Do you have experience with short sales? It doesn't sound like it, honestly (sorry - don't mean anything bad by that, but I read some intimidation in your words). Don't be afraid - common sense will get you through. The investor doesn't have any special pull - and if he does, for example, have some strategy or tool or contact, then you will benefit more by making him go through you for the negotiating.
You may or may not get the next listing - don't count on it. Usually these guys are agents themselves and don't hire anyone. Do not get caught up in the conflict of interest of looking for future benefits. You have one client - represent him, He needs you. The investor can handle himself.
Having negotiated a number of short sales myself (currently 100% success rate...!), I am suspicious of direct contacts with banks, as negotiators are assigned on a per deal basis. It is true that one develops a network over time of helpful managers and so on, but the same internal process is followed in each case.
There are firms (like ours) that specialize in short sale negotiating and remove the hassle from realtors whose skill set lies in marketing and finding sellers/buyers, but it is not hard to do it if you have the patience and time. Like anything else, if you farm this out to increase your efficiency, specialize in what you enjoy or provide better quality service to your client, you pay for the service.
Hope this helps. My two cents.
Cornerstone Properties and Financial Services LLC
This is becoming more common place. It was made popular from "Short Sale Riches" - which claims to investors that it's an automatic system to become a millionaire.
The theory is sound. Afterall, one of the hardest parts of the short sale is getting a long lasting offer and heck, the investor negotiates it. PLUS! They want to pay you twice the commission probably!!!
However, having worked on both ends of these deals here's the problem, the investor offers are far too low, the banks move too slow, you still have to find an end buyer, the process is LENGTHENED, not shortened, and if the bank's BPO comes in too high you have an investor that is staying put and you can't sell it out to the end buyer.
Bottomline - it's not in the best interest of your client UNLESS they are a few days away from foreclosure.
Other problems occur when an investor just heard of this option contract process and tries to do this. I get calls all the time now.
MY NUMBER ONE QUESTION IS, HOW MANY HAVE YOU CLOSED?
In Georgia, this process is extremely difficult due to title seasoning issues, which I could get into via email if you want. Some states allow equitable interest from option contracts and some don't.
What's the surefire system to do short sales? Hire a closing coordinator or ex-loan officer to do the negotiations for you, pay them at closing if the bank won't pay their fee.
Investagators who work directly with the loss mitigation departments??? After reading that, you have no business at all working short sales. If you are not mitigating them yourself, or have somebody in your office doing them, WHO are you representing???
As you already know, one of the most critical aspects of working with buyer is the BUYER CONSULTATION. This is your first line of defense against finding yourself with situations like the one you described: "4 contracts have fallen through â€“ impatient buyers". For this to work, you must set the stage, systematize protocols or models and follow them to the "t". The moment you don't do the consultation and properly set expectations for buying real estate in this market and for selecting the qualified buyers you want (operative word: "want" - not "must"), to work with, it is the moment you've set yourself for the dissapointments that come later. If I may, buy and read Millionaire Real Estate Agent. It is full of models to follow. Actually, if you approach one of our local offices, ask the Team Leader for a copy. Tell them I sent you from Miami Beach. Often, a sincere smile is all you need for the asking.
The other point I'd like to mention is EDUCATION. It is obvious by your designations that you're a professional in the business who values her education and ensures to offer her clients the most advanced industry knowledge this way. Since Short Sales and REOs are probably here to stay for a while and will likely represent a great bulk of the sales we see over the next few years (they amount to about 60% of all sales in my county - imagine trying to work this business pursuing only the only 40% that is not selling), it is imperative to "dominate" this market segment. For this, I would stongly recommend to visit http://www.CDPE.com and pursue this certification. There are well over 2000 CDPEs nationwide now and growing. The creators are Realtors and teach on the matter to Realtors - and have their license and that of their broker at heart. Not only will getting certified give you the knowledge and tools you need to properly present offers, service listings and help smooth out any distress transaction, but it will help ensure your business explodes in the near future. Just think how many of your colleagues bad-mouth distress property sales and avoid them like the plague, only because they don't understand them when in fact, they should be embracing them.
Finally, investors are a breed apart. They are not to be avoided, but to be understood. Their business criteria is much different than that of regular buyers and sellers. Having said that, there are probably way too many would-be investors who, though well meaning, will likely get themselves in trouble and even drag you along if you don't properly understand the techniques they want to use. Too many of these would-be investors are recent graduates of a weekend course (or even a correspondance course), taught by less than professional people. This does not mean you should avoid them, but you should definitely understand them and learn to figure out who's for real and who's a rookie who could get you in serious trouble. For this, I'd recommend you visit http://www.NationalREIA.com and find a Real Estate Investor Association/Club in your area. Start attending meetings, learn their lingo and psyche and integrate them slowly into your business. They could be the source of many small purchases and, done right, they could let you list properties as they sell them and even teach you the ropes if you ever want to engage in real estate investing.
There's a lot more I'd like to say but...I believe I've rambled enough. Bottom line, remember: Luck is when preparation meets opportunity. Happy selling...
FHA is not allowing these type of transactions without a minimal 90 day seasoning.
I get alot of questions as to how much the investor bought the property for. The real issue is how much is the new buyer willing to pay for the property (market value). If the new buyer is getting a good deal than what ever the investor bought it at is irrelevant in my opinion.
What are your thoughts?
You are not missing anything. The banks are working closely with the cash buyers to get them off their books. Also, the if the investor is striving to be unfront with the bank by letting them know what their intentions are they
respect their honesty.
There's nothing wrong with teaming up with a skilled negotiating team who will make sure everyone gets there fair share and wants to develope a long term business relationship with you. Keep in mind that the home owner will also be saved of long suffering as a result of foreclosure.
Bottom line is honesty...Read the contracts that everything taking place in the transaction is clear and upfront.
ok I know the above doesn't quite have to do with your situation.
I was approached by an investor with this type of "scam" a year ago, he wanted the homeowner to basically Sign the deed over to him, then he would negotiate with the bank for a price, hopefully a bit lower than what an avg. buyer in the area would still pay for the home. Once he gets that number from the bank, he would turn around & "sell" the property to the new buyer for a higher amount & keep the difference.
** I don't think any bank would go along with this, if all the cards were laid out on the table. All the cards laid out meaning: Although the bank is in agreement with the investor for say $200K, they wouldn't let the sale go through knowing that there was a buyer willing to pay $250K. **The bank would never approve a Final HUD stating that some investor is making $50K on the deal when the bank is taking such a HUGE loss.
** The only way the investor can make this $50K, is to HIDE it from being on the Final HUD by doing some kind of Double Escrow, which for YOU the REaltor is FRAUDULENT, Unethical & probably just plainly Illegal.
Tell this investor: NO Thanks, I am an Ethical Realtor & I do not participate in Fraudulent activities.
**Feel free to contact me, should you need any tips or have any questions about getting your short sale to close quickly.
Main Street Realtors
Serving Southern California & Las Vegas
By the way FHA has extended the restriction on anti flipping rules so you don't have to wait past 90 days to resell.
I just heard of a similar "offer" from an investor in Southern California. In his approach, he will make an offer (saying that banks will accept an offer up to 20% less than their appraisal comes in at), and write the offer so he has the right to assign the contract. That way, you don't have to close twice, or get caught up with the 90-day FHA rule. It sounded plausible. The benefit to your seller-client is that they don't have to watch 4 offers fall by the wayside, and drag out the process. I haven't done the research yet, but I am intrigued. I have 5 short sale listings right now, all under standard contract, but I see the benefit to my sellers, and to myself, working with an investor in this manner. I'm going to look more closely at this option.
Good luck to you!