Beware of The Short Sale Investor|Short Sale Fraud

by Bill Gassett on August 17, 2010 · 132 comments

Beware of The Short Sale Investor|Short Sale Fraud

Short sale scammer

Any Realtor that regularly works with short sales is bound to come across a proposition from a potential buyer who happens to be a short sale investor.

As a home owner you may have also at one time or another noticed some signs around town that say  something like “we buy houses” or “stop foreclosure” or “We buy homes for cash FAST”

If you are selling a Massachusetts home and it happens to be a short sale let me give you some words of wisdom – make sure you or your Realtor does their due diligence when deciding whether or not to work with an investor.

A short sale investor has one goal in mind and that is to buy your short sale at the lowest number they possibly can. Seems reasonable enough. An investor obviously needs to buy the home on the cheap because more than likely they are going to turn around and flip it to someone else making a handsome profit. As a Massachusetts home owner trying to short sell your home you may be thinking why should you care as long as you find a buyer?

The answer is real simple. One of the biggest reasons why many short sales never reach the closing table is because the seller accepts an offer that is too far under market value and the lender rejects the contract denying the short sale.

When you are short selling your home what you need to understand is that the lender is going to verify the market value of the property prior to giving short sale approval. The lender will send out either an appraiser or ask an independent Realtor to do what is called a BPO (broker price opinion).

The contract price that you have accepted from the short sale investor needs to be within a reasonable proximity to appraised market value or the short sale will be rejected. From an investors perspective they could care less because they have your home tied up and there is no risk to them if the transaction does not happen. They get their deposit monies back if the lender does not accept their offer. A short sale investor knows this and will put offers on many short sales hoping something eventually sticks.

Just by putting a few of these deals together they can make quite a bit of money. Guess at who’s expense though? Trust me their pitch is going to be how they are going to be helping you get out of a desperate situation.  You will be more desperate when it does not happen because you will be that much closer to FORECLOSURE.

Your home will be off the market tied up for months with this investor while you wait for the banks reply. When it finally does come and the answer is no way Jose you will be starting from scratch and the foreclosure will more than likely be right around the corner. This scenario happens all across the country on a regular basis with short sales.

If your Realtor is naive to how short sales work, you could easily get caught in a situation you are really going to regret. I tell people all the time in the short sale articles I write that it is critical to work with a Realtor that has a strong track record of closing short sales.

There are also situations where the investor buyer is the referral source to the listing agent. The listing agent may be given an incentive from the investor buyer to take on a short sale in return for receiving the re-sale listing after the investor buys the short sale home. In essence the Realtor lists the house again when the home is being “flipped”. For performing the transaction for the investor the Realtor is promised they will handle  more of these transactions in the future. The problem with this arrangement is very simple.

Any Realtor who signs a contract with a seller to sell their home is working for that seller! It is the Realtors fiduciary responsibility to get the seller the best terms and conditions. How can a Realtor do this when there is an inherent conflict of interest? THEY CAN’T. This is a short sale scam!!

Financial ramifications of an accepted low ball short sale offer

Going back a few years ago it was not uncommon for many lenders to completely forgive a seller of their short fall. So for example if the seller was $50,000 short the lender would wipe out the debt and the seller would be free and clear. The game and the playing field has changed quite a bit in 2010.

It is much more routine for a lender to require a seller to pay back a portion of their short fall in order to close the property. An agreement to pay back a portion of the debt will become part of the approval letter. Typically the owner will be asked to sign a note where they agree to pay back a certain amount over “X” amount of time.

The reason why this becomes important when dealing with a short sale investor is because if they do manage to get the lender to approve the short sale you will more than likely be on the hook for a larger portion of debt than if you held out for something closer to market value.

Short sale investor/mortgage fraud

One of the other short sale scams that takes place is when there is fraud committed against the lender by efforts of both the Realtor and short sale investor. A simple example would be a short sale that is listed for $175,000. A Real Estate agent receives an offer from a couple that wants to buy the home for $160,000.

Massachusetts Short sale bribe

Instead of submitting the offer to the lender, the agent calls up an investor friend and has them submit an offer for $140,000. The agent does not let the lender or seller know about the $160,000 offer but instead submits the investors offer of $140,000.

The investors offer of $140,000 gets accepted and the investor turns around and sells the property to the couple who was willing to pay $160,000. Folks this is what is known as MORTGAGE FRAUD! The other term for this practice is known as “flopping”. Someone caught doing this will find themselves in Federal Court.

Many of the larger lenders now are requiring a full appraisal before a resale can take place. They are also requiring short-sale buyers sign statements affirming the transactions are arms length, with no hidden buyer-seller relationships, and that there are no agreements to resell the property in place.

Firms such as Bank of America and others have language in their short sale approval letters that prohibit the flipping of a property and after closing they will audit transactions to identify “flips” or “flops”.

Other measures have been put in place by the Treasury Department to prevent short sale fraud by requiring that the buyer and seller have no hidden relationship and banning a re-sale to take place in under 90 days.

Let me be clear on this issue. If the bank knows up front that a flip is going to be taking place it is NOT mortgage fraud.

There is nothing wrong with an investor making money. Being in business and making a profit is what most people strive for. Non-disclosure is a completely different story! A Realtor however, does not get off the hook quite so easily if they have not performed their fiduciary duty to get their client the best terms and conditions in the sale. Realtors that get involved with these kinds of transactions walk a fine line with getting themselves into a situation where they are clearly not working in the best interest of their client.

Block head Massachusetts short sale Realtor

If you find yourself in a position that you are going to need to do a Massachusetts short sale it is highly advisable that you work with a short sale specialist who is knowledgeable, honorable and someone you can trust! There are numerous Realtors that have begun to take short sale listings that have no experience what so ever completing a short sale transaction.

I would encourage you to do your home work when selecting a Realtor to work with in a short sale transaction. The last thing you need is to be stuck with a block head agent that does not know what they are doing!

Many agents do not know the 1st thing about short sales and try to learn on the fly. When you are facing foreclosure the last thing you want is to be stuck working with an agent that doesn’t know about short sale procedures!

If you are needing to complete a  short sale of your home or condo in Ashland, Bellingham, Framingham, Franklin, Grafton, Holliston, Hopedale,  Medway, Mendon, Milford, Hopkinton, Southboro, Westboro, Natick, Northboro, Northbridge, Whitinsville, Upton, Uxbridge, Shrewsbury, Worcester, or Douglas Get in touch! I would love to interview for the chance to represent your best interests.

I am successfully completing short sales through out the Metrowest Massachusetts area. So far over the last three years, knock on wood, I have a 100% success rate for short sale approval! I work hand in hand with a local short sale Real Estate attorney who knows how to get short sales done!

If you are outside of the Metrowest Massachusetts area or even in another state and need to do a short sale please feel free to contact me and I would be happy to refer you to a Realtor in your location that handles short sales and knows what they are doing! I have referred short sales to other Realtors all around the country.

Other short sale articles of interest:

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About the author: The above Real Estate information on beware of short sale investor|short sale fraud was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356. Bill has helped people move in and out of many Metrowest towns for the last 24+ Years.

Thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!

I service the following towns in Metrowest MA: Ashland, Bellingham, Blackstone, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northboro, Northbridge, Shrewsbury, Southboro, Sutton, Wayland, Westboro, Whitinsville, Worcester, Upton and Uxbridge MA.

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{ 132 comments… read them below or add one }

short sale investing student September 14, 2010 at 5:34 pm

Insightful article, Bill. Undisclosed flipping schemes give a bad name to those doing short sale investing legitimately.

jay September 15, 2010 at 4:40 pm

Andrea Bryant

I think you hit on a fundamental difference between a lot of investors and a lot of realtors. A lot of realtors feel that the asking price is what the house is worth. Investors feel that what a house sells for is what its worth. Worth and value aren’t the same. Money has value ($100 value is $100). However it’s worth is determined by what a person is willinig to do for that $100. Some women will sleep with a person for $100. But for that same $100 some women will not. Why? Because its worth isn’t determined by value. So as an investor if through my work,diligence and putting my reputation on the line. I can get a house negotiated for 150,000 and market it at 180,000 and another person comes in and says, “that house is “worth” 175,000 to me”. What makes me unethical for saying, “ok”. Especially if my marketing brought the two of us together? I’m not trying to have a harsh argument, but if you have a problem with this philosophy, then in essence you have a problem with your hair salon, grocery store, mechanic, phone service, pharmacist. Walmart does’nt tell me how much they purchased products b4 selling them to me, neither does my tire shop or car dealer. I have a choice either buy or don’t buy. Because I determine what it is worth (the buyer not the one listing).

Bill Gassett September 15, 2010 at 6:08 pm

Jay I am not sure what your comment has to do with the short sale article?

Ryan September 16, 2010 at 3:14 am

“The home is only on the market because you are looking for another buyer to flip the home to make a profit. ”

-This depends on the property. Many homes are purchased and rehabed (ie/ not flipped on the same day)

“You are a middleman Ryan. I don’t need a middle man because my short sales are priced where they should be. Why do I need you or any other investor to buy my listings? Clearly I don’t because every short sale I have ever listed has sold.”

-Middleman? Perhaps it may seem that way to those who do not see the complete process of what investors (like myself) do. I think “middleman” explains wholesaling our REO’s. “Grand orchestrator” is a more appropriate title for the short sale deals I’m involved in. I’ve had transactions where I have gone above and beyond what any realtor or end buyer would do just to make the deal happen. As you know short sale have many moving parts, therefore without having the right people in place, the deals fall apart. If you have truly sold every one of your short sales, it’s a shame you have the view point that you do. I would love to work with a realtor like yourself so you could help more people.

“The reason I am getting hostile responses Ryan is because what I am saying is the truth and very logical. Investors hate it when Realtors point out the obvious facts. There is lots of money to be made in these deals and you guys don’t like anyone spoiling your party.”

-I don’t believe you’re receiving hostile reponses because our party is being spoiled. The problem is everyone screams “fraud” when they don’t undertand the legalities or the process. They make false claims and it hurts us trying to run an honest business. It’s these types of posts that make me combat the “used car salesman” image almost daily.

“Maybe investors can be of help when they find a clueless Realtor who does not know what they are doing but that is not the case here.”

-I would say more of “an open minded” Realtor. There are some
Realtors who “get it”, and others who don’t. To each their own…I’ve made it my business not to try and convince those who “don’t get it”. The reason I posted on your blog is because I have a problem with information that is provided in a slanted way that it groups us ethical investors into the same bad group.

Nonetheless, your posts have grabbed quite the attention of Realtors and investors. I think I should be grateful, since I can see which posters on this board are “like minded” and feel as passionate about it as I do. Those individuals I would love to do business with. With that said, I would love to reach out to the “like minded” posters on this board. My one partner and I are doing deals throughout the country. Whether your an investor or a real estate agent, I would like use this as an opportunity to network together. Please feel free to contact me directly if this is of interest.

All the best!
Ryan

Bill Gassett September 16, 2010 at 12:37 pm

Ryan my article does not say that every investor is unethical. I don’t see explaining short sale fraud as being slanted as you mention. The fact of the matter despite what you want to believe is that there are lots of investors who do not do things above board and the legal way. Just look at any Real Estate forum online and you are bound to hear stories from lots of Realtors who are approached every week with propositions for unethical transactions.

Does that create a problem for investors like yourself who do things the right way – It sure does but this is factual stuff. Short sales create an environment that are ripe for abuse with plenty of people that have no problem doing things illegally.

jay September 18, 2010 at 9:41 am

Bill,

I apologize for not being as clear as possible. However I do think that my statement could be clearly understood and is truly relevent to any real estate article that has dialogue between investors and agents. I appreciate the agents like yourself that have passion for your careers, but you all don’t hold a monopoly on ethics in real estate.

What I currently do and will do for the next year is not only handle a short sale for a homeowner, but offer to teach them all that I know so they can gain control of there financial future, for free! Since guidelines don’t allow us to give them any fish(money), I teach them how to fish(how to make money). For absolutely free! Why, because I care about more than a dollar, I actually care about the homeowner. And why do I care? Because I, like most investors and entrepenuers know that helpless, lonely, almost hopeless state where we were just about ready to throw in the towel and then somebody or something showed up with an answer or solution. So we can relate to these homeowners.

I think your article is great, but not for the purpose that you wrote it. I don’t know if your successful or not, but I can tell by this article your not as successful as you could be. Just speaking from this article your thinking has you cornered, limited and less efficient than you could be. I appreciate your efforts though. Please read my other post again. I think you will see it’s revelance if you have not by now.

Bill Gassett September 18, 2010 at 12:29 pm

Jay I don’t think my thinking is cornered, limited or whatever else you want to put to it. The fact of the matter is a Realtor should never give up control of their listing to an investor. This of course is something no investor wants to hear because it cuts into your business. I wrote a follow up article here that explains to a consumer and other Realtors why if their home is listed with a Realtor they should not give up control. Realtors should not let short sale investors negotiate with lenders.

I have no problem with your business model if you meet a home owner before I do. There is a big difference in terms of fiduciary duty that I have to abide by though. You do not have the same guidelines as you are a buyer. There is a big difference in what we both do even though we have a common goal.

In regards to your question about my success I have never listed a short sale that was not approved by the lender. Frankly, I know there is quite a bit of luck in that and my streak will end at some point but I think we can both agree that is unprecedented success. I have been one of the top RE/MAX agents in the country for many years. I have been one of the top 5 RE/MAX agents in Massachusetts for ten out of the last eleven years. I think I understand the business pretty well Jay.

Arlene September 24, 2010 at 1:37 am

How you guys are really going at it. In any case, I work with a group of investor who are willing to fund homes for homeowners or new homeowners with challenged credit, foreclosures, etc. We developed our company to help consumers get funding because lenders are unwilling to fund anyone or anything.

Jay, I would be interested in more information about the free teaching you provide.

Please take a look at my website and I hope to hear from you soon.

DJ October 19, 2010 at 6:50 pm

I live in an 8 unit condo where one unit is trying to do a short sale. I have legitimate evidence that this is a fraud and wonder what the best steps to take are? How do I contact or find the bank?

Bill Gassett October 19, 2010 at 10:10 pm

DJ how do you know that there is fraud taking place? The lender holding the mortgage can be found by having any lawyer check the registry of deeds. You could do this yourself as well.

Jeff November 3, 2010 at 6:41 pm

Interesting article Bill.

Un/fortunately, I agree with Ryan and Jay… your thinking is one sided – please tell us your experiences with working with a legitimate investor(s). Please explain the legal, ethical and moral opportunities for the homeowner when working with a legitimate investor and how the homeowner can benefit? Like Realtors and investors, there ARE ethical and unethical people out there. I can recite several instances when Realtors have also been caught and been fined or gone to prison for highly unethical acts.

What happens when a Realtor can’t obtain a buyer for their property -what would do they do? Do they move on to the next distressed homeowner?? Are you currently pricing it lower than what an investor would price it at…is that the reason why you have never ‘not’ sold a property? how about a deficiency judgement? Do Realtors know how to negotiate one with the bank that so that your homeowner will not be served with one? Have you ever taken a significant reduction in your commission to make sure the homeowner does not get a deficiency judgement? Does a Realtor offer to buy the property? Well, good investors do!

Last, you make A LOT of assumptions of what you think investors are doing, which I could specifically contest 99% of your content, however, I do not have the time to write long articles one-sided articles – so in summary, I will say that I do agree with you that homeowners need to be careful who you do business with these days – investors and Realtors alike, however, my belief is that good Realtors and Investors can work together to successfully achieve the goal of helping the homeowner achieve a successful short sale. We work with many broker agencies such as Remax, Keller Williams, Coldwell Banker, and other top agents and we continue to have great success in helping homeowners.

Bill Gassett November 3, 2010 at 9:29 pm

Jeff I don’t need to work with an investor when I can accomplish the same thing for the home owner and obviously have a much higher success rate in doing so. We both know that in order for you to want to buy a short sale there needs to be a profit involved otherwise you would not have an interest. Lenders today are getting far more rigid on what they will and will not accept. They are far more likely to accept an offer when it is around the market value. Your offer is not going to be around the market value because you want to turn a profit.

In regards to working with the companies you mentioned are these Realtors letting you take over negotiations with the lender or are you letting them handle the short sale? If you tell me that you are being allowed to negotiate for the seller then these Real Estate agents are not too bright and are opening themselves up to potential lawsuits. See Realtors should not let short sale investors negotiate with lenders.

We can agree that there are both good and bad Realtors and investors. I have no problem with you helping a seller accomplish a short sale if you find them on your own. Don’t expect a Realtor who is obligated to be a fiduciary for a seller let a buyer take over negotiations. That is down right ridiculous. There are plenty of naive Realtors who are doing this and could get sued if the transaction does not work out.

Greg December 12, 2010 at 4:33 pm

Bill, I think you need to look at the big picture here.

#1 Claiming a 100% success rate proves nothing. I have spoken with many Realtors who pick and chose who they will work with and who they won’t based on the condition of the house, who is the lender, and how many other liens are on the property.

#2 You are speaking about something with which you have no experience. You have not worked together with an Investor on a Short Sale, correct?

#3 You said, “One of the biggest reasons why many short sales never reach the closing table is because the seller accepts an offer that is too far under market value and the lender rejects the contract denying the short sale.”
“One of the biggest reasons”, I believe is your opinion. My opinion is that you forgot to mention that Investors make several offers EVERY TIME they negotiate a Short Sale. Don’t you if the first offer is rejected?
Every investor I have spoken to who is working with a Realtor will back out of the deal if there is no spread (profit). The Investor’s buyer moves into his spot and closes on the house. The Homeowner avoids the Foreclosure, the Realtor gets paid, and I can continue to sleep well at night knowing I have helped another family out.

#4 Thank you for pointing out the difference between a Flip and a Flop. They can appear to be the same to the untrained eye.

#5 Realtors work for the client, not the other way around. Yes you have a responsibility to protect your client but this does not mean you should protect your commission first.

Bill, I’m glad you have written this article and have allowed feedback here (whether you like it or not). This shows strong character and professionalism. I wish I could find more people like you to work with. I just wish more people would not be so rigid. I wish more people would stay flexible and move with the changing economic current.

Greg

Bill Gassett December 12, 2010 at 5:08 pm

Greg – I don’t pick and choose someone who needs to short sale their home. If I can help a seller achieve a short sale, I will regardless of the lender, condition of the home, etc. I don’t need to work with an investor to explain how things work. This isn’t brain surgery it’s common sense.

If a Realtor is listing a home they should never hand over negotiations to an investor. The Realtor was hired to short sale the home, not a buyer (investor). See Realtors should not let investors negotiate for a home seller. I have no problem with an investor meeting a seller before a Realtor and helping them complete a short sale. There is a big difference however, when a Realtor meets the client 1st and is asked to complete a short sale for them. Realtors are asking for trouble to allow a buyer to take over negotiation for a seller.

I have spoken to a number of lawyers about this and there will be lawsuits that come out of these situations. Of course this is not what an investor wants to hear but it is the truth.

Mr. ShortSale January 21, 2011 at 8:05 am

Can’t we all just get along? The discord between Real Estate Investors and Real Estate Agents is getting old! We are all real estate professionals at a time where many of our fellow colleagues are becoming casualties of the market. Both Investors and Agents alike are being drowned and carried away by the monstrous tidal waves the current crisis has created! We should be pursuing unit instead of each others throats.

I am an Ex-Real Estate Agent and Mortgage Broker turned Real Estate Investor. In my 15 years in the industry I have done almost every type of residential real estate deal outside of short sales (tax sale, fsbo, mls, wholesale, foreclosure, rehabs, rentals, estate, probate, etc.) For the past 5 years the bulk of my business has been short sales. I would dare even say that short sales represent about 85 to 90 percent of my deals.

Here the deal with short sales and the whole Real Estate Agent vs. Real Estate Investor synopsis.

1. There is an extreme shortage of Real Estate Agents that are knowledgeable and
proficient with short sales.
2. Truth Be Told..the Real Estate Agent really works for the
Bank/Lender/Mortgage holder NOT the homeowner. The bank is who pays the
Agent’s commission. The seller/homeowner is not allowed to receive any
compensation nor do they benefit from the bpo’s/cma’s appraisals etc. All of
these services and reports directly interest the Bank, including the your services
as a Realtor
3. Although the homeowner must sign the listing agreement; It is the Mortgage
Holder/Bank that is demanding that the house be listed NOT THE
HOMEOWNER….in most cases they don’t care what the house sells for as long
as they get rid of the property. So the BANK is your real client!
4. Real Estate Agents MOSTLY tend to the needs of the BANK despite the
fiduciary commitment to the homeowner. After all, it is only logical to be, first
and foremost, loyal to your Boss (the Bank) who funds your paycheck. Likewise
the Banks/Mortgage Holders only employ agents because they feel that it is in
THEIR (THE BANK’S) best interest to do so. The banks do not hire Realtor for
the Homeowner’s sake; they do it for their own benefit!
5. The best interest of the homeowner is a quick process, a quick sale, and a
commitment from the Mortgage Holder not to pursue a deficiency judgment.
Instead, what they get is a very lengthy and cumbersome process, unrealistic
and inaccurate bpo’s and cma’s that murder potential offers and drastically
extends the sale process. Persistent Investors persevere through all of these
obstacles and nonsense just to be told that they will still hold the homeowner
responsible for the remaining balance!
6. Most short sales fall through because of Bank Greed and Jelly-Back Agents that
refuse to tell their clients the truth for fear of not getting the listing. So instead
they grossly inflate their bpo’s and cma’s to satisfy the banks….not the
homeowner. Once again, this extends the market time tremendously if not
indefinitely. Agents have a natural inclination to puffery because they get paid
more, the higher the sales price. In the long run this all ends up hurting and
costing the homeowners, NOT THE BANKS.
7. Most agents are ill prepared to deal with foreclosures and the short sales
process. When it comes to foreclosures and short sales, most Investors consider
Realtors as deal killers and refuse to work a deal with an agent. The reason for
this is because of the limited paradigm of the agent. Most agents do their
property valuations/cma’s strictly through statistical mls data analysis.
However, they are totally oblivious to the fact that there is another market
which we Investors call wholesale. A significant portion of the foreclosure and
short sales are sold on the wholesale market to Investor’s not on the regular
(mls) market to average American Home buyers.
8. Ordinary Buyers do not look for foreclosures and short sales. It has been my
experience, that the average person that is looking for a home tends to shy away
from foreclosures and short sales because they carry the stigma of being
complicated and requiring extensive rehabilitation. INVESTORS BUY SHORT
SALES! So therefore, the true value of a foreclosure or short sale property is
what Investors are willing to pay for it and this current time.

Banks and Realtors alike miss this very important concept. As a result, many
properties are foreclosed on instead of being sold by short sale. The banks then
present, by way of public auction, the property to some of those same investors
that they turned down for a short sale. Needless to say, the property ends up
being take back by the Bank by way of an FAILED auction. Then they list it with
another jelly back Agent who, once again, comes up with an inflated sense of
value and the property sits on the market for another year or two before they
finally decide to take a sensible offer that is far below the original short sale
offer!
9. Successful, seasoned Investors such as myself are always cleaning up the messes
that Realtors leave behind! Right now, I have several deals that were brought to
me by Agents because they have screwed something up or just can’t sell the
property after years of trying! I have done several short sales that were by the
previously submitted by Agents or other novice Investors and were turned by
the Bank.

Many of my Realtor associates have shelved their licenses and real estate
careers because they are not selling houses! A lot of my investor buddies got out
of the business and are seeking 9 to 5 jobs! Investor like myself are able to
survive because of the people that we have helped. At this point in my business I
do not have to advertise as homeowners that I have worked with previously
send me referrals religiously. Right now I am feeding a few starving Realtors
short sale deals of my own. The homeowner contacts me, I put together the
short sale report and proposal, I put together the funding to purchase the
property or I find a fellow Investor that wants the deal. I do all the work myself
then I bring in an Agent ONLY because the Banks usually require the property to
be listed so that they can see if they get a better offer before accepting mine!
There is generally nothing left for the agent to do but list the property for a few
weeks and then collect their 3%!
10. Agents can not do short sales without Investors because Investors are
generally their buyers! Investors can not do short sales by themselves because
the Bank usually requires the participation of a licensed real estate Agent
in some form or another so it behooves us to work together.

In conclusion, Real Estate Investors play and integral part of the short sale process whether you like it or not! There are numerous benefits to a homeowner dealing with a short sale Investor! Realtors and Banks do not invest in short sales that help homeowners…..Investors do! I will not do a short sale where the bank can pursue the homeowner for a deficiency judgement so generally the homeowner do not care what price is on the contract! The banks loss is being supplemented by the Federal Government. Realtors are being spoon fed by the Banks. Real Estate Investor’s all across the country are cleaning up the mess the big banks created and helping to restore our housing markets by Investing in short sales and other non performing products! So why all the hostility Bill?

Bill Gassett January 21, 2011 at 9:39 pm

Mr Short sale your posting has to be one of the most grossly inaccurate comments I have ever seen! Real Estate agents DO NOT work for the lender NOR are the hired by the lender as you reference in points #2 and #3! Please get your facts straight we are not talking about a bank owned property!

#4 – Tend to the needs of the bank?? We ask the bank to approve what is presented to them – What planet are you from?

#6 Jelly back agents telling a seller what they want to hear? Again you must have been a great Realtor! In a short sale the owner doesn’t see any funds so they rarely ever care about the sale price as long as it makes sense that the lender will approve it.

#7 & 8 – Really? I would love to know what state you are in because it is certainly not the case here in Massachusetts! An investor has never bought a listing of mine. I have sold every short sale to a buyer who wants to live in the home not flip it for a profit. So this quote is completely wrong “Agents can not do short sales without Investors because Investors are
generally their buyers!” So if that is the case Mr. Short sale then why are you belly aching about Realtors?

“Realtors are being spoon fed by the Banks.” Really? It seems to me you don’t know the difference between a short sale and a foreclosure. That is pretty scary!

William Bronchick, Esq. March 10, 2011 at 11:37 pm

I hear a lot of people throw around things like “illegal” and “fraud” in real estate transactions. Can you point to the exact federal law that is being violated and how?

Bill Gassett March 10, 2011 at 11:44 pm

William you are a lawyer and are asking me this question???

John Larkin June 7, 2011 at 5:30 am

Bill, it seems you are trying to dodge Mr. Bronchick’s question? I believe he is asking if you yourself know the exact laws that are being violated. In other words can you back your cries of foul with the actual laws that are being broken.

By the way, I am in Florida and invest in real estate and see that both owner occupants and investors are buying short sales. This is greatly influenced by the neighborhoods and areas where the short sales occur. For instance, in lower income neighborhoods and areas of high rentals investors will be the main buyers because owner occupants with buying power don’t want to live in those areas and the investors will keep the properties as rentals (who else is going to buy these properties). In good neighborhoods or middle and high end areas both investors and owner occupants will be the purchasers of short sales because owner occupants want to live there and investors can either re-sale those homes or keep them as investments. So if you have never sold a short sale home to an investor you must be selling in extremely affluent areas only where banks are can get top dollar offers every time; or something else is going on.

Investors are needed in real estate. Owner occupants can’t and won’t buy every home everywhere. But investors need to make some kind of a profit when purchasing homes and there is nothing wrong with that.

Bill Gassett June 7, 2011 at 11:15 am

John I don’t think you read the article closely. I do not have a problem with investors buying short sales and making a profit. The problem I have is an investor asking someone like myself who has been hired by the seller to complete the short sale to let them take over direct negotiations with the lender. If you want to buy one of my short sales then make a legitimate offer to the lender through me or another Realtor.

John the problem is many investors want all the control in the transactions because they want to submit a low ball offer and hope that the lender goes for it. That does not put my client in a good position when it doesn’t work out. Further while the lower ball has been submitted the investor is looking for another buyer who will pay more for the property. If there is a buyer that would pay more why would I let this transaction take place? That is not representing a seller well is it? The problem with many investors is that you don’t know anything about Real Estate law, code of ethics etc. Realtors are held to higher standards than anyone else in a Real Estate transaction.

Aaron Garner June 17, 2011 at 10:23 pm

I have an investor friend who wants to get rid of a couple of properties that he is upside down on. He wants to short sell the properties to me, and lend me the money to buy them from him. We would then list the properties for re-sale at market value. Would this type of arrangement be considered mortgage fraud?

Bill Gassett June 17, 2011 at 10:29 pm

Aaron – yes this would be considered an example of a fraudulent transaction. I would stay clear of this arrangement.

danny investor September 1, 2011 at 2:55 am

Bill,

You still haven’t answered Mr.Bronchick’s question.

and I quote ………………..” John the problem is many investors want all the control in the transactions because they want to submit a low ball offer and hope that the lender goes for it. That does not put my client in a good position when it doesn’t work out. Further while the lower ball has been submitted the investor is looking for another buyer who will pay more for the property. If there is a buyer that would pay more why would I let this transaction take place?”
ANSWER: By “pay more” I hope you’re not referring to retail price or anything close to that. The Reason an investor will sell it higher is because he’ll be marketing it to fellow active investors, and probably a cash buyer. The wholesale investor has to consider the needs of his buyer and leave enough profit for him.Everyone has to win. At this point, most homeowners are not that concerned about price but just want OUT of that house that has been a thorn in their flesh.
The reason the wholesale investor will outsell an agent in a short sale deal is because most seasoned wholesalers have a list of ACTIVE, QUALIFIED CASH Buyers in place who understand the process.Agents want to get the highest price for the house so that they get a higher commission.This talk that you’re looking out for your homeowner is utter hogwash! if you were so concerned about his IMMEDIATE NEEDS, You’d very well understand that his main motivation to sell is to get out of the house and the bad situation.Thus any investor worth their salt negotiating short sales would not pursue one if the bank opted to pursue deficiency judgements.
All in all Bill, I do like your article.
In this industry as long as an Agent does not understand something, the “F” Word comes into Play. “Fraud”.

Bill Gassett September 1, 2011 at 11:58 am

Danny I understand short sales perfectly fine my friend. The bottom line is the probability the bank will except a low ball offer is getting smaller and smaller every day. What is hog wash is that most investors have other investors in their pocket waiting to buy these homes. Where are these folks? They don’t have access to MLS like every other red blooded human? Come on man stop trying to fool the public with this non-sense.

William Bronchick, Esq. September 10, 2011 at 6:58 pm

With all due respect, Bill, you haven’t cited me the specific law that has been broken or potentially broken. “Fraud” is just generic term that gets thrown around a lot, but I don’t see what law is being broken. What law is flopping? What specific provision of the law is “mortgage fraud” that you are referring to.

John Taylor September 10, 2011 at 10:13 pm

Bill by the looks of it Mr.Broderick is not only an attorney but an investor as well. I would hate to have him as my legal representative. Is he really trying to say that mortgage fraud is not illegal? All you have is do a quick search and you can see there are numerous convictions for mortgage fraud as well as a number of pending suites.

All I can say is Mr. Broderick are you serious?

John October 12, 2011 at 12:52 am

Bill, I realize I’m a little late to the party with this post. I agree with absolutely everything you have stated in your article. As an agent who does short sales and bpo’s I run into all of the local “investors” and their owner by contract or A-B-C short sales. A couple of things I see on an almost daily basis you didn’t mention in your article. The manipulation of the broker price opinion…this is a vital element in the short sale flops. I almost can’t stomach meeting these con-artists at homes for the bpo’s anymore, as I know what’s coming beforehand, every time the same stuff. Here are some examples: fake foundation repair estimates ( I have seen these as high as $50000 on a foundation that needs no repair at all), made up mold reports (I think some of these guys intentionally leave water on in homes to grow some quick mold), and the best one yet, the fake “condemned” sign on the front door.

Since I see this every day I actually follow the property to see if they pull off the short sale or not. I see about 1 out of 50 actually sell and not go into foreclosure. I would say they have about a 5% success ratio. I have seen one agent this year who has had over 50 homes go into foreclosure while trying the owner by contract short sale flip.

I guess its a numbers game for these investors, even if they get one out of 50 through they can make as much as $100,000 (that is the highest I’ve seen, but I’m sure in other markets they can make even more) on one deal. No wonder these guys are attacking you.

Bill Gassett October 12, 2011 at 1:46 am

John what is amazing is some of these investors who have committed probably do things the right way but they want to basically deny that there are investors out there that pull the BS just as you have described. What is sickening to me is the Realtors that get involved with short sale fraud. Everyone one of them that participates in this kind of crap is a disgrace to the Real Estate industry.

William Bronchick, Esq. October 24, 2011 at 8:37 pm

Still waiting for the answer to the simple question of what specific law is being broken by reselling a short sale for profit? If I buy it and resell it a year later, no problem. A month later, no problem. Why is it fraud if I resell it a day later?

Bill Gassett October 24, 2011 at 8:43 pm

William you may want to go back and read the article again and find where it says that you can not sell a short sale for a profit. I certainly didn’t write it. By the way there are some lenders that do have riders to their contract that prohibit an investor from selling within a certain period of time.

Paul February 13, 2012 at 9:27 am

Hello Massrealestatenews,
Along the same lines,, When I first started using short sale techniques to purchase properties in 2004, they were quick and easy (sort of) to complete. Today, however, foreclosure transactions are a huge pain in the butt!
I look forward to your next post
~ Paul

WBB March 2, 2012 at 5:27 pm

The article is clear and concise. The take away from this article is to price your property properly when doing a short sale and make sure the realtor who does the listing for the short sale has experience and solid references.

Unfortunately. too many that have posted comments seem to think that this is asking too much of the realtors. Well too bad, all it takes is a handful of unethical realtors to spoil it for the rest. So get use to the scrutiny.

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