HELP - Your Suggestions??

Question

Hi there,

Question to the forum. I've a got a distressed seller who has been given the option to either short sale, deed in lieu or catch up on payments (worth around $16K to catch up). Bottom line he wants to short sale and get rid of it.  From a wholesaler perspective, I'm a little green to this approach so I'm just curious what initial course of action would you take in order to move this property off his back. Any suggestions or ideas would be helpful.

Thank you,

James

Jorge Vega · Answer

@James Abuan I think I need more information. How much is the home worth and do you know how much is owed against the property? The short sale in my opinion is the best option and also seems to be the what the seller wants.

It can be really challenging to deal with a mortgage servicer if you have never worked with them before or are not very versed in Short Sales.

This could help your seller potentially get financial assistance to relocate as well. Get Authorized with the servicer and initiate the Short Sale. How you initiate the process will depend on the Mortgage servicer some servicers use online platforms to process their files others are just call and go.

In regards to wholesaling the deal, it is very possible to do this but you would need to be careful these types of things can be frowned upon by a lot of servicers and depending on how its done it could be a violation.

Anthony Davis · Answer

Hi James,

I'm not an attorney; and my suggestions here are not legal advice.

After you have the purchase contract signed with the seller(s), you will have some rights concerning the subject property. Before you have a purchase contract signed with the seller(s), be careful of how you represent yourself to other parties. Your actions could be outside the law if you plan to talk to others on behalf of the seller(s), or the subject property. In addition, the seller(s) will have to sign a 'release of mortgage information' document, so that it can be sent to the mortgagor. Without it, it is unlikely that you will be successful when attempting to communicate with the mortgagor.

Wholesalers can utilize transactional funding to simplify the parties involved before the end-buyer closes the transaction on the tail end of the deal. Transactional funding can be used if you do not want to lose the subject property, because an end-buyer is unable to close the deal by a certain date. The wholesaler would secure funding to buy the subject property, so that the end-buyer could purchase from the wholesaler in the near future. Extended transactional funding will occur 'holding costs' before the second close. You may want to do your own research outside this platform. Acquisition strategies will be based on the investor, the seller(s), the property, and sometimes, the lender.

I am not aware of the wholesale contract that you are referring. A general acceptance with the seller(s) via a signed purchased contract, offer to purchase, purchase and sale, etc will suffice. A real estate attorney can let you know if wholesaling is an option in the state of the subject property. Additional phrases need to be added into the contract to provide an exit strategy for you. You may want to do some research outside of this platform. I hope I have said something to help you.

James A. · Answer

Hi @Anthony Davis,

See my answers to your questions.

1) His lender with Wells Fargo has given those options to either SS, deed in lieu and come up with the back payments.

2) Hasn't moved forward with the mortgager yet. That's why he called me, but his commitment is to pursue short-sale.

3) I personally wouldn't be capable of paying the payments from my end. That's why I'm attempting to see if I can wholesale this out to an end buyer.

4) I definitely have a line of potential buyers through my line of network.

5) As a wholesaler, why would I need transactional funding if I am attempting to wholesale the property to a potential buyer? *As a side a note, he does have an auction date of 2/26/15 before going into auction. What are the benefits to leveraging LENDING HOME?

6) From a wholesaler perspective, you want to:...

A) Can I use a general wholesale contract to setup with attorney? Or does the contract have to be structured specifically with the attorney? B) As a wholesaler, were you referring to negotiate a price with the seller or bank to create a win-win situation?; How would you DOUBLE-CLOSE?

In general, either way I can still attempt to setup a wholesale contract with the seller and then proceed with the course of action to work with an attorney and broker? Is that correct?

James A. · Answer

Hi @Ted Akers,

So, why can't someone like myself approach the bank as a wholesaler (or another party consultant) without being a licensed realtor? Not to say I wouldn't be opposed but would have to eventually. I can certainly find one through my local REIWA and other networks if I need to find a short sale realtor.

But, just to confirm I can still put the property under contact with the seller either way? Is that correct? Is there a specific contract from a wholesaler perspective that needs to be structured with a realtor and attorney? Or just put it under contract first then go find the broker and attorney?

As a side note, the seller already has an auction date till 2/26/15 before they will foreclose. Anything here that would restrict me from helping the seller to move the property as a wholesaler?

Ted Akers · Answer

Hello @James Abuan,

The bank holding the mortgage will require that a realtor present the short sale offer to them.  Short sales 1-3 years ago could be very profitable because the banks were more willing to take deeper discounts.  Today it is more of a challenge to get enough of a discount to make a flip work.  That said though, deep discounts are difficult to find in most markets from most sources, and I would pursue it because you have a willing client at the table.

If you do not have a very good short sale realtor I would try to contract with the homeowner then find a short sale realtor.  You want to find a very experienced short sale realtor that is on board with your concept of buying and reselling.  Remember, you are bringing the deal to them.  Many are so focused on the current as-is market value.  You want one on your side that is focused on how to justify a fairly deep discount understanding that this is a distressed asset - not your cleaned up, repaired, ready of immediate occupancy type of property typically listed on the MLS.  You want a very experienced one because the process, and especially the price negotiation, can be time consuming and at times frustrating, with the bank taking months to approve the short sale.  However, your seller will be able to stay in the property while the short sale is underway, unless or until the bank decides to foreclose.

Anthony Davis · Answer

Hi there,

1) Who has given the distressed seller the option to either short sale, deed in lieu or catch up on payments (worth around $16K to catch up?)

2) If the distressed seller has not yet agreed to move forward with the mortgager to implement one of the above mentioned options, you have a 'window of opportunity.'

3) Choose a strategy to help the distressed owner. Are you capable of paying the payments that are behind for the distressed seller? (If so, contact a REAL ESTATE ATTORNEY in the city of the subject property to see if you can acquire the property via contract; and have the current owner 'rent to own' the property BACK from you_based on a method that you & your attorney decide.) The attorney will inform you of Dodd-Frank, and any other concerns.

4) Do you currently have capable buyers who are ready to buy properties, such as the subject property, in the area of the subject property? If not, locate potential buyers as you work on contracting the property.

5) Research transactional funding, extended transactional funding. This funding can be used to buy the property out-right. If the property enters the 'short-sale' category, there will be additional rules to abide by. If you use transactional funding, use it before the property enters 'special conditions', such as pre-foreclosure, foreclosure, etc, to keep things simple. RESEARCH & CALL the folks at LENDING HOME with questions about this particular situation.

6) From a wholesalers perspective, you want to:

A) Contract with the help of your attorney; then sell your contract interest to an end-buyer. B) Negotiate a purchase price that creates a win-win-win situation; Sign a contract with the seller(s); then, prepare to DOUBLE-CLOSE.

Brainstorm your potential strategies. Consult with your REAL ESTATE Attorney on acquisition options. If needed, consult with lending home. This company has an UPFRONT application FEE_$199.00?; however, they are dynamite to utilize when investing in real estate.

May Your Efforts Be Rewarded!

Anthony

Scott Schultz · Answer

Unless the short is pre approved its way to time intensive to pursue these, as a broker that has worked many SS deals, i look for other outlets, and only look at shorts if ive got no other leads, and everything else is done, ,y books are buttoned up, my garage is clean,  and the windows in my house are washed, and still no prospects, then i may start looking at them,

James A. · Answer

So, would I need to get a short sale broker involved either way?  Should I attempt to lock it under contract first then have a SS broker involved?

Christopher Brainard · Answer

@James Abuan

While I'm not familiar with the laws in Washington, generally speaking, banks require short sales be posted in the MLS in order to obtain the best price. Unless you are a licensed real estate agent, you won't be able to list the property. There is always the possibility you can lock it up under contract (if you have the ability to close) and try to wholesale it, but generally speaking prices on the MLS are well above what investors are targeting for wholesale deals.

-Christopher