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Updated over 14 years ago, 07/26/2010
Can a short sale be wholesaled???
I saw a listing on the MLS for a property that is accepting all short sale offers. My first question is...can a short sale be wholesaled? If so, do I have to tell the lender or bank that I plan to wholesale the property? I'm still trying to get my first deal under my belt to wholesale and I'm facing many challenges. Any help that you can give...would really make my day!!!
Thank you, :help:
There are a lot of people in this forum that seem to make short sale wholesales happen.
However, I do short sales from the agent side, and i don't see it happening. Especially for a new investor.
Yes you can wholesale shortsales. It's what I do. As far as telling the lender, that is your choice. But IMHO i would recommend being upfront with all parties about what you do and if they dont like it...NEXT!
Now obviously I dont say, " I am going to do a simultaneous closing and make $50,000 as soon as we close hahaha!"
But I do ask them what are their seasoning requirements if any, and if I decided to sell the house would they give me any issues about it. 99.9% of the time they say "after you close we want nothing to do with the property and we don't care what you want to do with it."
Now there was ONE incident where someone told me " If we find out your flipping it we will flag your name and we won't allow you to do any more shortsales with us."
Do I believe them? NO! These people have too much going on to track you down and find out what you did with the property after they already closed. And even if they do, it is an easy problem to solve. Find a partner and use their name to buy it!
Now I do agree with David, if you are new don't try this on your own...too many things can go wrong. I suggest you find an investor who is experienced in shortsales to help you first.
Good Luck!
We wholesale short sale properties all the time. But, we first buy the property and then sell it later that same day. We also do not get the properties from the MLS. We go directly to the homeowner. Also the end buyer might have issues with seasoning. The only way is to be upfront from the start.
I also must agree, this is not a process that you will want to get into without either experience or help from someone whom has the experience. But by all means YES you can!!!
I would like to learn how to do this type of wholesale. Is their someone that is willing to mentor me for the first couple? Send me a PM
Also the end buyer might have issues with seasoning.
Amen. I'm guessing that statement encompasses 95% of short sale wholesale problems.
I would also like more info on how to wholesale or assign shortsales if anyone care to pm me.
Actually "seasoning" is not really a problem to often. If you state from the beginning No Fanny/Freddy it wipes out most of the problems.
If ya'll are interested in the steps, I will be more than happy to help, but on a public offering only. That will ensure that multiple people can get the info at a time, not just one/two.
Thank you so much for all of the replies. I saw the listing and was curious if this could be done. I really would rather NOT start out w/ something that would be too challenging, but I know this is the place to ask any questions. I've been looking for a mentor in the Norfolk, VA area and still have no luck. So...thank you for your valuable information!!
Crosswind, I would certainly be interested in hearing anything you have to say about it, and it seems that others would be also.
I'm just trying to get started in this entire thing myself, and I can certainly understand why the more experienced folk would discourage the unexperienced from using this strategy, but my concern is what happens if I market to motivated sellers, and I get a call that is a perfect candidate for this? Then what? Either let the deal pass, or learn quickly and carefully. Speaking only for myself, I'd have a hard time letting any potential deal pass, for a number of reasons, not the least of which is how desperate I am to get my first deal out of the way. So, with that being said, I'd appreciate any info I can get.
Jeff
Okay, so where would you like for me to begin?
1) How we market to attract homeowners in preforeclosure.
2) What to do to get the homeowner on your side.
3) The complete steps we take in the short sale process.
Just let me know where to begin and I will tell the steps.
Hello CrossWind,
the complete steps for #'s 1-3. Thanks
Can the contract be assigned once the offer is accepted?
Well, I guess the issue is why are new investors discouraged from trying this strategy? What is the difficulty compared to a normal wholesale? Is it just a matter of finding the money to close on the short sale, and then being able to sell instead of assign to the end buyer? If so, then it would seem that the only problem is that the beginner trying this better make darn sure that he has a deal, but that doesn't seem like a problem to me because the hard money lenders that I've spoken to have said that they analyze the deal themselves, and wouldn't lend in the first place if they don't like it.
Is it just a matter of seasoning? Because I was only planning on wholesaling to end buyers using hard or private money anyway, so I don't see the issue there. The seasoning issue becomes their problem, and I'd imagine they would know how to deal with it.
Basically, what is it that I should be aware of that can make doing it so difficult that it's been suggested that a beginner should think twice?
I have found what seems to be a good short sale candidate, but I have no clue how to perform a short sale. I too am interested in crosswind's strategy.
I want to answer a few questions before I start.
Earl Gray- I have in fact assigned one(1) contract. It was through Citi Residential. I was told that the assignment fee could not exceed 4% (which happend to be the amount they would allow to go to a realtor. We don't use a realtor to buy so no commissions were coming out.) It did work, but I have never even tried it since. I hear people say you can/can't. I only know it did work for us once.
Jeff Z- I don't know why people tell new investors not to try short sales. I do not think they are hard. Just takes time.
Note- We are not realtors. We buy properties through short sales. We close the deal than sale the property. We do not use realtors to purchase properties or find the homeowners. In fact, we wil not persue a deal if the property is listed.
1)Marketing to homeowners- We go online to our local clerk of the courts to get the filings of the lis pendens. EVEREYDAY. This info is the homeowners name/lender(s). We then go to the county property appraiser and use the name to get the property address. From there we send out a letter direct to the homeowner. It says, Hello________, I would like to talk to you about buying your home. If your are interested call__________. That is it! Then they call.
2) We first ask, Is the property listed with a realtor/ or are you working with a realtor? IF YES, than sorry we do not go that route, I am sorry for the waste of time. IF NO, than we tell them that we are an investment company that buys properties. We usually buy them trough "short sales." Are you interested in selling? If yes, I then tell the homeowner that I need to drive and look the property over. When is a good time for me to see the property? While I look over the property, I explain what a short sale is. I also tell them how it is not guaranteed that the lender will allow it, can't know without trying. Also, there is alot of paperwork that goes along with the short sale, are you willing to help gather all the needed paperwork? If YES to all questions, than I set an appaointment to come out and sign a contract and gather ALL the paperwork. I leave the homeowner a list of what is needed. And some other paperwork explaining what to expect and it also answers alot of other questions.
3) We return for the "contracts" visit. (Note, I call the day prior to the appointment and ask if they were able to get all the needed paperwork? IF not we go over why and how we can get it.) At the appointment, we sign the pruchase and sales agreement (here in Florida we use the FAR/BAR), and all the other paperwork is gathered. We then return and contact the lender that day. We then start the short sale process.
This is it for now, I will return later and give out more details. I truly hope that this will help. Please remember, this is how we do the process.
The next step that I will cover is the paperwork. We have a "common" list of paperwork that we have every homeowner fill out and aquire. Please note: some lenders will require other paperwork and some require that you use their forms.
The list is as follows:
Authorization to Release Information.- Lender will not talk to you without.
Hardship Letter.- Explains the hardship
Financial Worksheet.- It shows what moneys come in and where they go out.
Tax Returns- Two(2) years, most recent.
Pay Stubs- Two(2) most recent.
Bank Statement- Last two(2) months.
Contract- Purchase agreement.
HUD-1- Get from your title company.
We also have several that we have generated. That also are included in each Short Sale Package.
Affidavit- This is a list that speels out the steps of the short sale and also states that the homeowner is aware that they will get NO MONEY. And we also have in this, that the homeowner is allowing us to sell the property to a third party.
Estimated Repair Costs- We include this to justify the offer.
Also, if the homeowner does not have any of the items requested, we simple put a form in noting the missing items.
I truly hope that this is helping.
Crosswind!! This is a Great pointer for Beginners like me.... Thank you very much... This is beyond Help! ;-)
Cheers
Ram
Contacting the Lender(s):
1) call into the customer service dept. and request the fax number to send the Authorization to Release Info. We also request the short sale requirements at that time. Some lender(s) will tell you then and some will wait until your Release has been entered. We also request a Payoff. Most lenders will tell you it takes 48hours to input your release.
2) call back in 24hours. Check to see if the Release was entered. If yes, then get the fax number to send in the short sale package. Also ask for the phone/fax numbers for the short sale dept./ loss mitigation.
3) send in short sale package. Call to make sure they received the FULL package. Most lenders will tell you to wait for several days for the package to be entered into the system. Once the package is entered into the system, check to see if they need anymore paperwork.
4) tell the lender that they MUST call you to set up the BPO/Appraisal. When they set it up, be there.
5) after the BPO has been entered into the system than most lenders will assign a negotiator. Keep up with this person, check back OFTEN. They will either take the amount you have offered or they will counter.
6) the FUN really begins. Work back and forth with the negotiator till you both agree on an amount that is fair.
7) once an amount is agreed upon, get the lender to fax a statement on the release.
8) close the property.
These are the basic steps to a short sale. IF any questions arise, just ask...
Thanks crosswind, that is great.
I have read about short sales but never seen a nice list of the steps like that, much easier to understand.
Couple questions, does the bank at some point want to qualify you as a buyer, and what do they look for?
Thanks, Scott
S. Williams- Yes the Lender(s) only want a buyer that will buy. As of late, all of the lenders want to see either a letter stating that a mortgage has been preapproved or that the cash is ready. We purchase with cash, so we send out a letter showing that the funds are ready to close.
I was speaking with a person from Citi Residential the other week and he told me that they are now keeping a list of NONBUYERS. He stated that they will track investors that waste the time and get a short sale approved but never close. It sounds like a scare tactic to me. But I do trust what this guy says. He thus far has never led me the wrong way, but he also is trying everything to protect his company.
If you are wholesaleing the property, than there are several companies that will assist you with the funding of the first close. So that you are not using the end buyers money to close the deal, but buying the property and then selling it to a third party.
IF that didn't answer your questions, let me know.
Next I'll cover negotiating with the Lender(s).
1) If you have never negotiated with a business deal before, I reccommend to go to your public library and check out a book on this subject. The best part of this---- the book is FREE. I use the public library all the time. (I do want to note, that I am not affiliated in any way with any public library.)
2) The dollar amounts. Make sure with EVERY offer that you have proof to why this is a great offer. We send in estimated repair costs, info on listings in the area that are not selling, info about the down market in my area, and anything else that might help. (We do not send all of this at once, just as we need each time we counter.)
3) The person that taught me how to do this, told me that if your FIRST offer doesn't make you smile, than lower the amount. We offer PENNIES on the dollar to start off.
4) Have the ceiling amount ready. This is the MOST you are willing to pay. Above this you walk. Be prepared to walk.
5) Make the lender sweat. We will tell them after they counter that we must look over the offer. We will take a day or two. Ususally we know either we are going to counter or take the offer in a matter of minutes. But wait! I have waited before and in a day or two the negotiator called and lowered their offer due to them being worried. Once, I went out of town for something and when I got back I had a message to call back a lender. I called her back and she countered herself. The amount was lower than the offer that I had made that she turned down. How great was that!!!
6) Be honest- keep the facts to the truth. Enough said.
These are the basic steps to take. You will find, the more you do, the easier it gets. Than at some point it turns into a game.
I'd be interested in hearing about the companies that you mentioned... the ones that will fund the deals if you're doing a double close. Are you speaking of HMLs? Or are there companies doing these specifically for these purposes? Thanks in advance.
Hey Crosswind,
I wanted to say thanks for answering my question as well as providing this information on short sales.
Great Info !!! Thanks.
What secrets do you have in regards to getting the lender to give an extension. I have a buyer in place for a short sale that I just got my approval on thursday and they want to close in 2 weeks. Auction on 12/2. Just found out that buyer's lender is quicken loans and wants 12 months chain of title. Been told by a variety of lawyers in Ma that we would have not problem with double closings. Others said i would have to use transactional funding. Any tips? been informed that as a last resort for an extension to call banking div of the atty general and they might assist. also told to find some title issues to prevent closings.
Anne- The type of funding you are looking for is called "transactional funding". It is great, if you do not have the cash yourself. These companies let you "use" their cash for the day. A few items to note. You MUST have an end buyer in place. You must have everything ready to close.
You can use HML, but it will cost you more in the long run. Also check with your title company and make sure they will do the cosings.
I have a company that many of my associates have used and loved. We have used them once. I will gladly give you the name, just send me a PM. (Note- I am in no way affiliated with this company. Just have used them and know of many that have also used them with great sucess.)
Mark- There are No secrets in the short sale game. IF the buyers lender needs chain, you are between a rock and a hard place. DO you have any other buyers that will step up? As for getting an extension, some lenders will let you, some will not. I have found out, that if you ask for an extension, have an exact date. Just asking for an extension and saying, "can I get 3-4 weeks." Most will not go for that. But if you say, "we need until the ____ day to close." I have been allowed to do that.
Hope this all is helping..