All Forum Posts by: Herm M.

Can someone direct me to a thread that explains the process of negotiating short sales with the lender?

Can someone break down the commissions that Scott is calculating?

6% in the first transaction, and 3% in the 2nd transaction.

Where is that money going? I'm guessing the OP is not the listing agent? So 3% is going to the listing agent. And the other 3% is going to the seller's (OP, Paul) agent? Is he not licensed?

And then another 3% is being paid in the 2nd transaction....who is that going to? I'm just wondering...if the buyer is already in place, why is there 3% being paid out?

...as to how to make 40-50k a deal per short sale in California?

I understand that I need buyers. Right now I have 2-3 buyers. I also have 2 uncles that are going to let their homes foreclose because they are upside-down, so I might ask them to list their homes with this lady for two reasons: 1) so that we could try to find a buyer for them and make some money. 2) it would be beneficial for my uncle's to try and get a short-sale completed vs. a foreclosure.

I talked to a lady the other day who says she just made 85k on one deal...and she says she averages 50k profit per deal. She basically negotiates the lowest price with the lender, and has a buyer in place who will pay close to market value. So she basically buys at 75% and sells at 90%. She told me that she will pay me 25% of her profit if I help her sell her listings. I think 50-50 would be a lot more fair. She has more leverage because she has the cash to buy from the bank at 75%. However, finding the buyer is just as important. She currently has 42 short-sale listings.

Here's my questions:

1) She has this amount of listings so that she has a wider inventory to offer her buyer's list...correct?

2) What will I need to go about doing what she does? I don't have cash to purchase these houses at 75%, but have family members who might have the money. What are the things I need to do in order to get the lowest approval from the lender? She said she took classes to learn these things, but I'm sure I can find them on one of these forums.

3) Is the process of doing this by myself complicated? Filling out contracts, negotiating with the bank, etc., etc. Am I better off letting her handle all that work, and splitting profits (if she agrees to 50%)?

I just need to learn the whole process of flipping short sales for profit. I know the two most important things are: a) getting a low approval from the lender, which will probably require cash. b) having a buyer ready.

I am not looking to buy a house, and then find a buyer. I'm looking to have a buyer ready....purchase the home at the cash approval price, and flip it immediately to the end buyer, and make my $30,000-$50,000.

Well she probably has a creative way of doing it. I mean, all she really has to do is buy the house under someone else's name.

Or maybe she just lists it under another realtor's name...

^ Makes sense.

At first she told me that she has 42 listings, and I was like "WTF?" Then it made more sense to me....she wants as many short sale listings as possible, not because she wasnts to make 2%-3% on the sale, but so that she has more "leads" for her buyer's list.

She wants to find buyer's that will purchase her short-sale listings....because being the listing agent gives her the power to negotiate the lowest approval.

She said that she makes 50k a deal.

....and she explained to me how she is making a killing right now.

I want to see if this is the same method that a lot of you are using. I haven't had time to read all the forums here, as I'm focusing on getting investors for a big purchase.

Here's what she does:

She's a realtor that finds short sales. As the realtor, she negotiates an approval with the bank for the lowest amount possible. She aims for 70%-80% of FMV. Once she knows what the approval amount is, she looks for a buyer at 50k higher than the approval amount. She considers the buyer serious once they have submitted to her a purchase offer with a loan approval. She has cash on hand, and purchases the property from the bank at the approval amount. She then flips the home to the buyer who offered 50k for.

I'm looking to start working with her, since she has cash and I don't. Here's my questions:

1) Is this what a lot of the investors here try to do?

2) How can she get away with not forwarding the buyer's higher offer to the bank, and basically saving that offer for herself after she becomes the owner?

3) How long does it take to close escrow when she buys the property cash?

Here's a scenario:

My uncle purchased a condo for 505k, loan amount 450k. Lien-holder is Chase (previously WaMu). The property might get appraised at 350k (just a guess). My uncle is looking to get out of this property. I am going to have this agent list the property as a short sale. She is then going to negotiate the approval. My guess is that we're going to aim for about 275k on the approval. Then we will look for a buyer at 325k. Once we have that buyer, she will purchase it cash for 275k, and flip it for 325k.

So my question is this: When the house is listed for short-sale with Chase being the owner...the new purchased will submit the realtor an offer of 325k with a loan approval. So how does she get away with not forwarding this offer to the bank?

Is this what a lot of you do? I read one of the threads that had the rule of "always have your buyer ready." Is that rule referring to this type of investment strategy?

Thanks for the responses....

I spoke to my cousin who is a leasing consultant working at this complex. I've told him to keep up with the internal gossip, if there is any, regarding the sale of this property.

Yesterday his manager went to a corporate meeting, and she told him she was told that "there are a few offers, but nothing close enough for the seller to consider."

The broker is said "there are 11 offers, all ranging from 27-31MM. The buyers will be starting on their due diligence in the next two weeks."

So wow....2 very contradicting stories.

Also, all parties are aware (broker has said this, as has the manager) that the seller is going to take a hit on this property.

So if they do really have offers at $31MM, and they bought it at $37MM...how can the manager say that "there are a few offers, but none are high enough for the seller to even consider" ? What type of "hit" are they expecting? Are they expecting to only take a $2MM hit by selling it at $35MM?

Answer: There are no offers that high, the realtor is ********tin' me.

I understand that it only takes 1 idiot to outbid me.

But I don't understand how there's 11 people bidding on this property, and none of those offers are under $27MM. All 11 bidders can't be idiots.

Well here's the info for the property I'm working on:

http://www.biggerpockets.com/forums/88/topics/35152-can-someone-analyze-this-please-

The owner bought it for $37 million in 2007. They are aware that they are going to take a hit.

There is a loan of $19.4MM that MUST be assumed (there's a pre-pay penalty).

The realtor is saying that there is no other options but to assume the loan....so the down payment will be whatever the amount is over $19.4MM.

My goal was to work on getting funding to purchase this property at $22MM, or $25MM maximum.

We called today to confirm that the Freddie Mac $19.4MM has to be assumed, and he said yes.

He told us that right now they have received 11 offers on the property...and ALL of these offers range from $27MM-$31MM. This property has been on the market for 6-8 weeks.

NOI on the 2008 and pro forma numbers states $2.3MM.

I'd say that most invesors will use an NOI of $2.0MM on this property to be safe.

Debt service on the Freddit Mac will be $1.45MM yearly.

That leaves a net income of $550,000.

So here's my questions:

1) How is it possible that there's already 11 offers?

2) How is it possible that ALL of these offers are over $27MM?

We all know that anybody with funds right now is going to buy something at rock-bottom price, so I have a hard time believing that there's 11 idiots out there (with money) who are offering $27MM-$31MM on this property.

Remember, at a $27MM purchase price, the investor is to put down $7.6MM. With that down payment, the cash-on-cash return is (550,000/7,600,000) 7.2%. This is somewhat believable, but I still think that any smart investor in this market (and there's only smart investors out there right now, because the stupid ones don't have money) will put a max price tag of $25MM for this property (same view as me).

At $31MM, the new owner is paying $11.6 as the down payment. That brings their return to (550,000/11,600,000) 4.7%. I don't believe this at all.

Basically....I called the agent. I said "let's say I offer $22MM on the property, 20% would be $4.4MM. The 80% would be $17.6MM. Does that mean that I would have to pay down the Freddie Mac loan (currently at $19.4MM) down to $17.6MM through escrow, to bring it down to 80%?"

He said "the down payment will be cash anything over $19.4MM, but if you're looking to offer $22MM, you're wasting your time. There's already 11 offers, and they all range from $27MM-$31MM."

I'm sure this agent is BS'n me. But what do you guys think?

Well I'm trying to determine the price that should be paid for the property.

Actually, there's no list price on it, so the agent wouldn't be able to tell me anyways.

I know that NOI is $2,000,000.

I can't put the purchase price over $25,000,000, which would be 8% cap.

I'm wondering if the seller would accept $22MM, which is 9% cap rate.

Actually, does this even matter? I've read that I should check the cap rate for recently sold properties to get an idea of what this property should be valued at.

However, how many local comps could I possibly find for 250 unit complexes??