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.