All Forum Posts by: Moe M.

That was awesome Scott! :D

Moe

Hey Joe:

Are you thinking of investing in short sales? Just curious.

Depending on the MLS market and their definition, it could simply mean that the bank gave a VERBAL nod on the short sale, but there's nothing in writing, as James had already mentioned. And also as James had said, this is where realtors will start listing the property on the MLS to attract offers -- in other words trying to get the highest offer -- not so great for investors.

Or could mean that there's actually a WRITTEN acceptance from the lender which spells out the terms (pretty much leaves no room for negotiations).

Either way if a BPO was already performed by the bank then it won't be very flexible for investors to come in and try and negotiate. So unless the bank approved a very attractive price (highly unlikely), then you're probably looking at or around retail.

Also working with listing agents on listed short sales can be challenging, but that's a whole other topic :)

Best regards.
Moe M.

Matt:

As Jon had mentioned about HELOCs or Refi's which in California makes it a "Recourse" loan, then yes BoA can come after you with a deficiency judgment for the difference.

BUT If this was just a Purchase Money loan (no refi or HELOC) then they cannot come after you for a deficiency judgment.

Scott Hubbard on this board made a good point about this -- that basically BoA is generically putting this on their acceptance letters to let the borrow know that they "may pursue" and "unless agreed otherwise or prohibited by law". In other words, if they can pursue a judgment they will pursue it.

At least they didn't hit you with a promissory note to close this deal.

Moe

H Mann:

Yes even if the property is listed with a listing agent, we have them add these as an addendum to the PA.

- Moe

Hi SunnyCA:

Good point on the lender contributing on the A-B commissions, assuming they're going to pay for this. When the lender gives an acceptance they stipulate what their minimum payoff is and it sometimes doesn't include commissions or closing costs or it's less than you hope, which then eats into the spread. Although we're going to try and justify getting 5-6% commissions, 2nd lien contribution, and seller concessions from the lender, but ultimately it's up to the lender and you still have to figure out the bottom line and work from there. This is also why the BPO is so critical because it is a major factor that the banks rely on in determining their net. So as investors our offers have to be low enough to accomodate for the fact that the lenders may or may not include convering certain costs.

We're working on a short sale now where the lender's acceptance doesn't include commissions, but there's enough spread to cover commissions so it still makes sense. We take the 1st lender's net, minus other liens (junior liens, tax liens, etc), minus commissions, minus closing costs, etc -- then we add in whatever concessions and commissions the lender is contributing and that's the number we work with to determine the spread.

Best regards.
Moe

In some states there are state-approved purchase agreements and some specific to short sales. I'd first check in PA to see if they have a short sale purchase agreement and look at the language to see if it gives you an out. The other thing you can do is put whatever date on that settlement line (which is meaningless since the lender has to approve), but make sure you have an addendum giving you an out. The other thing I'd have removed is "seller" from "within 30 days of lender and seller approval of short sale". If you enter into an agreement with the seller, then they don't need to approve the short sale, only the lender. Also make sure you don't give earnest money until 24-36 hours after written bank acceptance.

Although I know it's becoming taboo, what about an Option Contract? This would also serve your purpose.

Best regards.
Moe

Hazel:

Well it depends on the person -- although I know my response was agent-specific because Luckyone was asking about having buyer's agent bring the investor short sale listings. And my only point to that was IF you have a buyer's agent bringing short sales from a listing agent you are now eating pretty deep into profits. Assuming the investor is offering 2-3% commission to the A listing agent, 2-3% to the B-C listing agent (which could be the A listing agent for double dipping purposes) and 3% to the C buyer's agent -- that's 7-9% already and this doesn't include taking care your buyer's agent who found the A listing agent. Not very practical.

Well I'm delighted that "Orange County agents" expect to make 20-50% of a 3% commission (obviously), this is true in other markets as well. BUT, there are agents who are not making money right now and if an investor presented a business model that consisted of making $500 phone calls to prospect listing agents with short sales, I'm sure there'd be some agents willing to do that -- even in the land of the County of Oranges. Hell there are agents fighting to do $50 BPOs so I know there are agents or non-agents who'd be willing to call short sale listings to let them know how we can make them more money. I’m being a bit of smart-a$$ about the whole OC thing, but I used to live in Rancho Santa Margarita and your response came across a little snooty.

I don't recall mentioning that I negotiate the short sales myself. And I certainly don't think having an "adept" agent negotiate for me makes much sense either. Sorry, and no offense intended here, but agents are real estate sales professionals...last time I checked, not negotiators. I actually believe in doing business systematically and having the right people for the right job, therefore it is my opinion that agents and investors alike may want to outsource the negotiations to experienced negotiators.

Yeah we’re all about allowing the listing agent to double dip – as I said in my response to Luckyone, it’s an incentive to get them to send us all of their listings. Our system is very straight-forward and a win-win proposition for all parties. It’s a win for the listing agent because we do offer them the ability to double dip in the deal, we negotiate with the lender, we stay in the deal as buyers even if it takes several months, and use creative methods to overcome the challenges associated with short sales, which in turn frees up the agent to do what they do best: find more listings. It’s a win for us investors because now we have agents who are generally very good at farming neighborhoods and finding short sales bringing us deals that we can purchase and we can continue to close on more deals which is good for the economy.

Best regards.
Moe

This is verbiage we use courtesy of Old School:

1. This contract is contingent upon short sale approvals, acceptable to Buyer.

2. The Seller understands that he will receive NO FUNDS AT CLOSING.

3. Parties acknowledge that the purchase price has been initially based on an estimated negotiated debt at closing. During creditor negotiations, there may be several different purchase prices submitted by Buyer to the Lender(s)/Creditor(s) until a final discounted figure is accepted. Parties acknowledge their acceptance of the different figures and Seller agrees to authorize Buyer to prepare various negotiating offers with various prices without obtaining Seller’s signature or approval of each and every negotiating offer.

4. SELLER hereby grants the Buyer and or their representatives all of the necessary rights to immediately list for sale, market, negotiate and enter into a contract to lease or sell the property immediately to a third party for a profit. All documentation in connection with the foregoing will be made available at the Lender’s request.

5. Parties acknowledge that Seller may be asked by Buyer to sign a new or corrective contract for the resale of the property. Seller agrees to sign such contract should such signature be needed and requested by Buyer so long as such signature will not result in any financial gain for Seller and that such addition is for the purpose of demonstrating additional evidence as to the dissolution of all Sellers’ rights and interests in the property and to permit any MLS Listing.

Hope that helps.
Moe

We've decided to pretty much stop using option contracts for short sales in CA because of the negative stigma surrounding it. We're currently using our own standard purchase agreements if we're dealing directly with the homeowner, or if an agent is bringing us the deal, then we'll use the standard CAR form (NOD-PA or the standard PA). We also make sure to use an addendum that discloses important aspects of the short sale -- such as homeowner will not receive any cash proceeds, bank has to approve short sale and of course our intentions of reselling for a profit. We still file a memorandum of agreement and affidavit to cloud title and to further disclose what our intentions as investors are.

That's a great question of whether the bank is more willing to close the deal since there's an option contract in place. My gut is saying no only because if the seller broke the option contract, what's the recourse for the investor? Since this is a distressed homeowner it's highly unlikely the investor would want to pursue legal action. I think the bank is motivated regardless of the option contract, especially if the short sale is packaged and presented properly. The banks are already motivated to avoid further foreclosures, so I see the option contract as more of a disclosure tool and a reminder to the homeowner to not sell to anyone else.

Moe

Since he's all cash, I would let this close A-C and put a "loss mitigation" fee on the HUD-1 so you're paid out at escrow. Otherwise like you said, you're going to have to get paid on the side and unless you really know this investor, it could be pretty scary. Did you make an offer in an LLC or Corp? If so, you could always sell your interest in the LLC/Corp just before closing and that would cover your fee.

Just my 2 cents.

Best of luck on this.
Moe