan specifically for those who have lost a home to foreclosure and who want to buy a new one.
BECU, another large credit union based in Washington State, is about to present a program to fellow lenders, ''How to Lend to the Newly Credit Impaired.”
Source: The New York Times, Ron Lieber (03/14/2009)
How Will Foreclosure Effect Credit Scores?
The amount of damage to a credit score caused by foreclosure, deed in lieu or a short sale during 2008 and 2009 may be mitigated by the slower economic times, say some credit and legal experts.
FICO may have to adjust its credit scores to lessen the impact of a foreclosure in the last two years, says Todd J. Zywicki, a professor of law at George Mason University.
''It just seems obvious that a foreclosure in 2008 or 2009 doesn't have as much information value as a foreclosure five years ago,'' he says. ''To the extent that foreclosure doesn't predict future behavior as much as it did in the past, you'd expect that the FICO algorithm would change to adjust for that.''
One of the country’s largest credit unions Golden 1 has already figured out a way to lend to people with a foreclosure on their record by offering a mortgage repair loan specifically for those who have lost a home to foreclosure and who want to buy a new one.
BECU, another large credit union based in Washington State, is about to present a program to fellow lenders, ''How to Lend to the Newly Credit Impaired.”
Source: The New York Times, Ron Lieber (03/14/2009)
Monday, March 9, 2009
Conference Call Recap 3/09/09
We tried a new day/time last night (Mondays at 5PM PST) and I'm happy to report that we're back to more than 10 people joining the conference call. The lifeblood of these calls are the experiences shared by those participating on the call. So I'm happy we're back on track and I welcome many more of you to speak up during the calls and share what's going on with your business.
It's been a few weeks since I recapped the learnings from the calls (although there was some really good stuff discussed), but here's the main discussions we had this evening:
Answering Questions from the End-Buyer's Realtor
Ok. You're all excited because you just countered all the offers received on your property for sale. But now the buyers' realtors are all reading the attached counter offer addendum stating that this sale (B-C) is contingent on a short sale approval. Wait a minute.....an investor is selling the property?
SREC actually has a good video on this topic (Module 6, video 3). You basically have to communicate to these realtors that their client is very fortune to have the opportunity to buy your house at such a great price. As the investor, you are going through the hassle of stopping the foreclosure process and removing all the liens so you can present "clean and clear title" to the end buyer at a price below market value. You are doing them a service and can close very quickly without the lender holding up the process. No more buyer's walking or waiting for the lender's approval. You can close immediately.
Lenders with Seasoning Requirments - Myth or Reality?
One of the first and scariest things you learn about purchasing and flipping short sale properties is to be weary of lenders with seasoning requirements. Everyone knows that FHA and VA lenders do have seasoning requirements and will not fund an end-buyers loan unless the seller has been on title for at least 90 days. But what about conventional lenders?
From my experience, I don't believe many conventional lenders do have seasoning requirements. As long as their appraisal is equal to or above their end-buyer's purchase price and all the docs are in order, they'll go ahead and fund the loan. While I'm sure there are some conventional lenders that follow FHA guidelines and have seasoning requirements, it would seem that most do not. However, I'd recommend that you ALWAYS BE PROACTIVE in calling lenders who are funding your end-buyers to make sure. Ask to talk to an underwriter, not a loan officer and be completely straight-up with them about what you do.
Fiduciary Responsibilty of Realtors in a Short Sale
I think there are a few different points of view regarding this topic. Some people say that realtors have a fiduciary responsibility to present the highest and best offer to lenders. Others say that their responsibility solely lies with the homeowner and it is the homeowner who decides which offers are submitted. Either way, to answer this question you have to understand the different dynamics and party relationships that take place in a short sale transaction.
When an investor records the Notice/Memo of Option Contract at the county courthouse, the investor establishes equitable interest in the property to market and list the property for sale. Any offers submitted on the property can be accepted by the investor at his/her discretion. These offers are not intended to buy the house from the homeowner, but to buy the house from you the investor. There is no fiduciary responsibility in this regard since the investor is acting as the owner.
The most common time fidiciary responsibility rears its head is when talking with more savvy realtors/brokers and attorneys in regards to tax implications. This is because the debt forgiven in a short sale is reported as taxable income for the homeowner. However, there are many ways to get this income discharged (see "Mortgage Debt Relief Act" post on this blog). Taxes are important, but the principal and most urgent need of distressed homeowners is to avoid foreclosure. Sometimes you have to remind these realtors of this point and pursue the most efficient and effective action to achieve this result (which is an investor getting the process started immediately and purchasing the property).
Using Bird-dogs to Grow your Business
I have recently taken on a bird-dog (although I refer to him as an assistant) and my business is moving on to the next level. It's just a matter of time before all the new leads, realtors and other sources of information I now have in front of me everyday start to materialize into real deals. In exchange for teaching him about the business, he's saving me all kinds of time and freeing me up to concentrate on more revenue-producing activities. Win-win for both of us and something I recommend you implement in your business if you want to get to the next level.
Offer Too High to be a Short Sale
What if you're offer on the property is higher than the 1st loan balance? Will the lender still consider it a short sale? Chances are no. But then how do you proceed? The easiest answer seems to be to lower your offer to a point in which the first lender is shorted. Seems a bit strange and counter-intuitive from the lender's point of view, but who said lenders make the best financial decisions. They are simply trying to liquidate the property and satisfy their delegated authority requirements. Sometimes lowering your offer to meet these guidelines does just that.
Okay, my brain is fried. Hope you soaked up some good learnings and please make sure and join us on the next call. Or at least sign up as a follower to this blog so you're updated as to new posts.
It's been a few weeks since I recapped the learnings from the calls (although there was some really good stuff discussed), but here's the main discussions we had this evening:
Answering Questions from the End-Buyer's Realtor
Ok. You're all excited because you just countered all the offers received on your property for sale. But now the buyers' realtors are all reading the attached counter offer addendum stating that this sale (B-C) is contingent on a short sale approval. Wait a minute.....an investor is selling the property?
SREC actually has a good video on this topic (Module 6, video 3). You basically have to communicate to these realtors that their client is very fortune to have the opportunity to buy your house at such a great price. As the investor, you are going through the hassle of stopping the foreclosure process and removing all the liens so you can present "clean and clear title" to the end buyer at a price below market value. You are doing them a service and can close very quickly without the lender holding up the process. No more buyer's walking or waiting for the lender's approval. You can close immediately.
Lenders with Seasoning Requirments - Myth or Reality?
One of the first and scariest things you learn about purchasing and flipping short sale properties is to be weary of lenders with seasoning requirements. Everyone knows that FHA and VA lenders do have seasoning requirements and will not fund an end-buyers loan unless the seller has been on title for at least 90 days. But what about conventional lenders?
From my experience, I don't believe many conventional lenders do have seasoning requirements. As long as their appraisal is equal to or above their end-buyer's purchase price and all the docs are in order, they'll go ahead and fund the loan. While I'm sure there are some conventional lenders that follow FHA guidelines and have seasoning requirements, it would seem that most do not. However, I'd recommend that you ALWAYS BE PROACTIVE in calling lenders who are funding your end-buyers to make sure. Ask to talk to an underwriter, not a loan officer and be completely straight-up with them about what you do.
Fiduciary Responsibilty of Realtors in a Short Sale
I think there are a few different points of view regarding this topic. Some people say that realtors have a fiduciary responsibility to present the highest and best offer to lenders. Others say that their responsibility solely lies with the homeowner and it is the homeowner who decides which offers are submitted. Either way, to answer this question you have to understand the different dynamics and party relationships that take place in a short sale transaction.
When an investor records the Notice/Memo of Option Contract at the county courthouse, the investor establishes equitable interest in the property to market and list the property for sale. Any offers submitted on the property can be accepted by the investor at his/her discretion. These offers are not intended to buy the house from the homeowner, but to buy the house from you the investor. There is no fiduciary responsibility in this regard since the investor is acting as the owner.
The most common time fidiciary responsibility rears its head is when talking with more savvy realtors/brokers and attorneys in regards to tax implications. This is because the debt forgiven in a short sale is reported as taxable income for the homeowner. However, there are many ways to get this income discharged (see "Mortgage Debt Relief Act" post on this blog). Taxes are important, but the principal and most urgent need of distressed homeowners is to avoid foreclosure. Sometimes you have to remind these realtors of this point and pursue the most efficient and effective action to achieve this result (which is an investor getting the process started immediately and purchasing the property).
Using Bird-dogs to Grow your Business
I have recently taken on a bird-dog (although I refer to him as an assistant) and my business is moving on to the next level. It's just a matter of time before all the new leads, realtors and other sources of information I now have in front of me everyday start to materialize into real deals. In exchange for teaching him about the business, he's saving me all kinds of time and freeing me up to concentrate on more revenue-producing activities. Win-win for both of us and something I recommend you implement in your business if you want to get to the next level.
Offer Too High to be a Short Sale
What if you're offer on the property is higher than the 1st loan balance? Will the lender still consider it a short sale? Chances are no. But then how do you proceed? The easiest answer seems to be to lower your offer to a point in which the first lender is shorted. Seems a bit strange and counter-intuitive from the lender's point of view, but who said lenders make the best financial decisions. They are simply trying to liquidate the property and satisfy their delegated authority requirements. Sometimes lowering your offer to meet these guidelines does just that.
Okay, my brain is fried. Hope you soaked up some good learnings and please make sure and join us on the next call. Or at least sign up as a follower to this blog so you're updated as to new posts.
Friday, March 6, 2009
Ever Wonder What an NOD Looks Like?
Many of us talk about Notice of Defaults (NODs) and other legal documents pertaining to the foreclosure process as if they were second nature. However, I realize many of you reading this blog may not have actually seen one first-hand and I thought it might be helpful and more tangible if I just posted one up here. So here's a typical NOD issued to a homeowner in default in the state of California...
ATTENTION: Meeting Day/Time Change
Please note that we have changed our weekly meeting day/time to Monday's at 5:00pm PST beginning on March 9, 2009. See you all on the call.
Wednesday, March 4, 2009
Mortgage Debt Relief Act
Make sure you know the provisions of the Mortgage Debt Relief Act. This information is VERY helpful when talking with savvy realtors, office managers, brokers or attorneys about the tax consequences of a short sale to the homeowner - particularly if you're buying the property significantly below market value. Read all about it at:
http://www.irs.gov/individuals/article/0,,id=179414,00.html
http://www.irs.gov/individuals/article/0,,id=179414,00.html
Thursday, February 26, 2009
Realtor Magazine Article on Short Sales
Click on the link below and read the article that was just published in Realtor Magazine (Realtor.org) about short sales called "Short Sales: The New Wild West". This is what realtors are reading and it's important you stay up-to-date on what information is out there.......Note: As you'll read, the information sheds a negative, scary, one-sided, law-suit ridden light on what we do as investors.
http://www.realtor.org/rmosales_and_marketing/articles/2009/0903_shortsales_wildwest
http://www.realtor.org/rmosales_and_marketing/articles/2009/0903_shortsales_wildwest
Tuesday, February 24, 2009
Calling Countrywide's Bluff
Countrywide seems to take twice as long as any other lender I've dealt with. I'm sure they have no intention of causing buyers to walk, homeowners to damage their credit further, or houses to foreclosure as a result of their delays, but that is the way their current process works. But don't think you can't take back control of the process despite the slow, non-sensical policies and many times unhelpful, hands-tied customer service reps.
I currently have a file that was referred to me late in the game - in fact, I'm just handling the loss mitigation part of the deal as a favor for a realtor and to get future business. About a month ago, I was able to get another appraisal ordered. Unfortunately, the appraiser never called to get into the property. When I called the loss mitigator about this problem, they informed me that they give the appraiser 10 days to make an appointment. Of course, this never happened. I then tried for 2 solid weeks to get in touch with the loss mitigator to no avail. And neither the customer service reps nor short sale dept. would do anything on the account until 12 more days had passed "without notes on the account".
After 12 days had passed, I called to find out that the file was closed and they were proceeding with the Trustee's Sale scheduled to occur in a week. What the f&%k, right? I immediately asked to talk to a supervisor and was informed that 2 appraisals were recorded to have happened on the property within the last 2 weeks that were MUCH higher than the offer submitted so the offer was declined without a counter. I replied, "Really? That's interesting because I'm the only one with the keys to the property and I was never called by an appraiser." The supervisor said that they have two appraisals in the computer occurring on such and such dates. I said, "Great, then why don't you send them to me. I'd like to see the interior pictures."
Anyway, I was able to convince the supervisor that any appraisals done on the property were bogus and must be discounted. I was also able to get a new loss mitigator assigned and a real appraisal ordered to take place next week. Net-net......If I wouldn't have put my foot down and known exactly how to handle the situation, the property would have been foreclosed upon and a homeowner's life changed for the next 5-7 years.
Situations like these just reconfirm in my mind what a valuable service we are providing to homeowners and how we're part of the solution when so many others on the sidelines are part of the problem.
I currently have a file that was referred to me late in the game - in fact, I'm just handling the loss mitigation part of the deal as a favor for a realtor and to get future business. About a month ago, I was able to get another appraisal ordered. Unfortunately, the appraiser never called to get into the property. When I called the loss mitigator about this problem, they informed me that they give the appraiser 10 days to make an appointment. Of course, this never happened. I then tried for 2 solid weeks to get in touch with the loss mitigator to no avail. And neither the customer service reps nor short sale dept. would do anything on the account until 12 more days had passed "without notes on the account".
After 12 days had passed, I called to find out that the file was closed and they were proceeding with the Trustee's Sale scheduled to occur in a week. What the f&%k, right? I immediately asked to talk to a supervisor and was informed that 2 appraisals were recorded to have happened on the property within the last 2 weeks that were MUCH higher than the offer submitted so the offer was declined without a counter. I replied, "Really? That's interesting because I'm the only one with the keys to the property and I was never called by an appraiser." The supervisor said that they have two appraisals in the computer occurring on such and such dates. I said, "Great, then why don't you send them to me. I'd like to see the interior pictures."
Anyway, I was able to convince the supervisor that any appraisals done on the property were bogus and must be discounted. I was also able to get a new loss mitigator assigned and a real appraisal ordered to take place next week. Net-net......If I wouldn't have put my foot down and known exactly how to handle the situation, the property would have been foreclosed upon and a homeowner's life changed for the next 5-7 years.
Situations like these just reconfirm in my mind what a valuable service we are providing to homeowners and how we're part of the solution when so many others on the sidelines are part of the problem.
Sunday, February 22, 2009
New Weekly Meeting Time - Need Your Input!
Hello Everyone,
Ever since the holidays, our turn-out for the weekly conference calls has been dwindling. At the same time, I think I speak for everyone when I say that our calls have never been more packed with great, insightful info and many of us are starting to close deals.
The truth is that our business is getting more fun every day and I don't want you to miss out. Not only because of the great conversations and knowledge base that we're building on the calls and with our blog, but because for every person who joins the calls our conversations are EXPONENTIALLY that much better. New investors, seasoned investors or just curious listeners. From a simple question to an experience someone had dealing with a lender, the lifeblood of our calls is based on you and your experiences.
I know that the regular time of our meetings (Wed. 6:30PM PST) has still been a challenge for some to attend, particularly with the late breaking SREC meetings that keep popping up (I think they're jealous). So, I'd like to suggest some interesting alternatives and I want your feedback:
---Mondays or Wednesdays at 10AM PST (yes, a morning meeting on the West Coast and a lunch meeting on the East Coast). If making our meeting during normal business hours will get people to attend, then let's do it.
---Mondays or Tuesdays at 5PM PST (early for those on the West Coast, but very doable for those everywhere else)
---Mondays or Wednesdays at 6:30PM PST (same time as present)
PLEASE LET ME KNOW WHICH DAY/TIME YOU PREFER ASAP. THIS WEEK'S MEETING WILL BE ON WEDNESDAY, BUT WE'LL ADJUST BASED ON THE GROUP'S FEEDBACK FOR THE FOLLOWING WEEK. AND PLEASE, EVEN IF THE NEW MEETING TIME DOES NOT TURN OUT TO BE YOUR FIRST PREFERENCE, I ENCOURAGE YOU ALL TO ATTEND. THIS IS SOMETHING TRULY SPECIAL THAT IS MAKING ALL OF US WHO ATTEND SMARTER, RICHER INVESTORS AND INDIVIDUALS.
To Everyone's Success,
Jordan
Ever since the holidays, our turn-out for the weekly conference calls has been dwindling. At the same time, I think I speak for everyone when I say that our calls have never been more packed with great, insightful info and many of us are starting to close deals.
The truth is that our business is getting more fun every day and I don't want you to miss out. Not only because of the great conversations and knowledge base that we're building on the calls and with our blog, but because for every person who joins the calls our conversations are EXPONENTIALLY that much better. New investors, seasoned investors or just curious listeners. From a simple question to an experience someone had dealing with a lender, the lifeblood of our calls is based on you and your experiences.
I know that the regular time of our meetings (Wed. 6:30PM PST) has still been a challenge for some to attend, particularly with the late breaking SREC meetings that keep popping up (I think they're jealous). So, I'd like to suggest some interesting alternatives and I want your feedback:
---Mondays or Wednesdays at 10AM PST (yes, a morning meeting on the West Coast and a lunch meeting on the East Coast). If making our meeting during normal business hours will get people to attend, then let's do it.
---Mondays or Tuesdays at 5PM PST (early for those on the West Coast, but very doable for those everywhere else)
---Mondays or Wednesdays at 6:30PM PST (same time as present)
PLEASE LET ME KNOW WHICH DAY/TIME YOU PREFER ASAP. THIS WEEK'S MEETING WILL BE ON WEDNESDAY, BUT WE'LL ADJUST BASED ON THE GROUP'S FEEDBACK FOR THE FOLLOWING WEEK. AND PLEASE, EVEN IF THE NEW MEETING TIME DOES NOT TURN OUT TO BE YOUR FIRST PREFERENCE, I ENCOURAGE YOU ALL TO ATTEND. THIS IS SOMETHING TRULY SPECIAL THAT IS MAKING ALL OF US WHO ATTEND SMARTER, RICHER INVESTORS AND INDIVIDUALS.
To Everyone's Success,
Jordan
Thursday, February 19, 2009
Loan Mods and Short Sales Don't Mix With Lenders
Ever call the lender and wonder why the file has still not been assigned to the short sale department? Ever wonder why a lender will order a second BPO or appraisal (even if one had been done last week) when you finally get a loss mitigator assigned? I've run into this problem a few times and have finally found a major (not only) cause of this situation.
First off, lenders will not let a homeowner pursue both a loan modification and a short sale simultaneously. They'd rather eat up 60 days of a homeowner's NOD time, ruin their credit and cause further mental anguish by pursuing a loan mod only to deny it. Thus leaving the homeowner with little time before the Trustee's Sale to pursue a short sale.
Anyway, many homeowners first pursue a loan modication in an effort to keep their home and then realize that a short sale is their only remaining option. Lenders open up a loan mod file and then will often NOT close that file unless directly ordered to by the short sale department or/and the homeowner. You will drive yourself crazy when you call in to talk to the short sale department and the customer-service rep says it shows the file is still in loan modification when you've been trying for weeks to get a loss mitigator assigned. MAKE SURE the lender closes out the loan mod file.
By the way, lenders will sometimes order a BPO based on a loan modification request. This BPO often does not count when the file is handed over to the short sale dept. and, hence, another BPO is ordered. Two different departments that don't talk and start from scratch when they get a file.
First off, lenders will not let a homeowner pursue both a loan modification and a short sale simultaneously. They'd rather eat up 60 days of a homeowner's NOD time, ruin their credit and cause further mental anguish by pursuing a loan mod only to deny it. Thus leaving the homeowner with little time before the Trustee's Sale to pursue a short sale.
Anyway, many homeowners first pursue a loan modication in an effort to keep their home and then realize that a short sale is their only remaining option. Lenders open up a loan mod file and then will often NOT close that file unless directly ordered to by the short sale department or/and the homeowner. You will drive yourself crazy when you call in to talk to the short sale department and the customer-service rep says it shows the file is still in loan modification when you've been trying for weeks to get a loss mitigator assigned. MAKE SURE the lender closes out the loan mod file.
By the way, lenders will sometimes order a BPO based on a loan modification request. This BPO often does not count when the file is handed over to the short sale dept. and, hence, another BPO is ordered. Two different departments that don't talk and start from scratch when they get a file.
Countrywide Minimum as 2nd Lender
I have a deal right now with Countrywide as the second lender. The balance is $250K+ and I submitted a HUD giving them $1000. Take that you slow behemoth! Anyway, I then spent weeks on the phone talking with their short sale department in an effort to find out why a loss mitigator had not been assigned. Finally, some light from a rare, very helpful woman.
Apparently, Countrywide's minimum requirement as a second lien holder is $3000. Any offers that come in under $3K get pushed under the rug and no loss mitigator will be assigned. I was told to resubmit the HUD with $3K to Countrywide and not only would a loss mitigator be assigned, but that I would likely get an approval on $3k or $5K. Interesting. So I did. And within a few days, a loss mitigator was assigned and I'm now awaiting their acceptance/counter.
Apparently, Countrywide's minimum requirement as a second lien holder is $3000. Any offers that come in under $3K get pushed under the rug and no loss mitigator will be assigned. I was told to resubmit the HUD with $3K to Countrywide and not only would a loss mitigator be assigned, but that I would likely get an approval on $3k or $5K. Interesting. So I did. And within a few days, a loss mitigator was assigned and I'm now awaiting their acceptance/counter.
Things You Should Know Dealing with WAMU
WAMU just recently established new guidelines in terms of what items and how much their willing to pay for different items on the HUD. I just found this out a few days ago during my negotiations with WAMU on a property.
Most importantly, WAMU has taken the stance that they will not pay ANY of the closing costs if an investor is purchasing the property. How do they know it's an investor? Because an LLC or Corp. is making the purchase. This could easily cost you another $5K or more in the deal based on your purchase price (it cost me about $6K). Sounds kind of ridiculous doesn't it? So what if an investor purchases the property - what if the investor is unwilling to pay all the closing costs? Is WAMU really going to let the property foreclose? Personally, I didn't push it as there was plenty of room in the deal and I just wanted to get it closed.
WAMU also won't pay any seller concessions if it's an investor puchase. This can mean $erious dollars. They have taken the stance that investors aren't living there and must buy the property as-is. Of course, you can simply adjust your purchase price to take into consideration any concessions you planned on asking for. But remember, your offer still needs to fall within the lender's delegated authority percentage. Could you scream, waive your arms and put up a stink about this? You could, but again, it's a numbers game. If you reverse-engineer your deal to meet their required delegated authority percentage, these things don't come into play.
Other WAMU quirks:
- No loss mitigation fees of any kind
- If two agents on the deal, then 5%
- If one agent on the deal, then 3% up to $300k purchase price; only 2.5% if over $300k
- Will pay second lender up to $5K without a problem. I even had the second lender down to $3K but the payoff extension is running out. I was told that if it runs out before escrow closes to just tell the second lender they'll get $5k to close the deal.
Overall, my first deal with WAMU has been better than most lenders. They moved quickly in ordering the BPO (10 days), assigned a loss mitigator two weeks after that, and then countered my offer a few days later.
Most importantly, WAMU has taken the stance that they will not pay ANY of the closing costs if an investor is purchasing the property. How do they know it's an investor? Because an LLC or Corp. is making the purchase. This could easily cost you another $5K or more in the deal based on your purchase price (it cost me about $6K). Sounds kind of ridiculous doesn't it? So what if an investor purchases the property - what if the investor is unwilling to pay all the closing costs? Is WAMU really going to let the property foreclose? Personally, I didn't push it as there was plenty of room in the deal and I just wanted to get it closed.
WAMU also won't pay any seller concessions if it's an investor puchase. This can mean $erious dollars. They have taken the stance that investors aren't living there and must buy the property as-is. Of course, you can simply adjust your purchase price to take into consideration any concessions you planned on asking for. But remember, your offer still needs to fall within the lender's delegated authority percentage. Could you scream, waive your arms and put up a stink about this? You could, but again, it's a numbers game. If you reverse-engineer your deal to meet their required delegated authority percentage, these things don't come into play.
Other WAMU quirks:
- No loss mitigation fees of any kind
- If two agents on the deal, then 5%
- If one agent on the deal, then 3% up to $300k purchase price; only 2.5% if over $300k
- Will pay second lender up to $5K without a problem. I even had the second lender down to $3K but the payoff extension is running out. I was told that if it runs out before escrow closes to just tell the second lender they'll get $5k to close the deal.
Overall, my first deal with WAMU has been better than most lenders. They moved quickly in ordering the BPO (10 days), assigned a loss mitigator two weeks after that, and then countered my offer a few days later.
Conference Call Recap 2/18/09
Thanks to those who attended last night's conference call. We didn't have as many members as usual, but the information and discussion is always....priceless. Here are some of the key learnings:
Dwindling Loss Mitigation Fees
An increasing number of lenders seem to be discounting or eliminating loss mitigation fees from the HUD. They insist that loss mitigation is really the responsibility of the real estate agents and that loss mitigation companies need to hit up agents for part of their commission if they want to get paid. So what to do?
Several options were discussed including the following:
1) Most lenders will allow some type of seller concessions. Since you are the buyer and any money you make on the HUD goes to the same place (your pocket), why not increase your seller concessions on the HUD to make up for loss mitigation fees lost. You can also tell the loss mitigator that the seller has agreed to pay you out of the seller concessions so to go ahead and approve or add money in that area of the HUD.
2) You can put loss mitigation fees on the buyer's side of the HUD so the lender is not paying for them. This increases your purchase price which increase your gross offer. You can then simply reverse-engineer your gross offer price to meet the lender's delegated authority percentage based on who actually owns the loan (Freddie, Fannie, FHA, VA, Conventional).
3) You can add a loss mitigation fee disclosure letter to your short sale package that basically justifies your value in the transaction and establishes the fees you expect to be paid. This is particularly powerful because it lets you keep your loss mitigation company on the deal (and get paid when it closes) even if you don't purchase the property.
4) Most lenders will pay 5% real estate commissions if there are two agents involved in the transaction. If you are the investor, you can use this to your advantage in negotiating the loss mitigation fee. For example, if you have agreed to split the real estate commissions with the listing agent, you could agree with the lender to reduce the total agents' commissions to 4% and allocate the other 1% to loss mitigation fees. Now instead of getting 2.5% commissions (half of 5%) and no loss mitigation fees, you actually capture 2% commissions + 1% loss mitigation fees = 3% total fees. Because you are doing all the negotiations, it's only fair that you capture something for loss mitigation.
2nd Mortgage Lenders Going After Deficiency Judgments
How do you deal with (or try to prevent) second lenders who are adamant about pursuing deficiency judgments from the homeowner? Some second mortgage lenders don't just want the $3000 you've offered as a payoff, but also want a note signed by the homeowner for the outstanding balance - usually paid over 5 years at zero or little interest. While there is no property attached to this note and the likelihood of getting paid is very small, some lenders are stubborn or just want it for their books. Is this a veiled threat on their behalf or will they really go all the way to foreclosure if they don't get the note?
The truth is that some homeowners don't mind signing the note given that they have no funds or intention of paying the lender anything. But smarter homeowners don't want any other possible credit damage or just want the home completely behind them. One strategy discussed on the call was to tell the second lender that the homeowner was in the process of declaring BK and that any note would be wiped away. Another method was positioning yourself as the lender's ally in getting more money from the first lender. This would involve going back to the first lender to get an approval for $5000 (for example) paid to the second lender at closing. Now you have a bargaining chip with the second lender to say that you were able to get $5k for them if they agree to let the deficiency go.
Shielding Your Different Companies from Lenders
As a short sale investor, you quickly realize the benefits of having different companies that you own all working on the same deal. Different companies = additional revenue streams that the lender will pay you on the HUD. However, it gets a bit tricky when the investor's name is signed on all the docs (buyer, brokerage, loss mitigation, private lending). Just for reference, there is only place on the Option Contract and one place on the NOD Purchase Agreement where the buyer's name must be written underneath the signature line - but that one place is enough to trip you up.
For example, if the lender discovers that the loss mitigator he/she is talking to on the phone is also the buyer, they certainly won't pay any loss mitigation fees and may even close the file because they think it's a conflict of interest (just ask Karl). If the buyer and the buyer's agent/brokerage are the same person, they won't pay any of the buyer's brokerage commissions. And they certainly won't pay any loss mitigation fees if they discover that the realtor and the loss mitigator are the same person. So how do you shield this information from lenders?
One way is to create your buying company with both you and your wife as principals. One of you signs as the buyer and the other is the loss mitigator. Although you have the same last names, this usually won't trip you up because your relationship with the loss mitigator is typically on a first name basis. You can also simply hire someone to do the loss mitigation for you. To solve the buyer/agent same person dilemma, remember that brokerages are paid commissions - not realtors. You therefore do not have to indicate who the buyer's agent is, only the brokerage representing the buyer.
Much more, but that's all I could keep track of. I encourage more of you to join our calls - we all benefit greatly with each person that joins.
Dwindling Loss Mitigation Fees
An increasing number of lenders seem to be discounting or eliminating loss mitigation fees from the HUD. They insist that loss mitigation is really the responsibility of the real estate agents and that loss mitigation companies need to hit up agents for part of their commission if they want to get paid. So what to do?
Several options were discussed including the following:
1) Most lenders will allow some type of seller concessions. Since you are the buyer and any money you make on the HUD goes to the same place (your pocket), why not increase your seller concessions on the HUD to make up for loss mitigation fees lost. You can also tell the loss mitigator that the seller has agreed to pay you out of the seller concessions so to go ahead and approve or add money in that area of the HUD.
2) You can put loss mitigation fees on the buyer's side of the HUD so the lender is not paying for them. This increases your purchase price which increase your gross offer. You can then simply reverse-engineer your gross offer price to meet the lender's delegated authority percentage based on who actually owns the loan (Freddie, Fannie, FHA, VA, Conventional).
3) You can add a loss mitigation fee disclosure letter to your short sale package that basically justifies your value in the transaction and establishes the fees you expect to be paid. This is particularly powerful because it lets you keep your loss mitigation company on the deal (and get paid when it closes) even if you don't purchase the property.
4) Most lenders will pay 5% real estate commissions if there are two agents involved in the transaction. If you are the investor, you can use this to your advantage in negotiating the loss mitigation fee. For example, if you have agreed to split the real estate commissions with the listing agent, you could agree with the lender to reduce the total agents' commissions to 4% and allocate the other 1% to loss mitigation fees. Now instead of getting 2.5% commissions (half of 5%) and no loss mitigation fees, you actually capture 2% commissions + 1% loss mitigation fees = 3% total fees. Because you are doing all the negotiations, it's only fair that you capture something for loss mitigation.
2nd Mortgage Lenders Going After Deficiency Judgments
How do you deal with (or try to prevent) second lenders who are adamant about pursuing deficiency judgments from the homeowner? Some second mortgage lenders don't just want the $3000 you've offered as a payoff, but also want a note signed by the homeowner for the outstanding balance - usually paid over 5 years at zero or little interest. While there is no property attached to this note and the likelihood of getting paid is very small, some lenders are stubborn or just want it for their books. Is this a veiled threat on their behalf or will they really go all the way to foreclosure if they don't get the note?
The truth is that some homeowners don't mind signing the note given that they have no funds or intention of paying the lender anything. But smarter homeowners don't want any other possible credit damage or just want the home completely behind them. One strategy discussed on the call was to tell the second lender that the homeowner was in the process of declaring BK and that any note would be wiped away. Another method was positioning yourself as the lender's ally in getting more money from the first lender. This would involve going back to the first lender to get an approval for $5000 (for example) paid to the second lender at closing. Now you have a bargaining chip with the second lender to say that you were able to get $5k for them if they agree to let the deficiency go.
Shielding Your Different Companies from Lenders
As a short sale investor, you quickly realize the benefits of having different companies that you own all working on the same deal. Different companies = additional revenue streams that the lender will pay you on the HUD. However, it gets a bit tricky when the investor's name is signed on all the docs (buyer, brokerage, loss mitigation, private lending). Just for reference, there is only place on the Option Contract and one place on the NOD Purchase Agreement where the buyer's name must be written underneath the signature line - but that one place is enough to trip you up.
For example, if the lender discovers that the loss mitigator he/she is talking to on the phone is also the buyer, they certainly won't pay any loss mitigation fees and may even close the file because they think it's a conflict of interest (just ask Karl). If the buyer and the buyer's agent/brokerage are the same person, they won't pay any of the buyer's brokerage commissions. And they certainly won't pay any loss mitigation fees if they discover that the realtor and the loss mitigator are the same person. So how do you shield this information from lenders?
One way is to create your buying company with both you and your wife as principals. One of you signs as the buyer and the other is the loss mitigator. Although you have the same last names, this usually won't trip you up because your relationship with the loss mitigator is typically on a first name basis. You can also simply hire someone to do the loss mitigation for you. To solve the buyer/agent same person dilemma, remember that brokerages are paid commissions - not realtors. You therefore do not have to indicate who the buyer's agent is, only the brokerage representing the buyer.
Much more, but that's all I could keep track of. I encourage more of you to join our calls - we all benefit greatly with each person that joins.
Tuesday, February 17, 2009
Conference Call Recap 2/12/09
We talked about SO MANY things on the call that it was impossible to keep up.....but also impossible not to be engaged. So many great learnings and ideas about how to make our businesses more efficient and profitable.
Anyway, here's some info recalled by Jeff:
Connecting with the BPO Agent
When BPO/App calls - make sure to write down the phone number where they called from, then skip trace the phone number on google while you're speaking with the BPO/App to build rapport. Example: Ring Ring Ring PH# on caller ID: (213) 253-1120....
Take that ph# and throw it into google like this.... "213 253-1120" you will get a solid match to a website. Now you have the company name, address, other workers, email etc etc...
While you are on the phone say something like the following:
You: "You're from _____ company right? (which you just found out)
BPO/APP: "yes"
You: "Yeah, the ______ bank told me you where going to call" (which you didn't know)
You: "WOW!!! This property is special (let them think whatever)...would you be offended if I sent you some of the information that ______ bank already has?
BPO/APP: "no" (everyone will say it)
You: "Your email is ________________, right?" (which you just got from the internet)
***now you have planted the seed - with your comps/pictures****
***remember, if it doesn't help you - IT HURTS YOU!!!***
SIDE NOTE: This method of skip tracing while on the phone is golden - you can use this while you are negotiating with the lender.
Example.
Bank: "May I have the loan number... blah blah"
**give all the info - while you're waiting for them pull everything up***
You: "Where am I calling today?"
Bank: "Fortworth, TX" (pay attention very carefully)
You: "Awesome..." NOW GOOGLE THE CITY, STATE IN GOOGLE MAPS FAST AS YOU CAN
You: "So are you near _____ or _____" (picking a main highway)"
The goal is build rapport as fast as possible... by using this technique the individual on the other line will assume you have been to that city. Everyone likes to do business with people they know. You can even say things about a golf course, the lake, the mall, etc. This way you now
have some type of connection.
Marketing
MLS: Marketing to previously "pending" MLS listing that went back to "active". This means that the buyer fell out of escrow and the agent is probably extremely frustrated. ***Listing
must be a short sale***
Send an email to the listing agent....
Example:
" Hey agent Joe, I saw your listing on 123 abc street just went back to active. I wanted to make an as-is all cash offer on this property. I can close very quickly but you're seller needs to be comfortable to allow us to do the negotiation with the bank."
**This week I'm going to test this....***
Breaking Down Brokerages Barriers
I (Jordan) have been fighting with the larger brokerages for weeks now trying to get them to accept the Option Contract and the way I do business. But these brokerages are big and slow and tangled in more red tape than you can imagine. Despite the sheer volume of short sales, REO's and foreclosures here in California, the real estate industry is a relative newbie in dealing with distressed properties - particularly the large brokerages. They just don't now how to handle or deal with anything other than the ordinary, standard agreements and ways of doing business. And none of them (with 200+ people in each) have ever worked with this type of an Option Contract.
Lately, I've had to let my attorney loose on these brokerages to demand what legal basis they have for not accepting the contracts. As a result, it looks like I'm about to be accepted by Prudential and Keller Williams. But I've had to modify the Option Contract & Affidavit of Understanding per each individual brokerage. And it turns out that it's not actually changes to the legal principles in these contracts that have changed. But rather adding clauses like the following:
- "The homeowner agrees that he/she is not under the influence of alcohol or drugs when signing this contract"
- "This contract is 5 pages in length."
- "(Bold this clause)"
- "This contract will be recorded in the county recorder's office"
After all the legal posturing, it's these kind of things that make them feel comfortable. Amazing, isn't it? I guess someone's got to break down the walls. Hopefully, my efforts will open up the doors for everyone. I'll let you know.
So much more that I can't remember. Until next time...
Anyway, here's some info recalled by Jeff:
Connecting with the BPO Agent
When BPO/App calls - make sure to write down the phone number where they called from, then skip trace the phone number on google while you're speaking with the BPO/App to build rapport. Example: Ring Ring Ring PH# on caller ID: (213) 253-1120....
Take that ph# and throw it into google like this.... "213 253-1120" you will get a solid match to a website. Now you have the company name, address, other workers, email etc etc...
While you are on the phone say something like the following:
You: "You're from _____ company right? (which you just found out)
BPO/APP: "yes"
You: "Yeah, the ______ bank told me you where going to call" (which you didn't know)
You: "WOW!!! This property is special (let them think whatever)...would you be offended if I sent you some of the information that ______ bank already has?
BPO/APP: "no" (everyone will say it)
You: "Your email is ________________, right?" (which you just got from the internet)
***now you have planted the seed - with your comps/pictures****
***remember, if it doesn't help you - IT HURTS YOU!!!***
SIDE NOTE: This method of skip tracing while on the phone is golden - you can use this while you are negotiating with the lender.
Example.
Bank: "May I have the loan number... blah blah"
**give all the info - while you're waiting for them pull everything up***
You: "Where am I calling today?"
Bank: "Fortworth, TX" (pay attention very carefully)
You: "Awesome..." NOW GOOGLE THE CITY, STATE IN GOOGLE MAPS FAST AS YOU CAN
You: "So are you near _____ or _____" (picking a main highway)"
The goal is build rapport as fast as possible... by using this technique the individual on the other line will assume you have been to that city. Everyone likes to do business with people they know. You can even say things about a golf course, the lake, the mall, etc. This way you now
have some type of connection.
Marketing
MLS: Marketing to previously "pending" MLS listing that went back to "active". This means that the buyer fell out of escrow and the agent is probably extremely frustrated. ***Listing
must be a short sale***
Send an email to the listing agent....
Example:
" Hey agent Joe, I saw your listing on 123 abc street just went back to active. I wanted to make an as-is all cash offer on this property. I can close very quickly but you're seller needs to be comfortable to allow us to do the negotiation with the bank."
**This week I'm going to test this....***
Breaking Down Brokerages Barriers
I (Jordan) have been fighting with the larger brokerages for weeks now trying to get them to accept the Option Contract and the way I do business. But these brokerages are big and slow and tangled in more red tape than you can imagine. Despite the sheer volume of short sales, REO's and foreclosures here in California, the real estate industry is a relative newbie in dealing with distressed properties - particularly the large brokerages. They just don't now how to handle or deal with anything other than the ordinary, standard agreements and ways of doing business. And none of them (with 200+ people in each) have ever worked with this type of an Option Contract.
Lately, I've had to let my attorney loose on these brokerages to demand what legal basis they have for not accepting the contracts. As a result, it looks like I'm about to be accepted by Prudential and Keller Williams. But I've had to modify the Option Contract & Affidavit of Understanding per each individual brokerage. And it turns out that it's not actually changes to the legal principles in these contracts that have changed. But rather adding clauses like the following:
- "The homeowner agrees that he/she is not under the influence of alcohol or drugs when signing this contract"
- "This contract is 5 pages in length."
- "(Bold this clause)"
- "This contract will be recorded in the county recorder's office"
After all the legal posturing, it's these kind of things that make them feel comfortable. Amazing, isn't it? I guess someone's got to break down the walls. Hopefully, my efforts will open up the doors for everyone. I'll let you know.
So much more that I can't remember. Until next time...
Thursday, February 12, 2009
conflicts and schedules
Due to the SREC call Thursday at 9EST I won't be able to make our 9:30EST meeting. It's difficult to catch all the coaching calls, when they get set up so quickly and are subject to changes at nearly the last minute. That being said I ran into a snag this week and I'd like to get some feedback from the group.
In the course of negotiating a stubborn second with Regions Bank, we got bumped up the food chain three times. Yesterday, we got an email that said they noticed my name associated with the Buyer and with the negotiating company. They called it a conflict of interest and closed the case. They want to get the money (we offered them the $3500 allowed by the first lender Wachovia) and go after the deficiency judgment (about $55,000). That's the real issue.
I'm considering letting the girl at the Stewart Title office have a crack at it, on commission. She gets paid when it closes. Of course, there's no conflict in negotiating your own purchase with the bank, but I wonder, since I sign the Option with my name, as manager AND when I negotiate, my name is on each email, how are you all keeping the two entities separate in the lender's minds?
This is the only place this has come up and I'm convinced they were looking for any reason to close the case, since they think there's money in this retired school teacher's future.
In the course of negotiating a stubborn second with Regions Bank, we got bumped up the food chain three times. Yesterday, we got an email that said they noticed my name associated with the Buyer and with the negotiating company. They called it a conflict of interest and closed the case. They want to get the money (we offered them the $3500 allowed by the first lender Wachovia) and go after the deficiency judgment (about $55,000). That's the real issue.
I'm considering letting the girl at the Stewart Title office have a crack at it, on commission. She gets paid when it closes. Of course, there's no conflict in negotiating your own purchase with the bank, but I wonder, since I sign the Option with my name, as manager AND when I negotiate, my name is on each email, how are you all keeping the two entities separate in the lender's minds?
This is the only place this has come up and I'm convinced they were looking for any reason to close the case, since they think there's money in this retired school teacher's future.
Thursday, February 5, 2009
Conference Call Recap 2/4/09
Thanks for a very productive and thought provoking call last night. The following are the main learnings discussed:
Don't Let the Banks Waste Your Time - Offer Lower
After spending hours faxing in 50, 60 or even 100 pages of documents making up the short sale package, some banks will claim that they lost your paperwork or never received it. One method used by Karl is to lower your offer price. His thinking is that it sends a message to the loss mitigators implying that he's not going to play these types of games and that they better take his offer seriously. Interesting approach.
Upcoming SREC Vegas Conference
Most of us have heard that the upcoming SREC Vegas conference will cover much of the same content as the previous conference. If this is truly the case, does it make any sense to attend? Although for networking purposes most of the group thought it would be helpful (including getting some new members to add to our discussion), it appears that most people will not be attending if it's the same content rehashed again. Of course, it would be great if we had at least one person from our group attend the conference to network.
Talking to Brokerages About What We Do
I made it a priority recently to get into the larger brokerages and talk to realtors about what I do. However, I soon realized that many office managers weren't warming up to the idea of having another "short sale guy" coming into the office. After digging deeper, I realized that they were assuming that I was either a short sale realtor vying to get some of their unwanted short sales or a loss mitigation company. However, when I finally got their attention I was able to explain that I am the BUYER, have nothing to sell, and want to work with them to turn their office into a short sales machine. More like a coach rather than someone selling thier services. Very effective.
Karl said something last night that helped me immediately and may also have helped you. Because realtors (including office managers) often have egos and don't like to be told that they don't know how to do something (i.e. short sales), approaching them as a short sales expert may not be your best move. A better way to approach them is by using what he calls the "Columbo Angle". Columbo, the TV and movie detective, was very successful by coming at things from a point of understanding, being disarming and exercising humility rather than trying to come across an expert. According to the Columbo Angle, you might say something like "Let me try to understand how your office is currently doing short sales and see how I can improve upon it in any way." I personally think this can only help you.
Tax Consequences of Short Selling
We had some good discussion about the tax consequences for the homeowner of completing a short sale. While I recommend everyone ask their CPA to be sure because I can't give tax advice, our understanding was that the Tax Reform Act of 2007 gave tax exemptions to homeowners as long as it was their primary residence and they hadn't refinanced. If it was an investment property or there was a refinance, the homeowner would have to prove insolvency or be subject to paying taxes on the 1099.
Getting the BPO Value
Some lenders will straight up tell you the BPO value if you ask, but many will not because it could compromise thier negotiation leverage. However, there are several ways you can use to get the BPO value:
1) Ask the BPO agent
2) If the BPO agent won't tell you, ask them some other questions ("The offer on the property is $xxx,xxx. Is this at all close to the BPO value? Is it in the ballpark?")
3) If the BPO agent still won't tell you, ask them to do a BPO for you on the same property address. Of course, it will come out the same. If it doesn't, you can always call the lender and tell them the BPO agent is committing fraud.
4) Wait for the counter offer from the lender. Usually the counter is the BPO value.
5) Ask the homeowner to call the lender and ask for it. Someone last night mentioned that it's possible that the lender will tell the homeowner the BPO value since they own the property. Worth a try.
Making Friends with Loss Mitigators
Rather than thinking of loss mitigators as your adversary, try to think about them as a team member. One approach Karl recommended might be, "How can we work together to get this off your chest so you can meet your quotas?" Again, I think this approach can only help you.
Email vs. Faxing in Short Sale Package
Julio mentioned that he now tries to email the entire short sale package into lenders rather than faxing it in. This could save you a considerable amount of time if you have a fast scanner. But how do you get the email address of the loss mitigation department (many won't give it to you)? Julio tells them that he's tried to fax it in numerous times and he keeps hearing that no one has received it. He then asks them for an email address and sends everything while he still has the person on the phone so he can confirm they received it. Better yet, he has a record they received it (even if they say they did not) if his email goes through. If he has to fax it it, Julio stamps each page with the loan number.
Is emailing better than faxing? That's a personal decision. But we all agree that it's better to send everything all at once then piece by piece. This way all the documents of the short sale package are together and it's harder for them to "lose" any.
Seller Concessions - Yes or No?
Should you ask for seller concessions on the HUD? Some people say that concessions are simply your own money that you're asking the lender to return to you. If this is the case, why ask for more money back from the lender thereby making it harder for them to approve the deal? The other side of the argument is that it could make your gross purchase price higher (which can look better) if you adjust for concessions OR give you a chance of getting more money back from the lender if you don't raise the purchase price. There's a good argument for seller concessions in our current state of the market including the need to entice the buyer and pay for unforseen repairs.
Drawing the Line of Fiduciary Responsibility
Very good discussion on this topic. Some realtors say that it is their fiduciary responsibility to send all offers to the lender. If they hold offers, they are not acting in the best interest of their client. We hashed it out and all agreed on the same conclusion. The realtor only has a fiduciary responsibility to the homeowner, NOT the lender. No offers are to be submitted to the lender unless the homeowner agrees, even if that means the property forecloses and you had a good offer in hand. The homeowner makes the decisions, not the lender, and he/she is whom you have a fiduciary responsibitly to.
However, when you as an investor record the Memorandum of Option Agreement, you take equitable interest in the property. Equitable interest in the property gives you the right to act on behalf of the homeowner to market, list and sell the property. It is therefore up to you (the investor) to decide which offers get submitted to the lender. And guess what? The realtor (who is now your listing agent when you list the property) has a fiduciary responsibility only to you.
When to Disclose Your Option to End Buyer's Realtors
Good question here with no obvious answers. When you relist the property on the MLS, some realtors might ask questions. Or when you counter their offers on the property, some realtors might ask how the lender is approving their offer or if it has even been submitted. I think it's best to be as straightforward and honest as you can at this point and emphasize the positives which include:
--Your client no longer has to wait for months to get the deal approved; it can be approved immediately and escrow closed within 30 days.
--Your client wouldn't have the opportunity to purchase this property if it wasn't for the investor; it would have gone to foreclosure
--Your client is getting this property below market value, with built-in equity
--The entire short sale process has been cut nearly in half because of the investor's actions - your buyer may have walked if it took the normal time to get a deal approved
At some point, this is a conversation you're going to have to have with realtors. Better off having it earlier than later and coming from a confident, normal course of business standpoint rather than having realtors think something shady is going on, which of course it's not.
Whew! That's it for this week. See you all on the phone next week with hopefully some deals closed.
Don't Let the Banks Waste Your Time - Offer Lower
After spending hours faxing in 50, 60 or even 100 pages of documents making up the short sale package, some banks will claim that they lost your paperwork or never received it. One method used by Karl is to lower your offer price. His thinking is that it sends a message to the loss mitigators implying that he's not going to play these types of games and that they better take his offer seriously. Interesting approach.
Upcoming SREC Vegas Conference
Most of us have heard that the upcoming SREC Vegas conference will cover much of the same content as the previous conference. If this is truly the case, does it make any sense to attend? Although for networking purposes most of the group thought it would be helpful (including getting some new members to add to our discussion), it appears that most people will not be attending if it's the same content rehashed again. Of course, it would be great if we had at least one person from our group attend the conference to network.
Talking to Brokerages About What We Do
I made it a priority recently to get into the larger brokerages and talk to realtors about what I do. However, I soon realized that many office managers weren't warming up to the idea of having another "short sale guy" coming into the office. After digging deeper, I realized that they were assuming that I was either a short sale realtor vying to get some of their unwanted short sales or a loss mitigation company. However, when I finally got their attention I was able to explain that I am the BUYER, have nothing to sell, and want to work with them to turn their office into a short sales machine. More like a coach rather than someone selling thier services. Very effective.
Karl said something last night that helped me immediately and may also have helped you. Because realtors (including office managers) often have egos and don't like to be told that they don't know how to do something (i.e. short sales), approaching them as a short sales expert may not be your best move. A better way to approach them is by using what he calls the "Columbo Angle". Columbo, the TV and movie detective, was very successful by coming at things from a point of understanding, being disarming and exercising humility rather than trying to come across an expert. According to the Columbo Angle, you might say something like "Let me try to understand how your office is currently doing short sales and see how I can improve upon it in any way." I personally think this can only help you.
Tax Consequences of Short Selling
We had some good discussion about the tax consequences for the homeowner of completing a short sale. While I recommend everyone ask their CPA to be sure because I can't give tax advice, our understanding was that the Tax Reform Act of 2007 gave tax exemptions to homeowners as long as it was their primary residence and they hadn't refinanced. If it was an investment property or there was a refinance, the homeowner would have to prove insolvency or be subject to paying taxes on the 1099.
Getting the BPO Value
Some lenders will straight up tell you the BPO value if you ask, but many will not because it could compromise thier negotiation leverage. However, there are several ways you can use to get the BPO value:
1) Ask the BPO agent
2) If the BPO agent won't tell you, ask them some other questions ("The offer on the property is $xxx,xxx. Is this at all close to the BPO value? Is it in the ballpark?")
3) If the BPO agent still won't tell you, ask them to do a BPO for you on the same property address. Of course, it will come out the same. If it doesn't, you can always call the lender and tell them the BPO agent is committing fraud.
4) Wait for the counter offer from the lender. Usually the counter is the BPO value.
5) Ask the homeowner to call the lender and ask for it. Someone last night mentioned that it's possible that the lender will tell the homeowner the BPO value since they own the property. Worth a try.
Making Friends with Loss Mitigators
Rather than thinking of loss mitigators as your adversary, try to think about them as a team member. One approach Karl recommended might be, "How can we work together to get this off your chest so you can meet your quotas?" Again, I think this approach can only help you.
Email vs. Faxing in Short Sale Package
Julio mentioned that he now tries to email the entire short sale package into lenders rather than faxing it in. This could save you a considerable amount of time if you have a fast scanner. But how do you get the email address of the loss mitigation department (many won't give it to you)? Julio tells them that he's tried to fax it in numerous times and he keeps hearing that no one has received it. He then asks them for an email address and sends everything while he still has the person on the phone so he can confirm they received it. Better yet, he has a record they received it (even if they say they did not) if his email goes through. If he has to fax it it, Julio stamps each page with the loan number.
Is emailing better than faxing? That's a personal decision. But we all agree that it's better to send everything all at once then piece by piece. This way all the documents of the short sale package are together and it's harder for them to "lose" any.
Seller Concessions - Yes or No?
Should you ask for seller concessions on the HUD? Some people say that concessions are simply your own money that you're asking the lender to return to you. If this is the case, why ask for more money back from the lender thereby making it harder for them to approve the deal? The other side of the argument is that it could make your gross purchase price higher (which can look better) if you adjust for concessions OR give you a chance of getting more money back from the lender if you don't raise the purchase price. There's a good argument for seller concessions in our current state of the market including the need to entice the buyer and pay for unforseen repairs.
Drawing the Line of Fiduciary Responsibility
Very good discussion on this topic. Some realtors say that it is their fiduciary responsibility to send all offers to the lender. If they hold offers, they are not acting in the best interest of their client. We hashed it out and all agreed on the same conclusion. The realtor only has a fiduciary responsibility to the homeowner, NOT the lender. No offers are to be submitted to the lender unless the homeowner agrees, even if that means the property forecloses and you had a good offer in hand. The homeowner makes the decisions, not the lender, and he/she is whom you have a fiduciary responsibitly to.
However, when you as an investor record the Memorandum of Option Agreement, you take equitable interest in the property. Equitable interest in the property gives you the right to act on behalf of the homeowner to market, list and sell the property. It is therefore up to you (the investor) to decide which offers get submitted to the lender. And guess what? The realtor (who is now your listing agent when you list the property) has a fiduciary responsibility only to you.
When to Disclose Your Option to End Buyer's Realtors
Good question here with no obvious answers. When you relist the property on the MLS, some realtors might ask questions. Or when you counter their offers on the property, some realtors might ask how the lender is approving their offer or if it has even been submitted. I think it's best to be as straightforward and honest as you can at this point and emphasize the positives which include:
--Your client no longer has to wait for months to get the deal approved; it can be approved immediately and escrow closed within 30 days.
--Your client wouldn't have the opportunity to purchase this property if it wasn't for the investor; it would have gone to foreclosure
--Your client is getting this property below market value, with built-in equity
--The entire short sale process has been cut nearly in half because of the investor's actions - your buyer may have walked if it took the normal time to get a deal approved
At some point, this is a conversation you're going to have to have with realtors. Better off having it earlier than later and coming from a confident, normal course of business standpoint rather than having realtors think something shady is going on, which of course it's not.
Whew! That's it for this week. See you all on the phone next week with hopefully some deals closed.
Tuesday, February 3, 2009
Conference Call Recap 1/28/09
I'll keep this one short and sweet because I didn't take notes last meeting...
Reverse Engineering the Deal
This is something Jeff Kaller talks about in his "Kaller Method". It's an interesting concept that lets you back into an offer price that the lender is most likely going to approve (without countering). How is this done? Here are the major steps:
1) Pull comps to estimate 90-day quicksale price
2) Determine bank's delegated authority (% of BPO bank will accept)
3) Calculate 20% profit margin
4) Subtract this profit margin, realtor commissions and closing costs from 90-day quicksale price - this is the price the bank must accept (the lender's net) to get you the 20% profit margin
5) Divide the lender's net by the delegated authority %. This gives you the number the BPO must come in at.
6) Ask yourself the question, "Can I get the BPO to come in low enough to do this deal?"
7) If yes, make an offer that is 11% higher than the lender's net (6% commissions, 3% closing costs, 2% misc. fees) so the bank, after subtracting these costs, will net a number you know they will accept.
Does it work? I created a spreadsheet that follows this reverse engineering logic and found it very helpful when talking with negotiators.
Outbound Marketing - New Approach
I mentioned that I'm trying a very straight approach in my next marketing efforts using SalesTeamLive. I customized my letters and postcards to remind homeowners what a foreclosure will mean in real terms (no credit cards, no leased cars, etc.) and explained how I can help them. I'll let you know how it turns out.
Setting a Vision/Mission for your Business
Let's face it. We all want to earn a great living. However, our business is more than about money. It's about helping homeowners. And when you talk about your business in this light, you'd be amazed what happens. Here's a personal story to bring this point home..
Before becoming a real estate investor, I spent 15+ years developing the brand strategies for some of the biggest brands in the world and, most importantly, those that had lost their way or lost thier purpose in the world. How did I give them back thier relevance and purpose? I talked them out of being a product-centric company and into being a company with something important to say. I created a vision for each of these companies that was much bigger than their products, much bigger than the competition, and hit a nerve with their target audience.
Here's an example for Crest Toothpaste: Rather than being known as the toothpaste company that whitens your teeth, they instead have the opportunity to be known as the company that brings smiles to the world (by giving you whiter teeth). This one little change in the way they talk about themselves makes all the difference and separates them from every other toothpaste company. It would probably double their sales overnight with a good advertising campaign.
Back to real estate investing....When asked about my company, I can either talk about myself as a short sale real estate investor or start the conversation by saying the mission for my company is to help save families in the Greater Los Angeles area from the devastating effects of foreclosure. And I firmly believe this. Which description of my company do you think people want to become a part of? Something you should consider next time you give your elevator speech.
Being a Warrior
I can't tell you how many times that extra call, extra thank you email, extra meeting at Starbucks has made all the difference for me in either getting deals or establishing a relationship with someone I recently met that will yield deals in the future. Personally, I'm more of a big picture kind of guy (hence the example earlier) and not very good at tying up loose ends or dotting my I's and crossing my T's. However, we all know that this business is as much about relationships as anything. And a few good relationships could mean hundreds of thousand of dollars. So the next time you're tired, lack the confidence or could easily skip making that extra contact, go the extra mile and be a warrior. It will make all the difference.
That's all I got. If it sounds like I'm preaching, my apologies. Some of this stuff is just streaming from my consciousness. Please add to this posting any other topics we discussed so our conversations are not lost.
Reverse Engineering the Deal
This is something Jeff Kaller talks about in his "Kaller Method". It's an interesting concept that lets you back into an offer price that the lender is most likely going to approve (without countering). How is this done? Here are the major steps:
1) Pull comps to estimate 90-day quicksale price
2) Determine bank's delegated authority (% of BPO bank will accept)
3) Calculate 20% profit margin
4) Subtract this profit margin, realtor commissions and closing costs from 90-day quicksale price - this is the price the bank must accept (the lender's net) to get you the 20% profit margin
5) Divide the lender's net by the delegated authority %. This gives you the number the BPO must come in at.
6) Ask yourself the question, "Can I get the BPO to come in low enough to do this deal?"
7) If yes, make an offer that is 11% higher than the lender's net (6% commissions, 3% closing costs, 2% misc. fees) so the bank, after subtracting these costs, will net a number you know they will accept.
Does it work? I created a spreadsheet that follows this reverse engineering logic and found it very helpful when talking with negotiators.
Outbound Marketing - New Approach
I mentioned that I'm trying a very straight approach in my next marketing efforts using SalesTeamLive. I customized my letters and postcards to remind homeowners what a foreclosure will mean in real terms (no credit cards, no leased cars, etc.) and explained how I can help them. I'll let you know how it turns out.
Setting a Vision/Mission for your Business
Let's face it. We all want to earn a great living. However, our business is more than about money. It's about helping homeowners. And when you talk about your business in this light, you'd be amazed what happens. Here's a personal story to bring this point home..
Before becoming a real estate investor, I spent 15+ years developing the brand strategies for some of the biggest brands in the world and, most importantly, those that had lost their way or lost thier purpose in the world. How did I give them back thier relevance and purpose? I talked them out of being a product-centric company and into being a company with something important to say. I created a vision for each of these companies that was much bigger than their products, much bigger than the competition, and hit a nerve with their target audience.
Here's an example for Crest Toothpaste: Rather than being known as the toothpaste company that whitens your teeth, they instead have the opportunity to be known as the company that brings smiles to the world (by giving you whiter teeth). This one little change in the way they talk about themselves makes all the difference and separates them from every other toothpaste company. It would probably double their sales overnight with a good advertising campaign.
Back to real estate investing....When asked about my company, I can either talk about myself as a short sale real estate investor or start the conversation by saying the mission for my company is to help save families in the Greater Los Angeles area from the devastating effects of foreclosure. And I firmly believe this. Which description of my company do you think people want to become a part of? Something you should consider next time you give your elevator speech.
Being a Warrior
I can't tell you how many times that extra call, extra thank you email, extra meeting at Starbucks has made all the difference for me in either getting deals or establishing a relationship with someone I recently met that will yield deals in the future. Personally, I'm more of a big picture kind of guy (hence the example earlier) and not very good at tying up loose ends or dotting my I's and crossing my T's. However, we all know that this business is as much about relationships as anything. And a few good relationships could mean hundreds of thousand of dollars. So the next time you're tired, lack the confidence or could easily skip making that extra contact, go the extra mile and be a warrior. It will make all the difference.
That's all I got. If it sounds like I'm preaching, my apologies. Some of this stuff is just streaming from my consciousness. Please add to this posting any other topics we discussed so our conversations are not lost.
Saturday, January 24, 2009
Number of Properties Underwater is Staggering
The charts above were provided by Mr. Mortgage (http://mrmortgage.ml-implode.com) and illustrates just how many properties are "underwater" (mortgage balance higher than current market value of property). Note: "Near Negative Equity Mortgages" mean that the homeowner has only 5% equity in their house. This effectively means that they are underwater if your consider commissions and closing costs.
If you can't read the charts above, in California there is 1.77MM properties (27.4%) underwater and another 2.05MM "near negative" (31.8%). This translates into a whopping 3.82MM properties or 59.2% of homeowners in California who are currently underwater. Wow! Use these stats in your marketing and when talking to realtors and homeowners.
Friday, January 23, 2009
Conference Call Recap 1/21/09
Someone needs to be in charge of taking notes every week on a rotating schedule to ensure we capture everything that was discussed. But here is what I recall:
BPO Appointment
Much was discussed regarding the BPO appointment and how the magic folder contents (information disclosed to the BPO agent) affects what you need to disclose to your eventual end buyer. The consensus was that you have to disclose everything, but that you can certainly emphasize certain information or tell the same information differently depending on your audience (BPO agent or end buyer's agent).
For example, if you show the BPO agent a chart of the registered sex offenders in the area, do you also need to disclose this to the end buyer even though it's public knowledge? The answer was definitely yes if it's a significant fact that affects the property's value. However, you might point it out and dwell on it when talking with BPO agents vs. simply disclosing it to the end buyer's agent in a sea of other disclosures. I think there's still some gray area, though, if the number of sex offenders is not significant (meaning it's average vs. other areas). If it is average, it would not affect the value of the property and may not need to be disclosed. Use your own judgment.
Banks without Seasoning Issues
We've talked a few times about proactively finding banks that do not have seasoning problems to ensure your end buyer can get funded. For example, if your end buyer's lender won't fund the deal, you need to have a few lenders in your pocket without seasoning requirements that have already prequalified your end buyer. This gives you the best chance of completing the A-B-C transaction rather than just the A-C.
I still have several banks to visit, but I have found two that don't have seasoning requirements: Bank of the West and Bank of America. IMPORTANT: You don't need to just know these banks exist, but rather you need to make friends with a broker in the branch. If you get in a pinch, you don't want to have to start from square one. Get the broker on your team ahead of time and you'll be able to move quickly.
BTW.....Bank of the West is a large bank in more than 33 states and appears to have no issues whatsoever with seasoning problems. Bank of America only requires that you're not settling the A-B transaction with B of A and that you are recorded on the deed before they will fund. Usually, you can get the deed recorded in less than 24 hours but note that the first few days and the last few days of the month are extremely busy and may take longer.
***Added Bonus: When you visit these banks and meet the brokers, you're not only asking them to do business with you but also to refer business to you. Remember, these guys are getting multiple calls a day from people trying to refinance a property that's already underwater. These leads usually get thrown in the trash or sometimes referred out to a loss mitigation company. Tell them to send these leads to you and in return you'll pay them a referral fee for every house you end up purchasing.
When to Payoff the 2nd Loan (or other junior liens)
When you're negotiating more than one loan on a property, you'll likely get one of the loans settled days, weeks, or even months before the other one. But these lenders have an expiration period on thier discount payoff notices in which the loan must be settled. These can be extended a month or weeks but usually not more than a few times. So what do you do if you can no longer extend the discount payoff notice but have not yet settled other loans on the property?
It depends on the deal. If you've already recieved a counter from the lender in which you're awaiting a settlement, then you should know if this deal is going to work out or not. However, any deal can fall apart at the last minute for a multitude of reasons. If it's worth the risk and you're confident you'll be able to settle, you might agree to pay off one of the loans in advance and just concentrate on getting the other loan settled. However, you could always just let the settlement expire and then go back and renegotiate. Who knows, you might be in an even better position then as more time has passed.
Is it really OK to list a property you don't yet own?
Yes, per Provision 6G in the Option Contract. Most realtors and brokers you talk to will probably grimace at the idea of listing a house for someone who doesn't even own it yet. They'll be concerned that they're breaking DRE regulations and may put their license in jeapordy. All you can do is show them the verbage of Provision 6G, maybe make a few analogies, and then ask them to show their attorney. If they're still squirming, don't work with them. You want agents on your team that are positive, entrepreneurial and ready to grab life by the horns.
***Side Note: The key agent on my team works for Prudential, a very big but conservative brokerage. The manager at the office read my Option Contract and initially turned it down. I asked to speak with him directly and after 5 minutes on the phone, I realized where the sticking point was. Being in the real estate business for more than 20 years, he ASSUMED that I was doing a "simultaneous" close (meaning that I'm using the end buyer's funds to close the A-B transaction) like a land trust. When I clarified that I was doing two completely independent, fully disclosed, transparent transactions funded by my own private money, he dropped the issue in a second. It's currently being reviewed by Prudential's legal staff, but everything looks good so far.
BTW.....Even though the office manager initially grimaced at me and even copped a little attitude, I tried to view this as an opportunity. And it just may pay off. Think about it. If I can convince him that what I'm doing works and makes money for his office, he might just champion me to his entire staff. As they say, if you can turn your biggest critics into believers, they will in turn be your most vocal advocates.
What to Do if Your Loss Mitigator Is Stalling
There was some discussion that you might be able to threaten them with a lawsuit. If they have all the necessary paperwork in order and a reasonable offer on the table yet do not act decisively, they could ruin someone's credit particularly if the property forecloses. Your case might even be stronger if the bank then sold the property as an REO for less money than the original offer.
HOWEVER, the group agreed that while this might be plausible, it's just not smart business. You have the best chance of getting your deals approved when you become the loss mitigator's partner rather than his enemy. Worst comes to worst, you can always nicely ask to talk to their supervisor and explain the situation.
Helping Homeowners After They've Vacated the Property
I believe Karl mentioned that he tries to put some of his defaulting homeowners into lease options in other properties in which he owns. They desperately need housing and want to own rather than rent, so Karl helps them along and eventually sells them the property when they've got their credit back in order. What a fantastic idea that's a win-win for everyone (as long as they don't default on you :-)).
That's all I can remember, so please add anything I have forgotten.
BPO Appointment
Much was discussed regarding the BPO appointment and how the magic folder contents (information disclosed to the BPO agent) affects what you need to disclose to your eventual end buyer. The consensus was that you have to disclose everything, but that you can certainly emphasize certain information or tell the same information differently depending on your audience (BPO agent or end buyer's agent).
For example, if you show the BPO agent a chart of the registered sex offenders in the area, do you also need to disclose this to the end buyer even though it's public knowledge? The answer was definitely yes if it's a significant fact that affects the property's value. However, you might point it out and dwell on it when talking with BPO agents vs. simply disclosing it to the end buyer's agent in a sea of other disclosures. I think there's still some gray area, though, if the number of sex offenders is not significant (meaning it's average vs. other areas). If it is average, it would not affect the value of the property and may not need to be disclosed. Use your own judgment.
Banks without Seasoning Issues
We've talked a few times about proactively finding banks that do not have seasoning problems to ensure your end buyer can get funded. For example, if your end buyer's lender won't fund the deal, you need to have a few lenders in your pocket without seasoning requirements that have already prequalified your end buyer. This gives you the best chance of completing the A-B-C transaction rather than just the A-C.
I still have several banks to visit, but I have found two that don't have seasoning requirements: Bank of the West and Bank of America. IMPORTANT: You don't need to just know these banks exist, but rather you need to make friends with a broker in the branch. If you get in a pinch, you don't want to have to start from square one. Get the broker on your team ahead of time and you'll be able to move quickly.
BTW.....Bank of the West is a large bank in more than 33 states and appears to have no issues whatsoever with seasoning problems. Bank of America only requires that you're not settling the A-B transaction with B of A and that you are recorded on the deed before they will fund. Usually, you can get the deed recorded in less than 24 hours but note that the first few days and the last few days of the month are extremely busy and may take longer.
***Added Bonus: When you visit these banks and meet the brokers, you're not only asking them to do business with you but also to refer business to you. Remember, these guys are getting multiple calls a day from people trying to refinance a property that's already underwater. These leads usually get thrown in the trash or sometimes referred out to a loss mitigation company. Tell them to send these leads to you and in return you'll pay them a referral fee for every house you end up purchasing.
When to Payoff the 2nd Loan (or other junior liens)
When you're negotiating more than one loan on a property, you'll likely get one of the loans settled days, weeks, or even months before the other one. But these lenders have an expiration period on thier discount payoff notices in which the loan must be settled. These can be extended a month or weeks but usually not more than a few times. So what do you do if you can no longer extend the discount payoff notice but have not yet settled other loans on the property?
It depends on the deal. If you've already recieved a counter from the lender in which you're awaiting a settlement, then you should know if this deal is going to work out or not. However, any deal can fall apart at the last minute for a multitude of reasons. If it's worth the risk and you're confident you'll be able to settle, you might agree to pay off one of the loans in advance and just concentrate on getting the other loan settled. However, you could always just let the settlement expire and then go back and renegotiate. Who knows, you might be in an even better position then as more time has passed.
Is it really OK to list a property you don't yet own?
Yes, per Provision 6G in the Option Contract. Most realtors and brokers you talk to will probably grimace at the idea of listing a house for someone who doesn't even own it yet. They'll be concerned that they're breaking DRE regulations and may put their license in jeapordy. All you can do is show them the verbage of Provision 6G, maybe make a few analogies, and then ask them to show their attorney. If they're still squirming, don't work with them. You want agents on your team that are positive, entrepreneurial and ready to grab life by the horns.
***Side Note: The key agent on my team works for Prudential, a very big but conservative brokerage. The manager at the office read my Option Contract and initially turned it down. I asked to speak with him directly and after 5 minutes on the phone, I realized where the sticking point was. Being in the real estate business for more than 20 years, he ASSUMED that I was doing a "simultaneous" close (meaning that I'm using the end buyer's funds to close the A-B transaction) like a land trust. When I clarified that I was doing two completely independent, fully disclosed, transparent transactions funded by my own private money, he dropped the issue in a second. It's currently being reviewed by Prudential's legal staff, but everything looks good so far.
BTW.....Even though the office manager initially grimaced at me and even copped a little attitude, I tried to view this as an opportunity. And it just may pay off. Think about it. If I can convince him that what I'm doing works and makes money for his office, he might just champion me to his entire staff. As they say, if you can turn your biggest critics into believers, they will in turn be your most vocal advocates.
What to Do if Your Loss Mitigator Is Stalling
There was some discussion that you might be able to threaten them with a lawsuit. If they have all the necessary paperwork in order and a reasonable offer on the table yet do not act decisively, they could ruin someone's credit particularly if the property forecloses. Your case might even be stronger if the bank then sold the property as an REO for less money than the original offer.
HOWEVER, the group agreed that while this might be plausible, it's just not smart business. You have the best chance of getting your deals approved when you become the loss mitigator's partner rather than his enemy. Worst comes to worst, you can always nicely ask to talk to their supervisor and explain the situation.
Helping Homeowners After They've Vacated the Property
I believe Karl mentioned that he tries to put some of his defaulting homeowners into lease options in other properties in which he owns. They desperately need housing and want to own rather than rent, so Karl helps them along and eventually sells them the property when they've got their credit back in order. What a fantastic idea that's a win-win for everyone (as long as they don't default on you :-)).
That's all I can remember, so please add anything I have forgotten.
Monday, January 19, 2009
Conference Call Recap 1/15/09
I'll try and recap what we discussed last week. This is from my cluttered memory, so please add things I have forgotten.
When to List Property as Seller/Owner
We had some discussion about when and how to switch an existing listing on the MLS over to your name as the seller/owner. I think we all agreed that after the BPO was completed (possibly even when your offer is countered) was the ideal time to switch the listing over to your name. You do this by having the existing listing agent withdraw the MLS listing and then relist it with your name as the seller/owner.
When to List on MLS
This is a balancing act that must be evaluated on a house-by-house basis. The key is having a very good idea on the 30-day quicksale value of the house. If you know this, you know what price to list the property at. Why list the property at this price? Because you want offers flowing in the second you list it to capitalize on the "newness" and excitement when a house first gets listed.
Nathan J. (aka The Short Sale Kid) insists that you should list it on the MLS quickly to best gage the market value of the house and give it as much time as possible to get offers. You then simply counter and manage any offers that are submitted using a weeding out process to ensure the buyers will "stick" (more on this in another post). The challenge in listing the property so early that your listing gets stale while you're negotiating 2-3 months or longer. This is the balancing act you must walk based on the marketability of the property and your comfort level in the 30-day quicksale price.
Seasoning Issues
It still doesn't look like anyone's figured out seasoning problems for FHA (or VA) loans. One strategy is just to move out of the way and make a little money by completing the A-to-C transaction. Another way (pushed by Jason Medley & Nathan J.) is to refer these buyers to bankers who don't have seasoning issues. Jason & Nathan stipulate on thier listing that any potential buyer must prequalify with their bankers. This gives them a backup plan in case the buyer's lender (FHA or otherwise) has a seasoning issue.
How do you find these buyers? Refer to one of my earlier posts where I pasted Jason Medley's video on this very subject.
Turning Over New Rocks
We as investors are always looking for new ways to find homeowners in distress. One of the new ways discussed was to work with short sale brokerages. Who knew there were brokerages out there that only do short sales.....and close a very high rate of them. We, as investors, need to make friends with these realtors and capitalize on all the marketing dollars these firms are spending to get distressed homeowners to call.
Elevator Speech to Realtors
We talked about some ways to get realtors on board with what we're trying to do. Personally, I've had luck lately by positioning things something like the following...
--You can either be a realtor that lists short sales and then tries to find an end buyer OR you could be a realtor who brings an investor to the table from Day-1 to get the deal closed quickly. Which is more powerful?
The Magic Folder
We talked about the "magic folder" I give to the lender's BPO agent and some other content ideas that may be helpful to include. I've now given this to three BPO agents and believe it's been extremely successful in getting the BPO to come out low. Look back a few posts on the blog to see what is included in this folder and how to deliver it.
What to Do with Ugly Properties
Dave brought up the question regarding what to do with properties needing to be rehabbed that an end-buyer's lender won't finance. In this environment, most lenders don't want to risk taking back an unmarketable property into their portfolio. Dave threw out the idea of finding investors to finance your purchase and rehab costs (therefore not a quick-turn). Because you're buying the property so far below market value, the loan-to-value should be low enough to attract the attention and meet the requirements of investors.
That's all I can remember right now, we'll have someone take notes next time. Too much good stuff not to record.
When to List Property as Seller/Owner
We had some discussion about when and how to switch an existing listing on the MLS over to your name as the seller/owner. I think we all agreed that after the BPO was completed (possibly even when your offer is countered) was the ideal time to switch the listing over to your name. You do this by having the existing listing agent withdraw the MLS listing and then relist it with your name as the seller/owner.
When to List on MLS
This is a balancing act that must be evaluated on a house-by-house basis. The key is having a very good idea on the 30-day quicksale value of the house. If you know this, you know what price to list the property at. Why list the property at this price? Because you want offers flowing in the second you list it to capitalize on the "newness" and excitement when a house first gets listed.
Nathan J. (aka The Short Sale Kid) insists that you should list it on the MLS quickly to best gage the market value of the house and give it as much time as possible to get offers. You then simply counter and manage any offers that are submitted using a weeding out process to ensure the buyers will "stick" (more on this in another post). The challenge in listing the property so early that your listing gets stale while you're negotiating 2-3 months or longer. This is the balancing act you must walk based on the marketability of the property and your comfort level in the 30-day quicksale price.
Seasoning Issues
It still doesn't look like anyone's figured out seasoning problems for FHA (or VA) loans. One strategy is just to move out of the way and make a little money by completing the A-to-C transaction. Another way (pushed by Jason Medley & Nathan J.) is to refer these buyers to bankers who don't have seasoning issues. Jason & Nathan stipulate on thier listing that any potential buyer must prequalify with their bankers. This gives them a backup plan in case the buyer's lender (FHA or otherwise) has a seasoning issue.
How do you find these buyers? Refer to one of my earlier posts where I pasted Jason Medley's video on this very subject.
Turning Over New Rocks
We as investors are always looking for new ways to find homeowners in distress. One of the new ways discussed was to work with short sale brokerages. Who knew there were brokerages out there that only do short sales.....and close a very high rate of them. We, as investors, need to make friends with these realtors and capitalize on all the marketing dollars these firms are spending to get distressed homeowners to call.
Elevator Speech to Realtors
We talked about some ways to get realtors on board with what we're trying to do. Personally, I've had luck lately by positioning things something like the following...
--You can either be a realtor that lists short sales and then tries to find an end buyer OR you could be a realtor who brings an investor to the table from Day-1 to get the deal closed quickly. Which is more powerful?
The Magic Folder
We talked about the "magic folder" I give to the lender's BPO agent and some other content ideas that may be helpful to include. I've now given this to three BPO agents and believe it's been extremely successful in getting the BPO to come out low. Look back a few posts on the blog to see what is included in this folder and how to deliver it.
What to Do with Ugly Properties
Dave brought up the question regarding what to do with properties needing to be rehabbed that an end-buyer's lender won't finance. In this environment, most lenders don't want to risk taking back an unmarketable property into their portfolio. Dave threw out the idea of finding investors to finance your purchase and rehab costs (therefore not a quick-turn). Because you're buying the property so far below market value, the loan-to-value should be low enough to attract the attention and meet the requirements of investors.
That's all I can remember right now, we'll have someone take notes next time. Too much good stuff not to record.
Friday, January 9, 2009
Items to Bring to BPO Appointment
Wondering what to bring to your BPO appointment? Me too, but I just had one today that I thought went very well so I thought I'd share.
First, some background info...
BPO's are now often ordered the day the lender receives the short sale package, before a loss mitigator is even assigned to your account. They do this to streamline things for the the loss mitigator so he/she is all set to go once they get assigned. Once a BPO agent is called, they try and make an appointment within 24 hours. As my BPO agent put it, you get the call at 1pm and then at 3pm you get an email asking if it has been completed yet.
My Story...
The BPO agent assigned to my case was a really nice guy who called me yesterday trying to schedule an appointment for today. I followed SREC's coaching and agreed to the appointment but made it seem like I was doing him a favor. I told him the owner usually needs much more notice but I'll see what I can do. I waited 10 minutes, called the guy back and told him I convinced the owner to let him in the house. The guy was grateful. For all those keeping score at home, that's Jordan +1.
The appointment was to take place at 3:30pm today, however, the BPO agent called me a few minutes early and told me he would be late because of traffic. Again, I made it seem like I was doing him a favor by saying I had to cancel an appointment, but I would stay and wait for him because it was important the BPO get done (of course, I didn't really have an appointment to cancel). He showed up around 4pm, apologized for being late, and thanked me for canceling my appointment so he could get in the house "for 10 minutes, just to take pictures of every room". Score that Jordan +2.
Again, using SREC's suggestions, I started to plant the seed while standing on the driveway before we even went into the house. I said "Did the lender tell you the situation with the homeowner who owns this house?" He replied, "No". I said, "The house is in preforeclosure, it's a really sad and unfortunate situation." I then went on to dramatically tell him the sad story of the homeowner, "business failed, divorce, husband took all the $ leaving a single mom with 3 kids to raise". He started to empathize for the homeowner. Score Jordan +3.
I then gave him a manilla folder with a bunch of documents designed to make his life easy. My basic comments were that the lenders already have all this information but I thought I'd pull it together for you so you know what they're looking at. He was pleasantly surprised, thanked me, and put it in his car so he wouldn't forget it. Score that Jordan +4.
The contents of this folder were the following:
1) MLS listing of subject property
2) CMA with low comps
3) Independent BPO I had already done on the property
4) Property Summary Report
- This is a report I put together after getting some ideas from some of the paperwork the IRS requires to get a property discharged from an IRS lien. It's basically a letter intended to give a quick and accurate account of the current conditions of the subject property and the circumstances regarding its present owner. I addressed it to the lenders and wrote it in a very independent, objective voice.....kind of like, here are the facts. It covers a lot of ground and basically does all the hard work for me (unfortunate situation with homeowner, property not selling, finally an offer on the property, property needs major repairs, etc.)
5) Repair estimates (generated with HammerPoint)
6) Hardship letter
7) Map of the REOs and preforeclosures in the immediate area (generated by RealQuest)
8) Map of the registered sex offenders in the immediate area (info from megan's law)
- If you've never looked before, you'd be surprised how many registered sex offenders are in every community. I made a map with a house icon for the subject property and sprinkled icons that looked like men at their reported addressed. When I showed the BPO agent this map, I just said that my company is asked to put together all kinds of things like this for lenders because consumers do their research and know everything about a house. He wasn't surprised.
Anyway, I then left him alone to take pictures stopping him only occasionally to take note of some important repair areas the homeowner had told me about (I don't want him to miss these areas). Other than that, I just tried to make conversation about anything other than the house so it wouldn't seem like I had any real interest in what he was doing. When he was finished, I tried to close our conversation by redirecting his focus back on the homeowner's situation and away from the house (per SREC coaching) by saying: "The seller is really in distress and will appreciate the time and effort you put into this evaluation". He left satisfied and said he'd turn it around in 24-48 hours.
I don't know about you, but I thought it went almost TOO well. Jordan +4, BPO agent happy and satisfied. Well have to wait and see. I plan on emailing him a thank you note tomorrow and calling him on Tuesday to try and find out the BPO number he came up with. If he doesn't give it to me, I may ask him to come out and do another BPO on the property for me :-). We'll see, that's pretty balzy.
Anyway, that's my story. Hope you all got something from it and wish me luck. I'd love to hear your thoughts/ideas on this approach and some of your stories.
First, some background info...
BPO's are now often ordered the day the lender receives the short sale package, before a loss mitigator is even assigned to your account. They do this to streamline things for the the loss mitigator so he/she is all set to go once they get assigned. Once a BPO agent is called, they try and make an appointment within 24 hours. As my BPO agent put it, you get the call at 1pm and then at 3pm you get an email asking if it has been completed yet.
My Story...
The BPO agent assigned to my case was a really nice guy who called me yesterday trying to schedule an appointment for today. I followed SREC's coaching and agreed to the appointment but made it seem like I was doing him a favor. I told him the owner usually needs much more notice but I'll see what I can do. I waited 10 minutes, called the guy back and told him I convinced the owner to let him in the house. The guy was grateful. For all those keeping score at home, that's Jordan +1.
The appointment was to take place at 3:30pm today, however, the BPO agent called me a few minutes early and told me he would be late because of traffic. Again, I made it seem like I was doing him a favor by saying I had to cancel an appointment, but I would stay and wait for him because it was important the BPO get done (of course, I didn't really have an appointment to cancel). He showed up around 4pm, apologized for being late, and thanked me for canceling my appointment so he could get in the house "for 10 minutes, just to take pictures of every room". Score that Jordan +2.
Again, using SREC's suggestions, I started to plant the seed while standing on the driveway before we even went into the house. I said "Did the lender tell you the situation with the homeowner who owns this house?" He replied, "No". I said, "The house is in preforeclosure, it's a really sad and unfortunate situation." I then went on to dramatically tell him the sad story of the homeowner, "business failed, divorce, husband took all the $ leaving a single mom with 3 kids to raise". He started to empathize for the homeowner. Score Jordan +3.
I then gave him a manilla folder with a bunch of documents designed to make his life easy. My basic comments were that the lenders already have all this information but I thought I'd pull it together for you so you know what they're looking at. He was pleasantly surprised, thanked me, and put it in his car so he wouldn't forget it. Score that Jordan +4.
The contents of this folder were the following:
1) MLS listing of subject property
2) CMA with low comps
3) Independent BPO I had already done on the property
4) Property Summary Report
- This is a report I put together after getting some ideas from some of the paperwork the IRS requires to get a property discharged from an IRS lien. It's basically a letter intended to give a quick and accurate account of the current conditions of the subject property and the circumstances regarding its present owner. I addressed it to the lenders and wrote it in a very independent, objective voice.....kind of like, here are the facts. It covers a lot of ground and basically does all the hard work for me (unfortunate situation with homeowner, property not selling, finally an offer on the property, property needs major repairs, etc.)
5) Repair estimates (generated with HammerPoint)
6) Hardship letter
7) Map of the REOs and preforeclosures in the immediate area (generated by RealQuest)
8) Map of the registered sex offenders in the immediate area (info from megan's law)
- If you've never looked before, you'd be surprised how many registered sex offenders are in every community. I made a map with a house icon for the subject property and sprinkled icons that looked like men at their reported addressed. When I showed the BPO agent this map, I just said that my company is asked to put together all kinds of things like this for lenders because consumers do their research and know everything about a house. He wasn't surprised.
Anyway, I then left him alone to take pictures stopping him only occasionally to take note of some important repair areas the homeowner had told me about (I don't want him to miss these areas). Other than that, I just tried to make conversation about anything other than the house so it wouldn't seem like I had any real interest in what he was doing. When he was finished, I tried to close our conversation by redirecting his focus back on the homeowner's situation and away from the house (per SREC coaching) by saying: "The seller is really in distress and will appreciate the time and effort you put into this evaluation". He left satisfied and said he'd turn it around in 24-48 hours.
I don't know about you, but I thought it went almost TOO well. Jordan +4, BPO agent happy and satisfied. Well have to wait and see. I plan on emailing him a thank you note tomorrow and calling him on Tuesday to try and find out the BPO number he came up with. If he doesn't give it to me, I may ask him to come out and do another BPO on the property for me :-). We'll see, that's pretty balzy.
Anyway, that's my story. Hope you all got something from it and wish me luck. I'd love to hear your thoughts/ideas on this approach and some of your stories.
Wednesday, January 7, 2009
Conference Call Recap 1/5/09
From now on, I thought it would be helpful if someone posted a recap on the blog of each conference call so those who couldn't attend get the learnings and so our learnings every week are not lost. I suggest we all switch turns on doing the recap. I'll volunteer to do the first one from what I recall. Please add things I forgot. Sound good?
Recap of 1/5/09
Dealing with 2nd Mortgages
- Send the same paperwork to the 2nd mortgage lender as you did the 1st mortgage but with different cover letter.
- Tell the 2nd lender that the first mortgage has accepted (or is going to accept) considerably less than what's owed on the first mortgage and there is little funds available to other lien holders.
- However, it's best to play it nice and be the mediary. Don't rub it in their faces.
- Be the 2nd lender's hero by positioning yourself in their eyes as fighting for them to get more money from the 1st lender.
What Marketing is Working?
- I (Jordan) gave some results of different marketing lists and letters I've been using to market my business.
- Predictive NOD lists (pulled using a variety of credit sources and predictors) have not been successful. I find many of these homeowners are not anywhere near default and not at all motivated.
- Pre-NOD lists (30-60-90 day; homeowners behind in payments but not yet received NOD) can be successful. I got many calls from these lists and some people I may be able to work with. I think these lists would have been much more successful with a more clear (rather than vague) letter about what I do.
- NOD lists did not produce many calls. The calls I did get were all last ditch efforts with a trustee's sale scheduled within 1 week. Possibly a more creative letter would have been more effective.
*Note: I have recieved about 130 responses from the 1500 letters I sent out (almost 9%). Half of the letters said something like "I will buy your house" and half were from my realtor saying "I have a buyer who's interesting in buying your house". The former got more calls.
**Learning: I used a phone number on my letters that went straight to voicemail and emailed me when someone called. However, about 60% of callers did not leave a voicemail. If they had called my cell phone, at least I would have had a chance to speak to 60% more homeowners.
Effective places to find homeowners in default
- Several people (including myself) seem to have had some success with subscription-based investor/home posting websites. I'm guessing 95% of investors aren't willing to pay a little to get access to such websites. This leaves the door open. My experience is that most of these people have never been called.
- Most cities offer homeowners relief information and services one Saturday a month outside the City Housing Division. This can be a great place to find homeowners seeking assistance.
- Mortgages brokers. They get called every day from people who want to refinance their home but can't because they have no equity. These people drop off their radar but can easily be referred to you.
- Real estage agents with existing short sale listings. Keep trying, many are skeptical. I've personally found several agents who will probably give their next short sale property to me as a result of a 15 minute conversation over coffee.
Influencing the BPO
- Think of the things that would completely turn you off from buying a house if you were the end buyer and then do some research on the Web to find these things in your property's area.
- Sexual predator lists
- Narcotics anonymous meetings
- Sober living housing
- Crime indexes or recent crime reports
- You also might want to remind the BPO agent of the new law that went into effect Jan. 1 about it being illegal for BPO agents to inflate a BPO, force the property into foreclosure, and then hopefully get an REO listing (see the blog posting).
I know there was MUCH more we discussed, but that's all my exhausted mind can remember right now. Please add to this post by commenting on it. Thanks!
Recap of 1/5/09
Dealing with 2nd Mortgages
- Send the same paperwork to the 2nd mortgage lender as you did the 1st mortgage but with different cover letter.
- Tell the 2nd lender that the first mortgage has accepted (or is going to accept) considerably less than what's owed on the first mortgage and there is little funds available to other lien holders.
- However, it's best to play it nice and be the mediary. Don't rub it in their faces.
- Be the 2nd lender's hero by positioning yourself in their eyes as fighting for them to get more money from the 1st lender.
What Marketing is Working?
- I (Jordan) gave some results of different marketing lists and letters I've been using to market my business.
- Predictive NOD lists (pulled using a variety of credit sources and predictors) have not been successful. I find many of these homeowners are not anywhere near default and not at all motivated.
- Pre-NOD lists (30-60-90 day; homeowners behind in payments but not yet received NOD) can be successful. I got many calls from these lists and some people I may be able to work with. I think these lists would have been much more successful with a more clear (rather than vague) letter about what I do.
- NOD lists did not produce many calls. The calls I did get were all last ditch efforts with a trustee's sale scheduled within 1 week. Possibly a more creative letter would have been more effective.
*Note: I have recieved about 130 responses from the 1500 letters I sent out (almost 9%). Half of the letters said something like "I will buy your house" and half were from my realtor saying "I have a buyer who's interesting in buying your house". The former got more calls.
**Learning: I used a phone number on my letters that went straight to voicemail and emailed me when someone called. However, about 60% of callers did not leave a voicemail. If they had called my cell phone, at least I would have had a chance to speak to 60% more homeowners.
Effective places to find homeowners in default
- Several people (including myself) seem to have had some success with subscription-based investor/home posting websites. I'm guessing 95% of investors aren't willing to pay a little to get access to such websites. This leaves the door open. My experience is that most of these people have never been called.
- Most cities offer homeowners relief information and services one Saturday a month outside the City Housing Division. This can be a great place to find homeowners seeking assistance.
- Mortgages brokers. They get called every day from people who want to refinance their home but can't because they have no equity. These people drop off their radar but can easily be referred to you.
- Real estage agents with existing short sale listings. Keep trying, many are skeptical. I've personally found several agents who will probably give their next short sale property to me as a result of a 15 minute conversation over coffee.
Influencing the BPO
- Think of the things that would completely turn you off from buying a house if you were the end buyer and then do some research on the Web to find these things in your property's area.
- Sexual predator lists
- Narcotics anonymous meetings
- Sober living housing
- Crime indexes or recent crime reports
- You also might want to remind the BPO agent of the new law that went into effect Jan. 1 about it being illegal for BPO agents to inflate a BPO, force the property into foreclosure, and then hopefully get an REO listing (see the blog posting).
I know there was MUCH more we discussed, but that's all my exhausted mind can remember right now. Please add to this post by commenting on it. Thanks!
Monday, January 5, 2009
DRE Can Discipline Licensee for Inflating BPOs:
New Law Just Passed (from the Dept. of Real Estate)
Beginning on January 1, 2009, the DRE can suspend or revoke a real estate license if the licensee generates an inaccurate opinion of value (Broker Price Opinion or BPO) for a short sale of residential real property to manipulate the lender to reject the short sale or to acquire a financial or business advantage, such as obtaining a listing agreement. This new rule aims to preclude a self-serving agent from inflating a BPO in hopes that the lender will reject the short sale, foreclose on the property, and give the BPO agent an REO listing. Senate Bill 1737.
This may be something you can use to your advantage at the BPO appointment. Can't hurt to ask the BPO agent if they know about this new law. More incentive for their BPO to come out low.
Beginning on January 1, 2009, the DRE can suspend or revoke a real estate license if the licensee generates an inaccurate opinion of value (Broker Price Opinion or BPO) for a short sale of residential real property to manipulate the lender to reject the short sale or to acquire a financial or business advantage, such as obtaining a listing agreement. This new rule aims to preclude a self-serving agent from inflating a BPO in hopes that the lender will reject the short sale, foreclose on the property, and give the BPO agent an REO listing. Senate Bill 1737.
This may be something you can use to your advantage at the BPO appointment. Can't hurt to ask the BPO agent if they know about this new law. More incentive for their BPO to come out low.
Thursday, January 1, 2009
Finding Lenders Without Seasoning Requirements
Check out this video Jason Medley just posted on YouTube.com regarding the need for short sale investors to proactively find lenders that don't have seasoning requirements. This can save your B-to-C transactions and I think it's a really smart strategy I plan to incorporate into my business tomorrow. Here's the link:
http://www.youtube.com/watch?v=JeGrA2rsj94
http://www.youtube.com/watch?v=JeGrA2rsj94
How To Stop a Trustee's Sale NOW
I trust you guys will tell me the truth....
Do I have a sign around my neck that says "Call me if you're a homeowner in default with a trustee's sale scheduled in less than a week?" If I do, then I must also have a sign on my back that says "Kick me because I'm going after leads that I can't save."
In the last 2 weeks, I've dealt with homeowners with a trustee sale scheduled the next day, in 2 days, in 3 days and now have another one in one day (tomorrow). Couldn't save the last 3 because the lender had already postponed the trustee's sale once without a payoff and was a little pissed off. Pretty much ran into a stonewall no matter what I said after putting on my best debater hat.......
"I have a very strong cash offer that can close in 15 days..."
"You're going to lose far more $$$$ if the property forecloses..."
"This homeowner is in serious financial hardship. Just lost his job, death, etc. and all he's asking is for you to consider the offer presented?..."
If you research articles/blogs on the Web, most experts say that there's almost nothing you can do if you get within a 5-day window of the trustee's sale. However, I've talked to investors who've said they've stopped them within the last hour so I know it's possible. Anyway, I remember Josh Cantwell saying one option is to have the homeowner file for BK and then pull the BK off the table within 21 days. Seems pretty drastic.
I have some ideas for my latest case (Trustee's Sale scheduled for tomorrow at 11am)...
Got the call yesterday (New Year's Eve) at 5pm from a letter I had sent out to a Pre-NOD list. Two guys living in a beautiful 3,200 sqft. Craftsman home they restored in a hip area of Pasadena. The realtor on the property (who also lives in the house) gave me a call as a last ditch effort because my letter said I wanted to "buy your house" and got their attention because it was handwritten and seemed sincere. He said the trustee's sale was scheduled for January 3 and was willing to give me a shot to save it. Of course, I later confirmed that the trustee's sale was scheduled for January 2 with Wells Fargo being closed on New Year's day. Just fantastic, right?
Side note: I'm pursuing most anything these days because I've now learned that: 1) you never know what might be a good opportunity until you spend some time investigating and 2) it's a good learning experience for me dealing with homeowners and trying to make something happen. Maybe there's a last minute niche I got going here :-).
Anyway, I met the guys at the house at 8PM last night (New Year's Eve). GREAT house that just got certified as a historic landmark by the City of Pasadena, terrible lot (about 100 sqft. bigger than the house), no garage and located on a busy street. The property has been listed on the MLS since July at a price of $1.495MM with not much interest.....go figure. My best guess for a 30-day quicksale value (based on the comps) is about $825K.
So what's up with the high list price? Turns out the homeowner owes $950K to Wells Fargo and then $250K to Countrywide and was thinking he could make some extra cash with the sale of the property and roll it into another renovation project. I guess he should have actually looked at what the market was bearing :-)......Although, there have been a handful of $1MM+ homes sold in the area in the last 6 months.
After having them ask a lot of questions, sign all the paperwork and make copies of everything, I didn't get out of there until 11:15pm - just in time to drive by all the crazies camping out on the street in their armchairs for the Rose Parade the next morning. Ran some low comps this morning to include with the paperwork and wrote a cover letter with the following plea:
"This is a formal request for a pre-foreclosure short sale on the above referenced property. A very strong cash offer has been submitted on the property and is attached, but there is a pending trustee’s sale scheduled for January 2, 2009. We are asking that you postpone the trustee’s sale so you can do your due diligence in reviewing and evaluating the attached offer.
The property has been certified as a HISTORIC LANDMARK BY THE CITY OF PASADENA who has expressed interest that it NOT be foreclosed upon if at all possible. However, it has lost considerable value because the City would not let it be converted back into a duplex, deemed the parcel of land a “substandard lot” due to its very small lot size (3,292 sqft.) and busy street location, and will not permit a garage on the property.
The offer on the house is by a company on the Board of the Pasadena Cultural Heritage & Preservation Committee who has support to see the house preserved. Please consider this when evaluating the trustee’s sale postponement.
The homeowner, XXXXX, diligently pursued a loan modification with Wells Fargo months ago and was given the impression a workout plan would happen. Only in the last few weeks, did the loan modification get declined leaving him little time to pursue a short sale. We now have a strong cash offer on the house, relative to recent comparable sold historic homes, which the homeowner has accepted."
All above is true. This is in addition to my "URGENT" message and circles all over the fax cover page. I faxed everything into Wells Fargo (who is closed today) this morning with an offer price of $675,500. I'll let you know what happens tomorrow by submitting a comment to this post. Wish me luck with this case and better luck in the New Year reaching clients earlier in the process :-).
Do I have a sign around my neck that says "Call me if you're a homeowner in default with a trustee's sale scheduled in less than a week?" If I do, then I must also have a sign on my back that says "Kick me because I'm going after leads that I can't save."
In the last 2 weeks, I've dealt with homeowners with a trustee sale scheduled the next day, in 2 days, in 3 days and now have another one in one day (tomorrow). Couldn't save the last 3 because the lender had already postponed the trustee's sale once without a payoff and was a little pissed off. Pretty much ran into a stonewall no matter what I said after putting on my best debater hat.......
"I have a very strong cash offer that can close in 15 days..."
"You're going to lose far more $$$$ if the property forecloses..."
"This homeowner is in serious financial hardship. Just lost his job, death, etc. and all he's asking is for you to consider the offer presented?..."
If you research articles/blogs on the Web, most experts say that there's almost nothing you can do if you get within a 5-day window of the trustee's sale. However, I've talked to investors who've said they've stopped them within the last hour so I know it's possible. Anyway, I remember Josh Cantwell saying one option is to have the homeowner file for BK and then pull the BK off the table within 21 days. Seems pretty drastic.
I have some ideas for my latest case (Trustee's Sale scheduled for tomorrow at 11am)...
Got the call yesterday (New Year's Eve) at 5pm from a letter I had sent out to a Pre-NOD list. Two guys living in a beautiful 3,200 sqft. Craftsman home they restored in a hip area of Pasadena. The realtor on the property (who also lives in the house) gave me a call as a last ditch effort because my letter said I wanted to "buy your house" and got their attention because it was handwritten and seemed sincere. He said the trustee's sale was scheduled for January 3 and was willing to give me a shot to save it. Of course, I later confirmed that the trustee's sale was scheduled for January 2 with Wells Fargo being closed on New Year's day. Just fantastic, right?
Side note: I'm pursuing most anything these days because I've now learned that: 1) you never know what might be a good opportunity until you spend some time investigating and 2) it's a good learning experience for me dealing with homeowners and trying to make something happen. Maybe there's a last minute niche I got going here :-).
Anyway, I met the guys at the house at 8PM last night (New Year's Eve). GREAT house that just got certified as a historic landmark by the City of Pasadena, terrible lot (about 100 sqft. bigger than the house), no garage and located on a busy street. The property has been listed on the MLS since July at a price of $1.495MM with not much interest.....go figure. My best guess for a 30-day quicksale value (based on the comps) is about $825K.
So what's up with the high list price? Turns out the homeowner owes $950K to Wells Fargo and then $250K to Countrywide and was thinking he could make some extra cash with the sale of the property and roll it into another renovation project. I guess he should have actually looked at what the market was bearing :-)......Although, there have been a handful of $1MM+ homes sold in the area in the last 6 months.
After having them ask a lot of questions, sign all the paperwork and make copies of everything, I didn't get out of there until 11:15pm - just in time to drive by all the crazies camping out on the street in their armchairs for the Rose Parade the next morning. Ran some low comps this morning to include with the paperwork and wrote a cover letter with the following plea:
"This is a formal request for a pre-foreclosure short sale on the above referenced property. A very strong cash offer has been submitted on the property and is attached, but there is a pending trustee’s sale scheduled for January 2, 2009. We are asking that you postpone the trustee’s sale so you can do your due diligence in reviewing and evaluating the attached offer.
The property has been certified as a HISTORIC LANDMARK BY THE CITY OF PASADENA who has expressed interest that it NOT be foreclosed upon if at all possible. However, it has lost considerable value because the City would not let it be converted back into a duplex, deemed the parcel of land a “substandard lot” due to its very small lot size (3,292 sqft.) and busy street location, and will not permit a garage on the property.
The offer on the house is by a company on the Board of the Pasadena Cultural Heritage & Preservation Committee who has support to see the house preserved. Please consider this when evaluating the trustee’s sale postponement.
The homeowner, XXXXX, diligently pursued a loan modification with Wells Fargo months ago and was given the impression a workout plan would happen. Only in the last few weeks, did the loan modification get declined leaving him little time to pursue a short sale. We now have a strong cash offer on the house, relative to recent comparable sold historic homes, which the homeowner has accepted."
All above is true. This is in addition to my "URGENT" message and circles all over the fax cover page. I faxed everything into Wells Fargo (who is closed today) this morning with an offer price of $675,500. I'll let you know what happens tomorrow by submitting a comment to this post. Wish me luck with this case and better luck in the New Year reaching clients earlier in the process :-).
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