Bank rejected offers,must step aside and sell to end buyer, how can I collect a fee for work done?

Question

I've been working with a homeowner since July.  It's a rental property in poor condition in a great neighborhood. He evicted his tenant for non payment and I marketed the house @ $99K.  (Assessed @ 145K) No takers, needs lots of work.  He owes $90 on the property.  He tried to do a loan mod but doesn't earn enough. So we decided to do a short sale.  I've put in 2 offers, (1st at $48K, 2nd @ $61K) both were rejected as too low and I was told that they would now "close my file". They want $75K for it. With the amount of work needed, I think an end buyer might go to $75-$80K  so that puts me out of the picture with a double close scenario. I don't want to see this guy foreclose and I would like to get the property sold.  Has anyone worked something out with an end buyer to get compensated for all of their work and delivering the deal but not actually participated in the closing?  This would be an A-C transaction. I've read about many possibilities for adding fees on the HUD but my lawyer's not too keen on that. Any suggestions from those with more experience?

Nick J. · Answer

If I'm not mistaken you can add a negotiation fee on the buyers side of the HUD1 to where they have to pay you. I think thats what a lot of processors do, we've got a few on this board so hopefully they'll chime in.

Something to also consider, if you have to walk, don't get hung up on not being able to get paid on the deal. Don't let greed get in the way of helping the homeowner. Sometimes you have to walk and that's all there is to it. I'm pretty sure I'm walking on a deal and letting my listing agent list it directly for the seller here by the end of the next week b/c the lender just isn't budging and I can't get an offer at the listed price. I can't jeopardize letting the seller foreclose just because I can't profit

Jonathan Rexford · Answer

Nick is dead on. What you can do is allow this thing to go straight to YOUR TEAM REALTOR. You work the file to get it closed for end buyer. Buyer can pay or you can get the realtor a nice bonus for your next deal. I have 2 going right now AS a Real Estate agent. That I am not going to get paid on. I took them both to approval letter and the corporate office where I hang my shingle stated they did not like the idea that I wear both investor and realtor hat. So I was handed my license back. In the mean time the files sat for a week. I am still working with my managing broker to get them closed as he knows nothing about the files. The reason I am doing it is because I am the one that established relationships with the SELLERS and I want to see it through. It is a little work. But I know that something will come out of it. Even if its a bottle of water.

James Ward · Answer

An item that has yet to be discussed is how getting the Seller a Buyer can help more than just collecting a fee.  See, when you help a property owner in foreclosure and get the property sold, they will tell people about you.  But when you explain that you will step aside to further assist, the referrals will come.

See, you have truly helped someone.  And believe me, from experience, the word will get out.  And this is the best marketing you will ever get.

Scott Hubbard · Answer

No one makes a better plaintiff than a homeowner who lost their home because an investor could not perform.  I try and complete every deal even if I take a loss.
          
          Nick has a great way of making a few dollars on by charging a fee to the buyer on the HUD.  You will need a fee agreement signed by the buyer in order to collect this fee.
          
          This is not always applicable, so another way is to get the listing agent (your team member) to pay you a portion of their comissions by charging them a negotiating fee.  Again, you will need a fee agreement for this.
          
          Lastly, if none of the above scenarios will work, just step aside and let the market decide if this property is marketable.  This way, you avoid any legal liability.
          
If you do not want to see the inside of a courtroom, then never attempt to cloud the title by using a quitclaim deed.

Scott Hubbard · Answer

After failing to convince the 1st to take a short (which was a stretch since it is really not a short sale at all) and realizing it is in the 7th year of a 15 year mortgage, I changed gears and looked for a seller financing candidate.

After the arrears are paid and a little sweat equity, the property will have equity since much of the arrears will go towards principal.

After three years of living in the property, the buyer must sell or refinance ("3 year call").  If the buyer stays in the property for three full years, there will be an additional 24K in equity not including appreciation (or depreciation for that matter).

Although i will not get paid for several years, though I do not mind since I am out of Pocket ZERO, there will be a payday somewhere down the road.

It is also a good deal for the buyer since he will stand to collect the $8K tax credit for himself and have instant equity after some minor repairs.

Justin S. · Answer

I agree with everyone on this post.  I have a few deal where I have had to step aside and allow an A-C closing.  I do it for the reasons stated above, but it also gives you added experience of negotiating a deal and will also help grow your business.  A lot of previous clients will refer future clients to you.  Almost all the properties I picked up in October were off referrals.

I should also add that I too have my clients sign a negotiations agreement with me as well.  I flat out tell them upfront that if I cannot make a spread I will continue to negotiate their deal and help them find a buyer.  It creates a win-win situation.  Even if I cannot make a few bucks, they will still refer others to me like I stated above.

Michael Quarles · Answer

Hello Y'all

This isnt a Short sale

Its a sub2 non equity deal seller financing using a wrap. 3 year call, add 18 % to the 99k add 1.25% to the underlying note... Sell this bad boy with 10k down plus arrears, sweat equity from the buyer for the repairs... And be done

I bet its a 28k turn and burn...

Happy house hunting...

Michael

Bill Gulley · Answer

That's good thinking on your feet Scott, good plan! These types of deals are sometimes the most gratifying, getting the underdog out from under a problem, fixing the palce up and getting it off the books for the lender and getting someone in the home that needs assistance. It's a win-win-win, and at a profit, another win! Bill

Gail Smith · Answer

Hi Rod, Micheal...sry so late in responding, I don't get on my favorite site [i]as often as I should!  
Rod...I wrote a blog about this experience...
go to: www.rightmoveproperties.blogspot.com if there's any interest! 
Micheal...interesting solution but I'm not well versed in creative financing yet...this house needs so many repairs that it needs to be sold for much less than what's owed.  That would change the wrap situation, wouldn't it.
To make a long story short...the owner filed for bankruptcy, which I discovered the day the bank accepted my offer of $65.9.  Once the bank heard that, the deal was off, the property was tied up in the court system. 
I'm considering going after it again, because I've heard that in spite of the bankruptcy, the property can be sold. The bankruptcy lawyer said I had to call the bank, the bank said I had to call the bankruptcy lawyer! Too funny, right?

Rod Marlow · Answer

I agree too..it's true that what goes around comes around..and you can turn a potential negative experience into a positive one by simply looking at it differently..I'm just doing my first deals now and these threads are full of wisdom....So may I ask..What became of the deal Gail?

Bank rejected offers,must step aside and sell to end buyer, how can I collect a fee for work done?

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