All Forum Posts by: Clifton Jones

This is how we handle this scenario. First off, we usually deal with properties with no equity and then handle the short sale negotiations in-house. To market for our properties, we utilize the county records instead of drive-bys, as we are specifically looking for houses that are upside down on the mortgage. That said, the marketing to these customers is pretty much the same, although the responses from the potential customers will probably vary.

We mail individually written letters and hand write the address on the envelopes. We have a lady write the letter and address it to a man at the intended house, if one lives there. This usually results in the wife opening the letter, which is what we want. It provides a higher response and we receive many calls from the women who then state that it was a great marketing ploy.

Our letters are extremely simple. Here it is:

"Hello,

My name is Clifton Jones and I am interested in purchasing your home.

If you are interested in selling, please call me at (321) 622-9148.

Thank you"

We mail out about 100 per week and receive about 15-20 calls each week.

I guess I am the lucky one here. I received an Acceptance Letter for a 2nd from RTR (Eric Luna) where the 2nd was owed approx $45,000. I offered $1,000, but Eric countered with $3,000. Also, in the Acceptance Letter, it stated that they were providing a full release of lien, so that meant no deficiency. Unfortunately, the 1st is with Countrywide/BoA and they keep putting this file back in Equator. (This file was originally submitted just as they were starting out with the REOTrans testing phase and it was one of the files used.)

I am having a difficult time with BoA on this, as they will not remove it from the Equator system and there is no realtor involved in this sale.

Anyway, my experience with RTR has been much more favorable than it sounds like others have had.

It might be that you want to explain your business model better. You are actively looking for potential short sale properties with 2 loans. That I understand, but your supposition that this will allow higher equity is not necessarily the case.

Most, if not all, lenders will use the BPO/appraisal to set the lowest price they are willing to accept. If the property is worth $200K FMV per the BPO and the 1st is owed $340K, then how is having a 2nd mortgage in this scenario allowing you to produce more equity?

If you are shorting the 2nd, but taking the 1st over as a Sub-2, it is much more understandable. In this scenario, your question will work very well and allow you to receive a higher equity than through a normal short sale, depending on the amount still owed to the 1st mortgage.

If you could provide a more detailed explanation of your reasons for wanting properties with 2 mortgages, it will help in getting your question answered.

Welcome Steven. Great to have you join the team. You will be able to find answers to all of your questions either in the forums or the blogs. You have definitely chosen the right site to answer your questions.

Many on here specialize in their areas of expertise, so you will want to go to the proper forum for your question, but you will get help.

To understand how you can secure a 2nd rental property, I would suggest going to INNOVATIVE STRATEGIES or CREATIVE FINANCING forums, as you will find that a lot of us would rather use somebody else's money to purchase a property than use our own.

Regardless or your question, somebody should be able to help you. We're glad you joined and make sure you start meeting people on the site. A good investor knows that networking is half of the battle.

Originally posted by Joseph Ziolkowski:

Thanks James, it sure does! It's good to hear that you enjoy it so much. I hear a lot of people saying how much they hate dealing with the banks. That being said, any books you can recommend as good primers for this market? Protecting the homeowner is my biggest concern here, and I'd hate to see someone get slammed with a huge deficiency judgement and ruined financially (even more than they are) because I didn't know what I was doing, you know? Thanks!

Joseph,

One of the issues you negotiate is the deficiency judgment. When speaking with the the lender, one of the conditions that can be put forth is that the deficiency be waived. If they refuse, you have the option to back out because of that condition.

This does not mean that you have to back out, because if the short sale letter that states the lender is providing a FULL release of lien, then they are giving up their rights to a deficiency. Remember that the homeowner still has to approve the Acceptance Letter to close. If the conditions are not to their satisfaction, then they have the right to refuse to close.

As an investor, I do not want a short sale where I have invested my time to fail closing, so I make every effort to acquire the waiver of deficiency. In most instances, I am successful, but that is not always the case. Junior liens are much more difficult to obtain the waiver than primary liens.

As previously stated, you need to negotiate at least one short sale to understand the issues involved in the negotiations, such as the lender losing the paperwork, the account having one negotiator for a while, then right when negotiations are set to complete, the account is assigned to another negotiator, etc.

Many of these issues happen on short sales, so if you just farm the negotiations out without having encountered them yourself, you can have doubts about the veracity of your negotiator when they address these issues with you. When farming the negotiations out, you should always require periodic updates, no matter who your negotiator is.

If you are interested in acquiring a negotiation company, you can PM me and we can discuss.

Originally posted by Tony Lessan:

Thanks James.

When the lender states that they will waive the deficiency on the acceptance letter, I understand that the lender can still submit the settlement to tax authorities (state & federal). Is the seller liable for the shorted difference as taxable income if its not their primary residence?

Also, does the waiver of deficiency on the acceptance letter apply to the mortgage and promissory note?

Thanks!

Tony, the answer to both of your questions is YES. Deficiencies on non-primary residences must be reported to taxing authorities by law. I have heard that the homeowners can get out of the tax liabilities, but that is something that a lawyer would have to handle and address with the homeowner. It is not something that we as REI's have the legal authority to address.

As to the whether the waiver addresses the mortgage and/or the note. It addresses both Hope this helps.

Originally posted by Eddie Ziv:

Originally posted by Fred Bauer:

If you don't feel good about what you are doing for your clients, then GET OUT OF THE BUSINESS. You are probably ruining it for others if you feel that you are taking advantage of others.

I don't really understand that statement. How someone who have conscious problem "Ruining it for others"? All there is to understand here, as mentioned before, is that in 99% of the cases, when we, REI are getting involved, the damage is already done. There is noting for us to make things better by NOT getting involved.

I'm 100% with P NW on this. Disclose, disclose, disclose!!! It's not only the moral practice, it is also good business!!

If the OP does not feel good about what he is doing, then that shows in the way he portrays his business. When dealing with distressed homeowners, I have found that they look to blame somebody other than themselves. So, dealing with an investor who is not completely convinced that his/her business model is in the homeowner's best interests can and usually does cause that homeowner to blame the investor. This, in turn, leads to the negative press we see every day on investors.

It was not investors that caused the housing bubble or the crash. It was speculation by people who did not have a clue as to what they were doing.

If you are not convinced that you are offering the homeowner a service that is in their best interest, then you should not be working with that homeowner.

One of my first questions to every homeowner I deal with is whether they want to stay in the home. If so, I then recommend some ways that can be accomplished. If none of those will work, I will have done everything I can to help the person short of paying the mortgage myself, so at that point, I know that what I offer is in their best interests. All of this pertains to working with the homeowner.

When I deal with the lender, part of my short sale package is a cover sheet that states my conditions if the short sale is approved. The first condition is that I want all deficiencies waived for the homeowner. At this point, I have not had a 1st mortgage refuse to accept this, even though I deal with properties in a recourse state, meaning the lender has the right to pursue the deficiency.

Based on the OP's post, it appears he is not talking about REO's, but short sales. If he is talking about REO's, then he is not taking advantage of anyone, as the homeowner has already lost the house. The bankis now the owner. If that is the case, then the only possible party that could be taken advantage of is the bank.

Here is an update:

The husband was all for providing us with a 6 month lease-option. He wanted to set up a meeting to sign the paperwork, but when he talked with his wife (who was in the background), she stated she was unwilling to enter into an agreement. So, this property fell through, for now.

He stated that he would try and talk her into it, so there is always a chance he will come back to us. For now, it is on to the next property.

Everybody have a Happy New Year!!!

I appreciate all responses and am willing to present all of them. Please do not limit your ideas, based on my conversation with the client. The conversation was not face to face. I have a much easier time presenting ideas, and showing the +'s and -'s when sitting in front of the prospective client.

Originally posted by Matt Mathews:

He may have called you but he doesn't sound very motivated? Are they moving? What will they do with the cash if/when they sell. Buy another home? Put it in the bank @ 2%. No mortgage=Big Cap gains tax!! How about a high steady monthly income stream to supplement their retirement with no cap gains tax and a better rate of return. A lease option works also.

This is exactly some of the ideas I was looking for, especially when they paid less than half the asking price when they purchased. So, their capital gains would be over $50,000 at their current asking price.

Please keep the ideas coming. :cool: