All Forum Posts by: Jim Watkins

Webber is on the right track with his logic.

My experience with the lenders that are doing the foreclosure is...
They don't care. They usually are not in favor of a short sale because at this point, they have already invested too much time, effort and money into the property and they have had it.
I have never been able to get a lender to postpone a foreclosure but I am not saying it is impossible. Main reason they won't postpone is the cost to do it. To file a foreclosure costs between $750 and $1500.
If you can convince a lender that if they postpone it, the property will be sold, thus not having to re-file.... there is a chance.

In Texas, I never bother trying with the lender that is foreclosing. I do however, go after the 2nd lien holder because those are pretty easy to get discounted down to $0.10 on the dollar. They won't go for it right away but by auction Tuesday morning and the homeowner has not filed bankruptcy... the junior lien holders tend to give in and short sell their lien up to 90%.

This is something I teach in my rentals class and so far, it has worked every time with the landlords that have used it......

Getting a tenant to move peacefully and without causing physical damage is hard to do

Tenants being evicted tend to feel victimized and when they get upset they are a risk to do physical damage to the house and leave behind mountains of trash.

It will take a minimum of three weeks to legally evict a tenant and can cost in excess of $500 (Texas Law).

Owners tend to reason that they will keep the security deposit to offset losses but a tenant can cause thousands of dollars in damage in minutes.

Let the tenant know that you have filed to evict them and give them a copy of the eviction papers. (Making sure to follow the courts procedures)
Looks as you have done this.

Tell the tenant you will only talk to them 30-minutes before the court hearing and there will be no contact until then. When they laugh at you, tell them you will refund their full security deposit, in cash, the date they move out.

<30> Offer to issue their FULL deposit back to them the day they move out as long as all belongings and trash are removed.

Set a date for them to be out (date needs to be before a date the court will set), add the requirement that they agree to leave the property completely free of belongings and trash which includes small things such as a candy wrapper

Have them sign your prepared agreement and proceed to your court hearing.

Tell the judge that you have reached an agreement and you would like him/her to endorse it (This is the only time I remember telling the Judge how I want them to rule and they agree).

The judge should (and has) accept the agreement and inform the tenant that if they break this agreement, he/she will authorize an immediate eviction.

Finally, once the tenant is officially out, then withdraw the eviction.

It is hard to justify giving the tenant cash to leave after losing money with them already. I can only point out that in a situation such as eviction, there is NO winning! There are only degrees of LOSING!
Evicting a problem tenant only to face a damaged property is bad enough. Give the tenant the one thing that is of use to them.... cash. And offer it when it will be needed.... upon move out! This is also known as a "Cash for Keys" settlement.

The other suggestions by the others on this thread are all good. My suggestion is for damage control.
And REI is right about the notice to enter. Most leases require a 24-hour notice to enter. If they decide to enter, make sure you can tape (audio or video) the entry as this will only help if the matter reaches a judge.

Hope this has helped...

JB,

Short sales are not my specialty but I have a lot of investors around me that do them all the time. Your question could actually be answered by writing a few books. lol. It's a broad question for a complex area of real estate.

I did want to offer one point for you to (hopefully) remember for the rest of your career.

"Be Careful!"

I am referring to what a homeowner gets out of a short sale..... NOTHING.
When a lender is discounting a note (meaning they are losing money), they do not want the homeowner to profit from the transaction.
Here is where it can get dangerous.....
Last year, a national "guru" on short sales did a boot camp in Dallas. I was able to sit in as long as the host (not the guru) agreed to let me speak up if I saw the need. So I sat in his class.
When it came time to address what the homeowner gets in the deal, this is what he said,

"I agree to give the homeowner $5,000 but that has nothing to do with the house I am buying after the lender agrees to short sale it. It is a separate transaction. I actually agree to pay them $5,000 to buy their furniture in the house. The house closes, I pay them $5,000 for their furniture BUT.... I never pick the furniture up." Haven't you ever paid for something but never actually picked up what you bought?"

I spoke up right then and asked, "How is that not FRAUD?"

His reply, "Haven't you ever paid for something but never actually picked up what you bought? There is nothing wrong with simply not getting what I paid for, is there?"
And I fired back at him with...
"Let me ask you a question then... If the house deal ended up not closing... And the owners decided they will move out anyway... would you still pay them the $5,000 for furniture you never intended to pick up?"

He looked at me with a blank look on his face and after a long silent pause, he said, "That wouldn't happen because I would know if the deal was going to close or not."
We went to a break at that point and he went right to the class host and asked that I be removed from the class for disturbing the flow.

This is a well known national guru that said that. Let me tell you.... what he was doing was FRAUD! He smugly disguised it as an ethical way to compensate a seller in a short sale.

I will now stop my grandstanding on the subject but I hope you and anyone else reading this, will see my point.....
The homeowner cannot profit from a short sale on the HUD-1 or under the table or anywhere else. The only possible exception would be if you disclosed your intention to compensate the seller to the lender involved and they give you their ok. Otherwise... be careful. Fraud is nothing to toy with.

And lastly, I want to be clear that I am not saying you were or would get involved with a fraudulent act. I only wanted to point out how easy fraud can come up.

Good luck to you .

kmhendren,
Pre-foreclosures are my specialty background in real estate investing AND my experience just happens to be in Texas (Dallas area to be specific).
What market in Texas are you in?

I am going to send you a PM with some more information.

-Jim Watkins

My question to you would be, what would your need be with a Land Trust?

In the State of Texas, a Land Trust is used by investors mainly to effectively mask the identity of the owner.
The common reason for needing to mask the owners identity is when someone takes over the mortgage but the mortgage stays in the name of the seller. This is also known as buying a property "Subject To" existing liens. A warranty deed is usually filed so the owner of record changes to the buyer.

If the lender was to find out about the transaction, they would have the right to invoke the Due on Sale clause. If they do that, then the entire balance of the loan becomes due and payable within 30 days.
Transfering the title into a Land Trust would cloak the title so the lender would not be certain of who actually is on title.

The drawback with doing this (in my opinion) is when you go to refi or obtain a new mortgage for the property. You would have the mortgage in the previous owners name and the title would be in a Land Trust.
My mortgage friends all tell me that it is very difficult to get a loan done when title is in a Land Trust. You would end up needing to secure the note with a personal signature.
At that point.... what is the purpose of the Land Trust?

Just my opinion.

-Jim Watkins

There are several clubs in that area.

The main one in Austin is the Real Estate Investors Club of Austin.

Contact Person: Ken Goheen
Meeting Location: Omni Southpark
Meeting Address: South IH-35 at Ben White Blvd
City, State Zip: Austin, Texas 78744
Meeting Time: 2nd Tuesday, 6:50 p.m.
Phone Number: 512-302-6771
Web Site: www.yourREICA.com

The main one in San Antonio is:

Contact Person: Orlando Rodriguez
Meeting Location: Omni Hotel
Meeting Address: 9821 Colonnade Boulevard
City, State Zip: San Antonio, Texas 78230
Meeting Time: 1st Tuesday. 6:00 p.m.
Phone Number: 210-662-0297
Web Site: www.sareia.com

Both are very good groups and I have spoken for the Austin group twice.

-Jim Watkins

Charles Whittaker couldn't have said it any better.
That is almost exactly what I call a standard Hard Money loan.

Almost.

The only thing I want to offer is this:
Proceed carefully if the term is for 6 months. The lender I use offers 18 months.
A 6 month loan where a rehab is involved can be very dangerous. You have to factor in the actual rehab time, time on the market and the time it takes to close once a contract is in place. If a contract fails for any reason, you could find yourself back at the start with finding a buyer.

To me, 6 months is too risky. ESPECIALLY with how soft the market is now with it being a buyers market. Listings have been going longer and longer.
I would feel better having at least a 12 month term versus 6 months where you could lose the house after all you have put into it.

-Jim Watkins

Dollar,

One of the reasons I am not licensed is because I personally found that being licensed was more restrictive versus not being licensed.
From what you have said, I don't see why you would need a Realtor with what you are looking to do. Realtors are extremely valuable to me overall but in a case like this, having the ability to go directly to the homeowner to make an offer will only help your bottom line if Realtor fee's can be saved.

That being said, I wanted to offer my method for making an offer.
Granted, this is more effective when the property is "distressed" rather than an ordinary house listed for sale.

I don't make offers like most do by offering a number and hope they will accept it or counter. I prefer to start from payoff and go from there.
On a $100,000 sale price house where I want to offer $60,000, I go at it from the payoff. Here's how I do it....

I have been known to have sellers sign blank contracts. Most usually flip out when I suggest they sign one. I always say something like this:

"Until we know what the payoff is, it doesn't matter what amount I offer you because this contract is only worth something if I end up buying it and closing on it." "The bottom line is... How much cash do you have to have out of this? I mean after the deal is done, we have closed, taxes have been paid, fee's paid and the dust has settled.... how much cash in the end do you want to walk away with?"

My experience has always been that the number they give me at that point ends up being less than if I had given a purchase price offer. Generally it is not above $15,000. It is merely another way to approach sellers without appearing to be low balling them.

If they should give you a bottom line "out the door" number, then I would write the contract and put in the "provisions" that the deal is contingent upon the payoff amount and the seller must net X amount in the end (the number they said) after all fee's etc. have been paid at closing."

Give it a try and let us know how you fare with it.

-Jim Watkins

I'm sorry, I just noticed that you are actually in the DFW area.

Go to www.flsonline.com

They publish actual pre-foreclosure lists for all 4 local counties. Be careful of any other sites claiming to have pre-foreclosures. Most have REO lists.

If you have any questions... send me a message.

-Jim

That, my friend, is among the most difficult challenges I have faced in real estate. You are talking about their home, not a house.
Without going into hours of detailed explanations on the matter, I might just offer you this advice...
Approach any homeowner from an emotional standpoint, rather than a business one.
Logic is not something high on their priority list right now.