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Beware of The Short Sale Investor|Short Sale Fraud

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.

{ 132 comments… add one }
  • Anne on Short Sale August 17, 2010, 12:28 pm

    There are a lot of people out there who are thinking of making money from the misfortune of homeowners especially with short sales.

  • Short Sale Software August 17, 2010, 1:13 pm

    Bill – good article, but I do have a few comments I want to throw out there. While there are unscrupulous and ethically questionable investors out there, there are many that are actually a driving force behind the homeowner recover. Let me dissect / comment on some of your points:

    >>A short sale investor knows this and will put offers on many short sales hoping something eventually sticks.<>Your home will be off the market tied up for months with this investor while you wait for the banks reply<>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.<>Short sale investor/mortgage fraud<>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.<>I would encourage you to do your home work when selecting a Realtor to work with in a short sale transaction<<

    Re: fiduciary responsibility to get their seller client the best terms and conditions

    The seller’s best terms and conditions is to get away from their home without further debt burden. That can be accomplished any number of ways, an investor doesn’t preclude that from occurring.

    There definitely are some “bad apple” investors out there. But there are many more honest, ethical ones which significantly help out the market place.

    Even the recent short sale study for 2010 (available here: http://www.corelogic.com/uploadedFiles/Pages/About_Us/ResearchTrends/Short_Sale_Research_Study.pdf) states that
    “Investor driven short sales are not inherently bad. Investors provide the industry with necessary liquidity.”

    More high fives :)

    Best of luck,

    Nick

  • Bill Gassett August 17, 2010, 2:11 pm

    Nick I am not all that sure that short sale investors are a driving force behind a home owner recovering especially if a seller accepts a low offer that the lender approves and then the seller is stuck with paying back a large note.

  • Teresa Pringle August 17, 2010, 10:25 pm

    Bill, it’s really a shame but it sounds to me like you have been working with the wrong kinds of investors. We purchase and re-sell short sales and we have never, EVER been the cause of a deficiency judgment or promissory note, or cost the seller money or anything else, even intangibles, and we have always disclosed to the lender that the property is going to be re-sold. Do they like us? Some do and some don’t. But it’s unfortunate because what has happened in our industry is that the banks are quite honestly “whining” about potential money being left on the table if an investors flips one of their short sale properties. They feel that money should have gone to them.

    So – the bank, who is suing your client, who you represent, is putting out guidelines, some of which are not even law they are simply opinions, and many people are following their lead as though their word is gospel.

    There are many MANY ways to represent oneself in a short sale and many ways to do this legally and ethically and to the absolute benefit of the seller. Most times our short sales close much faster than if the property had sat listed at a higher price and this is a definite benefit to someone who is in the midst of having his or her credit banged around.

    I’m not saying there aren’t bad apples in the bunch, but there are also bad attorneys, bad Realtors, bad doctors, etc… and it’s really unfair to categorize a whole industry who can certainly BE part of the market correction. However this will only happen if the masses stop listening to the banks who were part of the initial meltdown in the first place.

  • Bill Gassett August 18, 2010, 2:20 am

    Teresa I do not work with short sale investors period. The thing that short sale investors fail to understand and always get upset about when Realtors who know better don’t want to work with them is that the Realtor has a fiduciary responsibility to get their seller client the best terms and conditions. You are not getting a seller client the best terms and conditions if an investor can turn around and sell the property for more money. That is leaving money on the table and I can certainly understand why a lender would be pissed off. Frankly, I don’t really care about the lender as they are not my client. The seller however is my client and I will do whatever is necessary for them to get fair market value.

    The fact of the matter, despite what you mention in your comments, is that a seller could more likely be on the hook for a larger deficiency when a short sale investor buys the property below market.

  • Dan Schuman August 18, 2010, 12:22 pm

    Bill, great information as usual. It would be a shame for a short sale seller to end up with a deficiency judgment, as this seems to defeat the purpose of going the short sale route. It does seem that there are a lot of people looking to get into the game of trying to make money buying and selling short sales. I suppose the challenge is being able to identify the people who are doing it the right way.

  • Jim Crawford Atlanta Homes August 18, 2010, 1:19 pm

    Bill this is an excellent post that sheds light on the realities of today’s real estate market. Many home sellers that are in deep water will go deeper in trouble with bad deals from unscrupulous buyers and their agents. Out of the frying pan and into the fire! Their approach goes beyond unethical, and clearly could be viewed as fraud, or a con game!

  • Sam August 18, 2010, 1:57 pm

    Bill,
    I am questioning your sources since you say directly that you have never worked with an investor doing short sales.
    I have seen short sales at FMV done by my local realtors and the lender insists on a promissory note as well as seller concessions. The ethical, educated short sale investor is going to be working hard for either a severe reduction or complete removal of both seller concessions and promissory notes. The fact of a lower price has nothing to do with what agreement can be reached with the lender involved.
    Disclosure is the key! And don’t call up an investor AFTER you have a higher offer!!!!

  • Bill Gassett August 18, 2010, 2:22 pm

    Jim & Dan – Thanks for your comments on my article about short sale investor fraud.

    Sam – Questioning my sources? This is about logic and ethics not sources. Did you actually read the whole article? There is no need for me to work with investors because I sell every short sale I list without resorting to the seller accepting a low ball offer from an investor. The fact of the matter, despite what you said, is that the seller will more than likely be on the hook for a larger deficiency if they accept a lower offer.

    It does not take a brain surgeon to figure out if someone can buy a home and turn right around and sell it again for a profit there was money left on the table. All the power to you if you find a deal like that. It just won’t happen on my watch. My seller clients can feel confident knowing that their home will be sold for the best price the market will bear.

  • Charlotte August 18, 2010, 4:37 pm

    Bill,
    Why do I have the feeling this won’t get posted?

    I think the most inflammatory part of this article is its title. I think you may want to educate yourself of what FRAUD actually is. You exclaim that if it’s being disclosed to the lender then it’s not FRAUD, so where did this fraud actually happen because you don’t point to it anywhere in your article?

    You can ALWAYS tell an agent or Realtor who has NEVER worked with a short sale investor because they seem to tout “it is highly advisable that you work with a short sale specialist who is knowledgeable, honorable and someone you can trust,” leading the masses at large to believe an investor is untrustworthy. I would also caution that telling other Realtors and Agents that working with a seller and investor is a “short sale SCAM”. Tell me Bill WHERE the scam is? The Realtor got an approval and resold the same property? So, let’s see, if this investor now held this property and resold it in 4 months, would the Realtor be SCAMMING the homeowner? If they resold the same property in a year and did both sides of the transaction would the Realtor be SCAMMING the homeowner then? Where did the SCAM occur as you put it? Why in the age of duel agency can’t a Realtor represent both sides of a transaction? Is it a timeframe thing? Tell me. That same property resold in a year by the same agent has now SCAMMED the homeowner? The agent’s fiduciary responsibility is to the seller and no one else. The agents we work with relist the property as a facilitator AFTER we have obtained an approval minus deficiencies. I think you can interpret your fiduciary responsibility many ways. We had a homeowner call us wanting us to buy his property. He was facing foreclosure in 4 weeks. We explained what we could do and then realized his property was listed and asked if we could speak to his agent. The homeowner was completely on board. We spoke to the agent who threw up all the big red flags to this homeowner that didn’t exist and next thing you know, the homeowner said his agent had “other options” – Fine. You can lead a horse to water. Now WHAT do you think happened to that property? Yep, foreclosure that could have been potentially avoided. Where was the fiduciary responsibility? The house had been on market two years. A house should be on the market less than a month if it’s priced right OR even a DAY if working with a competent investor. So, the agent wants to wait 3-4-5 months to get the best offer when the short sale could have been completed in that timeframe with a release of deficiencies. The Realtor’s responsibility is to make sure the homeowner knows the risks of a short sale 1) potential foreclosure 2) release of all liens and deficiencies and POSSIBLE 1099-C if they aren’t insolvent, 3) promissory note 4) approval but no release of deficiencies and let the homeowner decide who they will work with as a BUYER. It’s your listing Bill, not your short sale.

    It is NOT fraud if a homeowner/lender are aware a short sale purchaser intends to sell the property for profit. Please don’t make erroneous statements like this.

    This is why I know you’ve never worked with a real estate investor who is competently able to complete these transactions with ease. Most investors have a whole team of people working with them including lawyers, agents, negotiators, etc.

    I also think you should get your facts straight “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.” — FHA waived their 90 day title seasoning April 1 this year.

    There are many LEGITIMATE investors using WE BUY HOMES signs, or something similar and to tell the public at large to STEER CLEAR is again based on WHAT??? You’re unparalleled experience working with an investor?

    “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.” And I guess you know this from experience working with investors right? There is the SAME exact risk for a regular home buyer AND and investor with an offer on a short sale property. A regular buyer gets their money back if an offer doesn’t go through right? I don’t throw out wild offers. I evaluate the merits of each property and make sure it’s a sound offer and we can see it through to completion. I take on MORE risk than a regular buyer

    “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.” This actually makes me laugh. Again, you know this because you’ve done so many investor short sales?? A legitimate short sale investor makes a very clear distinction with transparent dislcosures that THEY ARE AN INVESTOR in the property and intend to make a profit. WE NEVER lead a homeowner to believe anything other than that. Do we help? Sure. We help buy getting a big obstacle to their draining credit off their back. I guess the Realtors don’t make money at the homeowner’s expense right. Let’s not forget you wouldn’t make a commission without this homeowner’s listing.

    Maybe you should work one short sale with an investor or even GASP maybe a few before you write an entire article that’s this filled with untruths. OR better yet, read what some other agents feel about FLIPPERS — http://activerain.us1.list-manage.com/track/click?u=d5efbc96a4f3239261fe921dd&id=11b7bdec27&e=b85deec670

    Get your facts straight and maybe do a few properties with an investor before you spout your so called knowledge of investor based short sales. At LEAST have the decency to call some other EXPERIENCED short sale agents that have worked with investors and talk to them about it.

    Good LUCK Bill with your old ways of thinking. Maybe you should update your knowledge base a bit.

  • Bill Gassett August 18, 2010, 5:49 pm

    Charlotte are your panties in a bunch because you have come to the realization that lenders are tired of seeing investors turn around and sell homes for a profit? Your comments make it clear that you know absolutely nothing about the Real Estate code of ethics and what a “fiduciary” is. When I list a short sale I work for the seller and no one else. Period end of story.

    You really did not read the article if you don’t see where the fraud occurred in the example I gave. Here it is again for people like you that only see what they want to: “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.

    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.”

    Jjust to be clear with you I don’t have a need to work with short sale investors because all of my short sales sell. Yes every single one of them! 100%! Your example of the home owner that was overpriced and lost his home would never happen with me because I know what I am doing. I don’t overprice my short sales.

    You can do what you want to discredit what I have written here but any sane person who is doing a short sale can Google this topic and find a 100 other sources that talk about the same thing. I am sure some of the most respected news sites around the country that have written about short sale fraud are all full of crap too Charlotte right?

    The good times for investors and their flips are slowly slipping away and you guys are none too happy about it.

  • Charlotte August 18, 2010, 6:44 pm

    Bill when you write that an agent representing both sides of a transaction is a SCAM I get very defensive. I agree your fiduciary responsibility is to the homeowner but I guess that’s where the interpretation of that responsibility is in question:
    http://www.realtor.org/toolkits/meetagency06
    No where here does it state that getting the HIGHEST OFFER POSSIBLE is the fiduciary responsibility? How about getting the BEST offer possible? I can argue that I’ve come into several situation where I’ve had to clean up after a Realtor has over priced a property for a year waiting to take the HIGHEST offer that never happened OR where their buyer walked. No where here does it state that an agent cannot represent both sides of the transaction either. It is VERY misleading to say it’s a scam.

    Your example of fraud IS THAT. IT IS FRAUD, but again MOST experienced short sale investors DON’T do it that way. Believe me, NONE of us want to be remotely associated with the “F” word. In your example which sounds creepily similar to the famous Connecticut case (which has been beaten to death-ya google that) happened when two real estate AGENTS cooked up a scheme.

    Again, I have to ask you to at least talk to your local investors or even a local agent who has worked a short sale with an investor? You seem to be pretty preachy for someone who has NEVER WORKED with an investor.

    Oh and thank you for removing the link showing the Virginia Association of Realtors SUPPORT of short sale flipping.

    I’m not debating that there isn’t short sale fraud. There sure is, but OF COURSE that’s going to make the headlines left and right. Do you think every time I work with Mr & Mrs. Smith and buy their home and sell it, it makes a national headline?

    You’re throwing out a lot of misleading information here. Just because there is an “I BUY HOUSES” home on the side of the road, doesn’t mean it’s backed by a fraudulent investor. Most are legitimate investors looking for their next purchase. So telling someone to “STEER CLEAR” is absolutely CREATING fear and panic for NO reason.

    The good times (and again your lack of sensitivity to a homeowner losing thier home is astounding) are not slipping away. My business has doubled in the past year. What I’m NOT happy about is a Realtor that has NO experience with a seasoned investor telling the homeowners at large that we are SCAMMERS, and doing something FRAUDULENT.

  • Patrick August 18, 2010, 7:46 pm

    Nice personal attack, Bill. My respect for you just went down about 90%.
    I don’t believe that anyone can say 100% of their short sales sell. I had an offer on an average property. The lender took 3 months to assign a negotiator (they had all docs up front and exactly as they wanted them. After 3 months they said the docs looked good but they wanted updated x y and z which they got two days later). Then they waited another month and the buyer walked. Then a week later, I had another buyer at the same price. “Oh, we have to start the process over again if there is a new buyer”. Another 3 months. Buyer walked. Home trashed. Not going to sell. Happens all the time. This is a lender who I have sold 4 short sales through, so it isn’t like they don’t approve them.

    In terms of the short sale flip, or flop, some realtors I know get a low investor offer right up front and use that to get to the final negotiator, get the offer rejected, then get a real buyer with a pre-approved price on the short sale. Works well. Every once in a while the lender takes the low offer, and the investor is really happy. The investor holds for 90 days minimum, but they still disclose to the lender that they are buying for resale.

    Keep the personal attacks down, people might respect you more. Although the damage is done now.

  • Bill Gassett August 18, 2010, 7:48 pm

    Charlotte – I did not write that an agent representing both sides of a transaction is a scam. Again I think you are reading what you want to see. I gave a very clear example of fraud which you are now agreeing with in your latest comment. I took out your link because it is a document with pages of tons of adds. I have no use for it.

    My article does not say anything about every investor being fraudulent. The article clearly states that if it is disclosed up front there is nothing wrong with an investor making a profit by flipping a house.

    There is a difference however in a Realtor who knows they can get more money for a property selling their client short. You can argue till you are blue in the face but the fact of the matter is if the home can sell for more money to another qualified buyer the seller should be accepting that offer. The Realtors job despite your limited knowledge is to get the best terms and conditions. We both know that the price is one of the most important so stop trying to claim it is just another term with little consequence.

    I know there are plenty of Realtors that don’t know what they are doing with short sales and will let an overpriced home sit on the market without an offer. I am not one of them! I am very well versed in short sales. Just read the numerous articles I have published on the subject.

    BTW – anyone reading the stream of comments would not be thinking that I am insensitive. What is more likely is that they would view you as an opportunist.

  • Bill Gassett August 18, 2010, 7:59 pm

    Patrick where is there any personal attacks here? The fact of the matter is I have never listed a short sale that didn’t close (knock on wood). Is it possible my streak will end? – Of course it will at some point. But that is the truth.

    Your statement here: “In terms of the short sale flip, or flop, some realtors I know get a low investor offer right up front and use that to get to the final negotiator, get the offer rejected, then get a real buyer with a pre-approved price on the short sale. Works well.”

    This is just another example of a Realtor doing something they shouldn’t be doing. All this does is clog up the system for folks that are actually doing the right thing. Phony offers are not the way to run your business if you have any ethics.

  • Teresa Pringle August 18, 2010, 8:51 pm

    Bill, it is truly amazing for me to read the rest of this thread, you CLEARLY have your mind made up about investors and honestly about the ONLY thing I disagree with Charlotte about is that I do not believe you should try working with one or maybe two investors, because your twisted viewpoints have proven to me that you are someone I would not even consider working with, even to prove a point. Banks are tired of investors making a profit? Wouldn’t it be funny too if they became tired of Realtors making a commission? Or perhaps you feel that you deserve to be paid for what you do more than someone else does in their business?

    We play by the book at I would gladly challenge you on any code of ethics, or legal issue related to how we conduct our business. We do what the LAW tells us we are allowed to do, and you are certainly entitled to your opinion about what those laws should be. If a LAW was written that there was a certain amount of time an individual must hold a property before re-selling it for a profit, (oh by the way – what if the deal resulted in a LOSS for the investor? Would that be okay with you?) then I have the resources to hold it and that’s what I will do. I do not apologize for making a profit and I sleep very very well at night knowing I am doing a great job for the sellers and buyers.

    Charlotte has HER panties in a wad? I think those people reading this, thanks to your rant, now have a clearer idea of the concepts and you have, as most prejudice people end up doing, discredited your own opinions all by yourself.

  • Teresa Pringle August 18, 2010, 8:52 pm

    By the way- CHARLOTTE I would love to network with you! How can I contact you?

  • Charlotte August 18, 2010, 9:14 pm

    Bill,

    I think the title of your article based on your example is REALTOR and INVESTOR fraud. You gear this article as if investors are fraudulent, but the example you give from a beaten to death case not only involved an investor but an AGENT.

    “My article does not say anything about every investor being fraudulent.”
    The title of BEWARE OF THE SHORT SALE INVESTOR is completely misleading. Maybe it should be NOT EVERY INVESTOR IS COMMITTING FRAUD…yep that’s better right?

    “I did not write that an agent representing both sides of a transaction is a scam. ” {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!!}
    So when you said there was a scam, what were you referring to?

    I love it. I’M AN OPPORTUNIST!! In America!! Can you imagine that? I could argue the same for you if you concentrate on short sales and homeowners in distress. No homeowner I’ve bought a home from has called me an opportunist. PROPERTY FLIPPING IS LEGAL IF ITS DISCLOSED! My homeowners have thanked me.

    Bill you can’t even see what you’re saying. I’m pretty much laughing at this point….nope you didn’t attack personally. What a severely inaccurate article. I feel bad for anyone that reads this and mistakenly believes your rhetoric.

  • Bill Patterson August 18, 2010, 10:06 pm

    Bill,
    It is obvious that the goal of your “article” is to create business for yourself. I have no problem with that. What I don’t agree with is throwing fellow Realtors (of which I am one) and ethical, competent investors (of which I am one) under the bus to do so. Your article is misleading and many of your so called facts are untrue. One thing you said was true….the listing agent’s duty is to get the best outcome for his client. You just don’t seem to realize that the best outcome is not the best price. The seller can not gain one cent from the sale. Therefore, the best outcome is to avoid foreclosure and get no deficiency. Our negotiator has obtained over 2,000 approval letters. When we can not achieve a spread, we continue to negotiate a direct sale to the end buyer. Our goal is to achieve the best outcome for the seller, too. If you have 100% success, you are very lucky and will have the lender pull the rug out from under your deal sooner or later. I don’t know how many short sales you have negotiated, but one deal at that nets the lender 90% of his loan balance is 100%. Don’t lump everyone into the same basket. As others have told you, there is nothing illegal, unethical or wrong with completing a disclosed flip of a short sale. Even FHA has realized this and placed a moratorium on the 90 day resale of properties on 2-1-10. Thanks for listening to my two cents worth!
    Bill

  • Pam August 18, 2010, 10:56 pm

    Bill
    I have a fiduciary responsibility to the owner if I signed the listing with them. Although in a short sale the seller receives no proceeds from the sale(this does not include hafa funds) , I still need to negotiate the smallest deficiency possible. If an investor can get more than a good listing agent should as well.

  • Bill Gassett August 19, 2010, 1:31 am

    Pam you made the shortest comment here but one that makes the most sense. “I still need to negotiate the smallest deficiency possible. If an investor can get more than a good listing agent should as well.” Amen to that! Good agents that work short sales do just that. Investors hate discussions like this that go on in well indexed websites because they know that consumers reading them can see right through their malarkey.

  • Bill Gassett August 19, 2010, 1:44 am

    Bill you are being so short sighted with your comment because the goal is also to have the seller come away with the smallest deficiency possible. That happens with a higher sale price and not an investor flipping for profit. If you read the whole article Bill you would see that I clearly stated that disclosure of a flip is perfectly legal. SO BILL please tell me which part of the article is not true?

    It is painfully obvious in every forum or blog where a discussion like this comes up that investors get riled up because logic tells you if you can flip a home for profit there was money left on the table. Stop giving me the crap about saving people from foreclosure. It is so old Bill! A good agent who knows what they are doing does not need to be involved with investors in short sales.

    Of course if you are a Realtor you know this. You also know there are LOTS of Realtors that do not know the 1st thing about short sales who are practicing like they do. Some are the direct cause of people going into foreclosure. I have no problem throwing those agents under a bus. In fact I hope they get sued. I am not one of them. I will agree with you and say that I am lucky. It is rare to never have a short sale get rejected. I do however, know what I am doing. I don’t let a seller accept offers that have no chance of happening.

    The probability of a short sale not being approved goes up exponentially when an investor is involved and is making a profit. It is just common sense Bill. We both know on many occasions an appraisal is going to come back for a higher amount and the investor will not come up.

  • Clay August 19, 2010, 4:15 am

    Bill,

    I am a Realtor and short sale investor. The largest challenge I see with your entire article is that you believe that a Realtor has any iota of an area of expertise to know what a seller’s best interest is and what their best terms would be. You seem to have the typical “I’m a Realtor, Attorney and CPA too” mentality many of the Realtors I run into share. I will only buy and flip a property from a seller who has legal representation. They MUST have an evaluation first to ensure that deed in lieu, bankruptcy, etc. does not serve their best interest given their holistic financial situation . Most help-seeking sellers come to Realtors upside-down and want to short-sale their house. A typical Realtor drules at the opportunity to get the listing and make money, shoves a disclaimer in the sellers face to sign “advising” they seek legal and tax counsel, then go on with listing the property for short sale. Did you know that interpreting the terms of an estoppel (acceptance) letter from a short-sale lender is practicing law and a felony? Did you know that talking about anything regarding a seller’s potential personal repercussions is practicing law and a felony? Your little hold harmless agreement wont protect you from practicing law. And there are ambulance chasing attorneys studying this law to file suits against Realtors who have done so, resulting in deficiency judgements and/or high tax consequences that force the seller into bankruptcy several years ofter the transaction.
    Let me give an example of a recent transaction I did where the seller actually saved nearly $100k in taxes because their attorney negotating the lender down as low as possible, giving me a good A-B price and creating insolvency for the seller (on an investment property) on the day of the A-B closing. If the lender had taken the B-C (end buyer) price, the seller would have still been solvent, therefore leaving the seller liable for taxes on a $350k 1099c from the lender. AND YES, THE TERMS WERE FULL SATISFACTION OF DEBT, preventing potential deficiency judgement. In sum, THE LOWER SALES PRICE SERVED THE SELLER’S BEST INTEREST!!! Good thing they didnt have you or another so called “real estate expert” renegade lookin’ out for the their best interest by bringing the HIGHEST offer to the table you could possibly find.
    BTW of course if disclosures are not provided and return receipt of the disclosures from the lender are not documented, it is bank fraud. However, the majority of short sale investors DISCLOSE, unless they are absolute morons. Actually, I’ve never met an investor that doesnt disclose. THE BANKS DONT CARE IF YOU FLIP; THEY LIKE THE FACT THAT THE INVESTOR HAS LOTS OF CASH AND WONT BAIL AFTER 90-120 DAYS of negotiations. They want to clear their books so tey can lend ou 10x+ that amount of bad debt and earn high interest on it! And what do you think all this TARP-bailout money is for? The institutional lenders actually get reimbursed the majority of their short losses, AND THEN THE SHROT LENDER 1099’S THE SELLER, SO THEY END UP PROFITING OFF OF THESE TRANSACTIONS!!! And you care about the freakin bank??? They are double dipping! I know, I know… The lenders have done a great job hearding NAR and their sheep into this paranoia.
    Another example of the advantages to the seller with the investor model is the investor also can use the profit margin we create to pay-off promissory notes the seller might be required by junior lenders to carry back in order to release the property in the short sale. I paid off a $42,000 promissory note for a seller 2 months ago. This very transaction situation would have gone to foreclosure if it hadnt been for the investor short sales model, because NO ONE would agree to sign off on such terms!!! If happens all the time… We get the debt settled when no one else can.
    My challenge with writers like yourself is your complete ignorance of the laws and the seller’s actual best interest from a wholistic financial and legal perspective. Yet you go out jumping on the band-wagon of the dumbmasses and perpetuate the rampant paranoia of these types of legal and ethical transactions that help everyone involved (AS LONG AS THE SELLER HAS LEGAL REPRESENTATION). BTW, no I am not a lawyer and do not represent clients. I am an investor who has cash available for a few very good foreclosure defense attorneys to use to negotiate the debt immediately and best outcome for the seller upon determining short sale is in the seller’s best interest. The challenge is 80% of the sellers never even get to meet me because of c-blocking Realtors of your ilk. If you have any comments or want to bring any more of your “expertise”to the table and try and stump me, bring it on. I will win. You can also bring on the large amount of ignorant Real Estate attorneys who make similar judgements you do, yet hide under their desk when asked to bring the legislation to the table that backs their “professionak opinions.” BTW, to other ss investors out there, go to a commercial RE attorney, foreclosure defense and/or transactional attorney for counsel on this; residential real estate attorneys get lost outside of the NAR/BAR contracts…
    Clay

  • Bill Gassett August 19, 2010, 11:48 am

    Clay – I don’t do any of the things you mention in your comment. I have legal counsel that negotiates all my short sales with the lender. This allows me to keep my time free for what I do best which is sell homes. I don’t want to be acting as a lawyer or CPA as you suggest. I agree with you completely on that argument. The rest of your argument…You bring one isolated instance to the table as defense for what I wrote about WHICH IS short sale fraud.

    Why does every investor that comments on an article like this just focus how they do everything above board and legal? This article is about people that DON”T. Wake up and stop preaching that this stuff does not go on everyday in America. Just because you have not met a short sale investor that works this way does not mean it is not happening. OH unless the National news has it all wrong???

  • Sam August 19, 2010, 2:37 pm

    Bill, You stated
    “The fact of the matter, despite what you said, is that the seller will more than likely be on the hook for a larger deficiency if they accept a lower offer.”

    This is one reason I would question your sources. Do you have proof that this is true? While it may follow “logic” to say the seller would be on the hook for a larger deficiency because of a lower price it is not often the case. The terms of the payoff are always negotiable.

    You also stated:
    “Just because you have not met a short sale investor that works this way does not mean it is not happening. OH unless the National news has it all wrong???”

    Are you saying that your sources are the National news?

  • Sam August 19, 2010, 2:44 pm

    To be more direct and make a statment rather than answering a question with a question.

    I will say that YES the National news has it mostly wrong…

  • Bill Gassett August 19, 2010, 3:16 pm

    Come on Sam are you serious?

  • Sam August 19, 2010, 7:02 pm

    At best the National news is vague. Many investors ARE helping homeowners and present a far more viable solution than most realtors. You are the only one I have heard claim they can close 100% of their SS listings. In my area the average is 13% which is……..not so good. 87% of homeowners are left to face foreclosure after their realtor failed to negotiate a deal and 3-4 buyers walked after growing impatient. This is on market value sales!

    Any credible investor will not take an upfront fee. The ones taking an upfront fee and walking away are not short sale investors they are scam artists pretending to be investors.

    A rift has always been around between investors and agents especially when dealing with an investor’s property acquisition. So this is nothing new.

  • Clay August 19, 2010, 8:12 pm

    Bill,

    Ok, there it is. The MAJORITY of REALTORS do not use legal counsel to counsel their sellers and negotiate their short sales, so based on your premise, everyone should LOOK OUT FOR REALTORS! The fact is, every time I read articles from Realtors flaming about investors like you do, you presume most investors are illegal and unethical and dont care about the sellers best interests, accept for tiny disclaimers you mention at the end of your articles. The investor model has the greatest likelyhood of success in a short sale over a conventional straight sale becuase the investor wont flake out and they have cash to close upon settlement. Yes, the investor goes in low at first, accept, guess what? The bank my deny or counter, at which time an updated CMA is provided and another higher offer is submitted. NOW the short sale negotations are at the phase in the loss mitigators pipeline so that negoitations can go back and forth quicly until the lender gets to a final number. If that number is less than the best C buyer offer we have on the table, then we can rightly cash out the lender and sell to C for a profit. If the lender and the best C offer are so close we investors cannot make a profit, to serve the seller’s best interest, the attorneys have us investors step out of the way so the lender and C buyer can close directly for the seller’s best interest. Sometimes the seller wants us to continue to negotaite and create a margin to pay off residual debts, as I mentioned earlier. Bottom line is the investor funds and our offer was there to dredge thru the entire short sale process with the lender’s loss mitigator. We do it in the right order–debt settlement AND THEN market the property, not Vice-Versa. BTW I run across Realtors who get offers from other investors who all the time. Not once in the 1600 transactions we have done have I ever come across a Realtor who has dealt with an investor presenting anything illegal or “scandalous.” So, is the National News wrong? Their job is to keep the public interested long enough to keep them until the next advertisement, and talking about the “good guys” never makes the news. Would you say the news fabricates sometimes? Would you say that the News appeals more to peoples emotions than rationality? If you disagree, you probably voted for Obama–see where the national news got us???
    Now of course there are probably investors out there that do invest illegaly. I promise you there are more REALTORS (proportionlly) out there breaking the law than investors. Real investors are creative and sophisticated, and bad ones get weeded out very quickly. We get audited sometimes when lender fraud departments notice 2 closings within a short period of time. When we remind them that they have recorded the disclosures and agreed to the terms of the transactions, they are like, Oh, ok… You’re good!
    BTW, on the 1600 transactions we have done, we have received FULL SATISFACTION OF DEBT on every first mortgage, and most second mortgages, laving no possibility for deficiencies. And to qualify for short sale, most people are insolvent as heck anyway so whether it is their primary residence, HELOC, refi or investment property, IRS form 982 saves them from any costs. ACTUALLY, FROM A TASX STANDPOINT A LOWER SALES PRICE 95% OF THE TIME ONLY MAKES THE SELLER MORE INSOLVENT, thus even more qualified to be forgiven for the 1099c obligation!!!
    Perhaps you should interview me and write and article that would actually help Realtors understand the difference between doing t right rather than wrong, rather than yacking a long dramatic diatribe skewing the reality of good, hard working, optimistic, capitalistic, altruistic, entrepreneurial investors out there (which are most of us, btw)!!!

    Clay

  • Ryan August 19, 2010, 8:23 pm

    Bill,

    Just curious why you deleted my lengthy (non attacking) reply? I had valid statements, most of which other posts have done a better job of explaining, so why were they removed?

    I’m happy to see the comments made by posters demonstrate how we (short sale investors) have good business practices which do help the homeowner. My guess is the intent of this article was to increase business for yourself. I just wish you didn’t provide misleading information.

    All the best,
    Ryan

  • Bill Gassett August 19, 2010, 9:46 pm

    Sam – I am not claiming I will close every short sale I list. Some of it is just sheer luck. I am sure eventually something I list will not close. I do know what I doing though so it changes the chances drastically. When a buyer wants to purchase a short sale of mine they have to wait a minimum of 90 days for short sale approval. This weeds out many of the buyers that would be wasting the sellers time.

  • Bill Gassett August 19, 2010, 9:59 pm

    Clay – Any intelligent home seller who needs to do a short sale should absolutely interview the Realtor they are going to hire very carefully. The fact is there are many Realtors who have never worked a short sale transaction before and don’t know the 1st thing about them. Things like taxes, debt cancellation and others that you mentioned are things they have no knowledge of yet pretend to know because don’t realize there are serious consequences for their actions. Just like anything else they see a trend and want to become part of it. I have not problem with that as long as someone actually knows what they are doing. After all we are talking about someone who could be getting screwed severely.

    The same holds true for a home seller who meets with an investor if there are no Realtors involved. I am sure you run a tight ship Clay and do everything above board. My article does not say that just because an investor is involved the transaction is fraudulent. The article serves a purpose of making people aware that their are bad people out there that will take advantage of others.

    If you would like to write a guest post for me I will consider allowing you to do that. You can tell your/investors side of the story and how to do it honestly and ethically.

  • Bill Gassett August 19, 2010, 10:03 pm

    Ryan I did not delete anything? There is no misleading information here Ryan. You are interpreting it how you like because you are in investor. The fact is I have shown examples of fraud. There are people that do this kind of thing. I did not say that because an investor is involved, the transaction is fraudulent.

  • Sam August 20, 2010, 4:13 pm

    Bill,
    It is fair to say you did put a disclaimer in your article saying “if the bank knows a flip is going on than it is not fraud” (which is exactly the intent of most short sale investors) you do however say that if an investor is involved it will most likely NOT be in the best interest of the owner. This is misleading.

    From your title, a normal reader would infer that if an investor is involved you will be dealing with fraud. Take a step back and look at your choice of words in the title and you will see what I mean.

    Cheers

  • Bill Gassett August 20, 2010, 6:43 pm

    Sam – I disagree that if someone reads the entire article they are going to automatically assume that all investors are fraudsters. If I replaced the word investor with the word “Realtor” do you think every reader would automatically assume that every Realtor who holds a license is a crook?

  • Sam August 21, 2010, 4:43 pm

    When talking about short sales with an investor involved you wrote:

    “If you are selling a Massachusetts home and it happens to be a short sale let me give you some words of wisdom – steer clear of this arrangement!”

    There are good investors and bad investors just as with realtors. You fail to clearly make any distinction between the good and the bad in investors like you do with realtors.

    I realize the article is just a pitch for your services so I expect some bias toward realtors to start with.

    I rest my case!

  • Bill Gassett August 21, 2010, 9:15 pm

    Sam my advice would still be the same. You are trying to put words in my mouth that are not there my friend. The article does not say that every investor is a fraudster. What the article does show is there are instances of fraud that go on with investors involved. You take exception to that because you happen to be an investor that works with short sales.

  • Charlotte August 23, 2010, 9:57 pm

    Bill, what instances? What instances do you refer to that INVESTORS are involved? You outlined ONE scenario and the only scenario in the “national news” that it compares to were two REAL ESTATE AGENTS!! The example of fraud you give seems to be based off the case in Connecticut which two real estate agents were involved, so could you please cite the case that you are showing an example of where a “FLOPPING” real estate INVESTOR was involved???

    So in your example that you show in the article what case involving an investor did it come from? Exactly what case with this scheme that you highlighted involved an investor?

  • Bill Gassett August 24, 2010, 12:54 am

    Charlotte are you kidding me? Short sale fraud happens every month all over the United States! You name it Texas, California, Florida, Colorado, New York. Short sale fraud is everywhere. The case in CT is only the most recent example that is in the National news at the moment. Just Google it Charlotte and you will get your answer. Of course you would have to be pretty naive not to know it does not exist if you are an investor.

  • Charlotte August 24, 2010, 1:34 pm

    “What the article does show is there are instances of fraud that go on with investors involved”

    Bill, I’d like to know where in your article are you citing an instance of fraud involving an investor. Just because you SAY there is monthly fraud with investors that doesn’t mean anything. There is monthly fraud with agents too right!! ?? (well to be honest, I can only cite a few cases of Realtor fraud so NO I’m not going to say there is monthly fraud with Realtors happening because I only know of a few cases) Show me the article that you pulled your example from. What case are you referring to in your article? Show me the cases of investor based short sale fraud.

    I can certainly show you the agent based fraud, so show me the cases where you felt compelled to write this article. I think that’s my problem here. You losely throw out the title of this article highlighting investor fraud, but you give an example of what an agent did in the body of your article. You should give an example of INVESTOR fraud if that’s what you’re going to title your article. OR REALTOR/AGENT fraud.

    This is merely your opinion at this point and not fact. Show me the monthly investor short sale fraud cases.

  • Bill Gassett August 24, 2010, 2:01 pm

    Charlotte the fact that you are being so naive amazes me!! Do you want court docket #’s?

    Here is one for you Charlotte:

    Gregory Chew, 42, of Waynesville, was convicted in Dayton in March following a 15-day trial for his role in a mortgage fraud scheme involving 57 investors and 246 residential properties located throughout the greater Dayton area. He is awaiting sentencing.

    Do I really need to provide you with a list of these Charlotte? Any consumer can go to Google and get plenty of these!!!

  • Teresa Pringle August 24, 2010, 2:43 pm

    Bill, you wrote:
    “Why does every investor that comments on an article like this just focus how they do everything above board and legal? This article is about people that DON”T. Wake up and stop preaching that this stuff does not go on everyday in America. Just because you have not met a short sale investor that works this way does not mean it is not happening. OH unless the National news has it all wrong???”

    I can tell you why investors feel the need to defend their business – it’s because for some reason you feel the need to throw out a blanket statement like “steer clear” of ANY of these types of deals. How can you honestly recommend that? If this article is about the “bad” investors that commit fraud then why not say that the Realtor should do their due diligence when deciding whether or not to work with an investor?

    This market is difficult enough without people feeling the need to bash each other. I wish I understood your motivation for writing such a slanderous article if your intentions are only to alert people to the potential of fraud – not the guarantee of it.

  • Teresa Pringle August 24, 2010, 2:55 pm

    Bill, you also wrote:
    “Bill you are being so short sighted with your comment because the goal is also to have the seller come away with the smallest deficiency possible. That happens with a higher sale price and not an investor flipping for profit.”

    Are you saying that your sellers end up with deficiency judgments and that the only way you get a smaller one is to sell for a higher amount?

    If this is the case let me be very frank in saying that your attorney has no clue what he/she is doing. Also – your correlation assumption between the sales price and the amount of the deficiency is 100 DEAD WRONG. Ever know a loss mitigator well enough to have them send you a copy of THEIR short sale guidelines? If you would like I can send you a copy of Wells Fargo or Bank of America’s. It explains in clear detail how they are taught to negotiate deficiency judgments and promissory notes and GUESS WHAT? It has nothing to do with sales price!!!!

    I commend you for the work that you do to serve your clients and I do believe that you truly care about their best interest. I am not here to bash you or your opinions, but rather, make a suggestion.

    What if everyone on this thread, including you, and your attorney, got together as a mastermind group and exchanged ideas and contacts? Don’t you think more people would be served as a result?

    Honestly I don’t think the “bad” investors have the guts to respond so publicly. I have actually GOTTEN business from posting on ActiveRain and usually it’s a result of a thread like this one.

    Think about it.

  • Bill Patterson August 24, 2010, 3:33 pm

    I don’t know what happened to my post (I now know how Ryan felt), but I applaud what Charlotte and Teresa have had to say in their recent posts.
    Bill, why don’t you go ahead and post what I wrote last evening? I did not say anything derogatory about you, but just disagreed with your condescending reply to my first post and quoted examples of misleading statements and un-truths in your article.
    Bill

  • Bill Gassett August 24, 2010, 4:19 pm

    Teresa I will modify the post to include the language “Realtors should do their due diligence when deciding whether or not to work with an investor”. I am more than fair with what I am writing here.

    I did not say there was a correlation between sales price and the deficiency!! What I said was “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.” This is a fact Teresa whether it is an INVESTOR or not!!

    I do care about my clients and the fact remains that an accepted offer price under market value stands are far greater chance of being rejected by the lender. Please don’t tell me this in not the case either it is SHORT SALE 101!.

  • Charlotte August 24, 2010, 4:55 pm

    Bill, I asked you to provide a sample of SHORT SALE FRAUD! I’m not going to debate you on the 1000’s of other mortgage fraud cases THAT AREN’T SHORT SALE RELATED.

    The title of your article is BEWARE of the SHORT SALE INVESTOR FRAUD!
    the case you just answered me with has NOTHING to do with a short sale or flip property.

    I’m asking you to provide me, other investors, other realtors/agents, and the public at large the CASE that you highlighted in your article. What EXACT case were you giving an example of? What CASE OF SHORT SALE FRAUD did you highlight in your article that involved an INVESTOR???

    Again your attention to detail is very scary here. You are making a blanket statement that you cannot show where you’re example came from.

    If I make a statement: Beware of The Short Sale REALTOR|Short Sale Fraud
    I better be prepared to at least show ONE specific example of a case that I’m aware of. You’re throwing out mortgage fraud cases that have NOTHING to do with a short sale. You can’t very well educate people if you can’t provide the facts. You have no right trying to educate anyone in this particular article because you have yet provide an example of short sale fraud involving an investor.

  • Bill Patterson August 24, 2010, 6:31 pm

    Your reply to Teresa……

    “I did not say there was a correlation between sales price and the deficiency!! What I said was “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.” This is a fact Teresa whether it is an INVESTOR or not!!”

    As I said in my disappearing post, in negotiations with the lender, we would just raise an offer that the lender felt was too low. This is called “Negotiation” and is what any negotiator, be it an investor, Realtor or attorney should be doing. So if the short sale will not close, it’s not because of an investor low offer. It is because an end buyer can not be found that will pay as much as the lender requires. It is easy to understand that having an investor in place to do these negotiations while attempting to locate an end buyer is advantageous. The investor does not back out as soon as the lender asks for more return on their investment, starting the process all over and moving the homeowner closer to foreclosure. We continue to negotiate while looking for the end buyer. The reason it may fail is if the lender has unrealistic BPO or other information and wants more than the market will support.
    Bill

  • Bill Gassett August 24, 2010, 8:07 pm

    So Charlotte you already know about the one in CT. Why do I need to provide you with anything?? Is the fact that you are so aggressively asking for an example because you don’t think short sale fraud is occurring across America? I suppose Charlotte you also don’t believe that the FBI has got task forces all over the country looking for this exact type of transaction?

    A majority of the short-selling fraud is related to LLCs and investment companies trying to make a quick profit,” said Tim Grace, vice president of fraud analytics at CoreLogic. LLCs refer to limited liability corporations.

    The Treasury has “put reasonable protections in place” to prevent short-sale fraud, requiring that the buyer and seller have no hidden relationship and banning most resales within 90 days, said Laurie Maggiano, policy director of the department’s Homeownership Preservation Office in Washington.

    Suspected property-valuation fraud almost doubled from the end of 2007 through the first quarter of this year, according to a June 8 report by Interthinx Inc., an Agoura Hills, California- based company that sells mortgage fraud detection software.

    In addition to banks losing money, “flopping” may hurt homeowners who complete a short sale and face higher deficiency judgments as lenders seek to recover unpaid mortgage balances, Ann Fulmer, vice president of Interthinx, said in an interview today on Bloomberg Television.

    I know, I know Charlotte….Corelogic, Bloomberg, Interthinx and the DHPO are all not credible sources of info either.

  • Charlotte August 24, 2010, 11:25 pm

    Bill,
    “Why do I need to provide you with anything??” Because the title of your article clearly states INVESTOR SHORT SALE FRAUD. You state that you’re giving an example of short sale fraud, but what you can’t seem to openly admit is that your example is AGENT FRAUD.

    THE CASE IN CT involved TWO AGENTS!!! OMG! I’m asking you to provide me with a known conviction case of an investor. You certainly can show an example of a case where two real estate agents were caught in a short sale scheme, but I’m asking you where are your examples of INVESTORS involved in short sale fraud.

    I’m not disputing that there isn’t all sorts of mortgage fraud in the world today, which hits headlines every day, but let’s get back to the basics. The TITLE OF YOUR ARTICLE clearly states INVESTOR SHORT SALE FRAUD, so EXACTLY what investor short sale fraud are you referring to?

    Anyone can regurgitate doom and gloom of the mortgage fraud industry, which you are clearly good at, but your article is about investor SHORT SALE fraud, so let’s hear it. I’m not disputing the credibilty of your sources. Show me where your credible sources convicted a short sale investor and how it’s related to your rant about investors.

  • Bill Gassett August 24, 2010, 11:37 pm

    Charlotte – Can you freaking read??? Please don’t make me delete your comments. This is getting real old!! Just look at my last comment please. These are cases of short sale investor fraud. Why do you continue to insist that this is not happening?

    There will be a lot more convictions coming. Do you think the Realtor case in CT is the only one by the way? There will surely be more coming with other Realtors involved as well. There are plenty more bad people in the world Charlotte. The FBI is going to get them too.

  • Chez August 25, 2010, 1:18 am

    Bill,

    I’ve been reading some of your articles/blogs for a while now, and have always gotten some very useful information, for that I thank you. You seem to dig a little deeper than most and that’s something I always appreciate. However, in this particular case I believe you have mis-interpreted a lot of aspects of what you’re calling short sale fraud. In combination to some of your remarks above I have to say I’m disappointed. Some parts of your article and comments are mis-leading, others are downright false. The last thing the housing market needs right now is more bad information. Unfortunately you’re doing more bad than good here, let’s try a little harder next time.

  • Charlotte August 25, 2010, 1:25 am

    Yes Bill. Thank you. I can read. Can you? I still have not seen you post an actual case of INVESTOR short sale fraud. I’ve seen you post AGENT short sale fraud or an example of it based on the Connecticut case. Again, the title of your article based on YOUR example should be AGENT short sale fraud.

    You spout sources of mortgage fraud. There is all sorts of mortgage fraud…all different ways to defraud, and you say that you’re providing an example of investor short sale fraud, but what you’ve provided was an example of agent short sale fraud.

    You win Bill. It’s just tiring at this point. Good luck with your blog. I’m sure you’ll get loads referrals now.

  • Sam August 25, 2010, 1:29 am

    If you read the FBI cases of fraud and ensuing indictments you will only see one involving short sale fraud with an agent/investor involved. The typical “short sale fraud” case is about people not adhering to the “arms length transaction” requirements and allowing the homeowner to benefit or selling to a relative and not about investors making a profit even though the national media seems to think otherwise.

    BTW, a lot of the FBI fraud indictments have to do with RE agents falsifying loan docs, income statements, down payment % etc. As well as a lot of indictments involving mortgage brokers, appraisers and teams of these people whose only goal is to manipulate transactions to extract money then leave the bank holding the tab.

    There is only one case of “short sale fraud” involving an investor making money on the deal. This case in CT is the only one! If you think otherwise please provide the cite(s) so we all can be educated.

  • Lynne August 25, 2010, 1:36 am

    LOL, sorry… but this reminds me of the analogy that everyone that sells drugs is an addict and druggy. There are pharmacies, legal.. ethical.. moral AND THEN there are illicit drugs rampant on our streets. Would you say everyone who takes a pill is an addict Mr. Bill?
    LOL… and that reminds me of another funny…. Mr Bill… Mr Bill, but now I’m just showing my age 😉

    Anyone want to do legal, moral and ethical Short Sales business in Arizona (with an investor), give me a shout!

  • Renee Burrows August 25, 2010, 2:11 am

    Hope you don’t mind gratuitous links to support your case that this is FRAUD and the FBI sees it as fraud:
    http://newhaven.fbi.gov/dojpressrel/pressrel10/nh021910a.htm
    http://newyork.fbi.gov/dojpressrel/pressrel09/nyfo052009c.htm

    It is fraud if it is not disclosed that the investor is seeking to purchase the home for less than it is worth and double escrow it. They are also taught in infomercial real estate school on how to sway the appraisal and BPO.

    Thanks for the informative article Bill. I have the infomercial real estate agents contacting me all the time and unscrupulous homeowners in distress. It is about time someone wrote such a comprehensive article to warn them of the dangers of dealing with infomercial real estate agents and how it can actually bite them in the ass.

    Here in Nevada they can think they are out of the woods but our SOL is 6 years!

  • Fernando Herboso August 25, 2010, 2:19 am

    Bill: I do a lot of short sales and just today alone I received 2 offers from investors for two of my short sales listings.. .of course they are low balls. . .
    I feel that my clients are lucky that I’m here to shield them from investors that would love to make a quick buck with no regard for the homeowner that could lose thousands of dollars at the end.
    Realtors shield these investor from operating directly with unsuspecting homeowners. Their agenda is to intentionally advise them to default and convince lenders to take less than owed in a “short sale” of the house, then covertly arrange for someone else to come and purchase the home as soon as the short sale is completed leaving the investor with a nice sum of money as profit and the homeowner with a possible bigger deficiency judgment for the near future.
    A lot of investors will cry foul citing entrepreneurship and freedom to make money by investing. ..
    There is nothing wrong with that, as a matter fact I do that myself. .
    What I have a problem with is that for the short sales flips to work. .someone has misrepresented the actual value of the home.
    Example. . if you think you have a gold ring and I tell you and your bank that is a fake ring , then I buy it cheap .. .then turning around & sell it AS A GOLD RING to another person.
    That is illegal and immoral in my books!

  • Tom August 25, 2010, 2:32 am

    Hey Bill,

    I appreciate your passion and desire to take care of your clients. I have to say though that your Gregory Chew reference is very much off base. He was convicted of falsifying financial documents, artificially inflating appraisals, wire fraud, etc. http://www.mortgagefraud.org/journal/tag/gregory-chew

    That has nothing to do with investors buying short sales at a discount and reselling them for fair market value. For what it’s worth I know investors who won’t complete a short sale if the bank won’t waive the deficiency judgement. Every time that I’ve heard of the bank will waive the deficiency anyway. Realize that in most markets a short sale won’t sell because of the headaches involved, not to mention the cloud on title of a large mortgage and often times other liens, which makes buying at a discount more than justifiable and reasonable. It’s a bonafide service to all parties involved…not to mention the American way. Every good that I buy “retail” from a store has been purchased at a wholesale price and resold to me. I don’t mind because they provide me with the convenience I require. Just my two cents…. from one realtor to another.

  • Bill Gassett August 25, 2010, 2:34 am

    So Chez why don’t you tell me what I have misinterpreted as short sale fraud? Please show me one false part of the article.

  • Bill Gassett August 25, 2010, 2:35 am

    Charlotte the examples I cited are short sale investor fraud. I really don’t know what you are looking at.

  • Bill Gassett August 25, 2010, 2:38 am

    Renee thanks for the links. Who knew that short sale mortgage fraud was happening in America. I really can’t believe it!

  • Bill Gassett August 25, 2010, 2:41 am

    Fernando thanks for your comments on short sale investor fraud. I know you do an awful lot of short sales. We both know there is nothing wrong with an investor selling for profit as long as it is disclosed. We both also know the chances are greater that a lender will say NO to a low ball offer that is not within reason to the BPO.

  • Bill Gassett August 25, 2010, 2:45 am

    Tom I don’t have a problem turning a profit by reselling a short sale. The short sale investors you know are obviously very honorable and I commend that. I would not agree though that every investor will not buy a short sale without complete debt removal.

  • Charlotte August 25, 2010, 2:54 am

    Bill you provided the Connecticut case which was AGENT FRAUD. Renee actually provided the first INVESTOR fraud case. Thank you Renee.

    So far that’s it. One investor fraud short sale case and one agent fraud short sale case.
    sigh….

    Let’s make a distinction here…not all MORTGAGE FRAUD is a SHORT SALE INVESTOR FRAUD SCHEME. I think that’s the problem.

  • Bill Gassett August 25, 2010, 3:05 am

    What does this say Charlotte – “A majority of the short-selling fraud is related to LLCs and investment companies trying to make a quick profit,” said Tim Grace, vice president of fraud analytics at CoreLogic. LLCs refer to limited liability corporations.”

    I am so glad that Renee was able to help with the information you wanted that I did not provide. I still don’t know what your point is. There are lots of different types of short sale fraud. The fraud can be with Realtors, investors and even lenders. themselves.

  • Sam August 25, 2010, 6:22 am

    If you read the FBI cases of fraud and ensuing indictments you will only see one involving short sale fraud with an agent/investor involved. The typical “short sale fraud” case is about people not adhering to the “arms length transaction” requirements and allowing the homeowner to benefit or selling to a relative and not about investors making a profit even though the national media seems to think otherwise.

    BTW, a lot of the FBI fraud indictments have to do with agents falsifying loan docs, income statements, down payment % etc. As well as a lot of indictments involving mortgage brokers, appraisers and teams of these people whose only goal is to manipulate transactions to extract money then leave the bank holding the tab.

  • Lenn Harley August 25, 2010, 11:03 am

    Good information. If experience with short sales has taught me one thing, it is that an owner/seller’s lender will take the time to examine the contract of sale carefully. Lenders are now looking for more than just a short sale contract. They are looking for a financially sound buyer and banks are now looking for a contract price close to market value. The time between contract acceptance and the lender’s valuation by appraisal or BPO is time that the property cannot be marketed to owner/occupant buyers. Often the loss of time will simply put the owner closer to foreclosure.

    If short sale listing agents examine the financial profile of buyers making offers they can usually determine if a buyer is going to be an owner/occupant or an investment buyer. This takes experience. One thing that I’ve found is that investor buyers are often seeking to finance that short sale purchase at owner/occupant interest rates which are far lower than investor owner rates. If the buyer clearly owns other real estate, especially a principal residence, beware. They are likely an investor buyer and the chance of getting to settlement are remote. However, the property will be tied up and not available to legitimate residential buyers.

    Investor buyers who are working on a small margin are usually seeking a quick settlement. They need to settle quickly so they can quickly resell before making mortgage payments. Once a contract with an investor buyer is accepted, investor buyers are not going to wait for the 3-8 months for lender approval and will be seeking a quick end to the contract and return of their deposit. However, the time your property is under contract to that investment buyer may discourage legitimate owner/occupant buyers. Another clue for an investment buyer is small deposits. Owner/occupant buyers will make a reasonable deposit and wait for the bank approval. Investor buyers seek a contract with small (walking away money) deposits.

    Owners who are seeking a short sale resolution to the sale of their home, must work with a listing agent who has the knowledge and experience to evaluate not just the offer, but the buyer behind the offer. The offer may look good, but is the buyer seeking a home for a quick flip or flop? Inexperienced listing agents may not know the intricate nature of short sales that it takes to, not just get a contract, but to get to the settlement table and get financial relief for their owner/seller.

    While short sales have always been around, the “short sale industry” is only about 2 years old and only very experienced agents should be selected to manage these listings. Owner/sellers in financial distress can’t take the risk of relying on friends or relatives to manage short sales when the end result could be more than a short sale. The owner/seller is at risk of financial ruin for years to come.

  • Sam August 25, 2010, 2:26 pm

    Fernando,
    “Realtors shield these investor from operating directly with unsuspecting homeowners. Their agenda is to intentionally advise them to default and convince lenders to take less than owed in a “short sale” of the house, then covertly arrange for someone else to come and purchase the home as soon as the short sale is completed leaving the investor with a nice sum of money as profit and the homeowner with a possible bigger deficiency judgment for the near future.”

    Really Fernando? You are clueless about how MOST short sale investors work. There are scam artists out there who would direct a homeowner to default on the mortgage to do a short sale but these people sell back to the current owner or a close relative. It is the collaborated effort of both the scam artist and the owner to pull one over on the bank and lower their payments. THIS IS FRAUD.

    “What I have a problem with is that for the short sales flips to work. .someone has misrepresented the actual value of the home.”

    Again a clueless response even though it is not your fault because that is what you are taught in SS 101. The truth of the matter is that the banks guidelines are based on assessed risk. Why not take a 35% hit on value now instead of spending money on attorneys, keeping the property taxes and insurance up to date as well as leaving the home vulnerable to damage. The other risk to the lender is that the owner might drag things out by trying the “produce the note” trick or file BK.
    Then after the lender has spent thousands getting the deed back through the “right of sale” and in some states waiting for the redemption period to end (6 months after the auction in MN) they must take a 27% deduction from value to even sell the thing.
    The argument “a lender will never leave money on the table” is an immature and uneducated argument.

    The lender rarely ever wins in a foreclosure. If there is equity in the property it will be snatched up at auction often for 1.00 OVER what is owed to the bank!!!!! These sales have NOTHING to do with property value. Even if the bank could auction it at value the extra money would go to junior lien holders or the owner.

  • Missy August 25, 2010, 3:17 pm

    Bill, in my area, the Title Companies look out for us and will not do a close on the same house. They smell a rat.

    Yes, I have been contacted by these so called investors, who want me to list it at this price, take and offer at this price, then relist for them at a higher price.

    I will not participate.

    As your post indicated and had some of the comments read, you were not disparaging investors but those who want to short change the banks, knowing the house is worth more.

    We work with investors all the time, nothing wrong with buying a home low, fixing it up and reselling.

  • Sam August 25, 2010, 4:12 pm

    This is great! Agents telling investors the “right way” to conduct business (buy, fix up and sell) ROFL

  • Renee Burrows August 25, 2010, 6:14 pm

    Sam, you almost have me convinced. What happens when the secondary buyer backs out at the last minute and the investor is stuck to close? More than likely many of the investors Bill is talking about have no “skin in the game” nor any cash to close.

    The homeowner could have lost valuable time at this point and get foreclosed on and be stuck with a higher deficiency tab to pick up. How is that any different than the stall tactics you mentioned above?

  • Sam August 25, 2010, 8:37 pm

    Renee,
    The investors who don’t have hold capital to back their purchase they are partnered with people who do. If an investor purchases with 10% “skin in the game” a private or hard money lender is going to be willing to back a purchase as long as their loan does not exceed 60-65% of value. This gives the investor time to find another buyer using borrowed monies at a rather steep interest rate but if it costs you 4k to net 25k who is going to complain.

    In the old days (when short sales first started an investor could use the end buyer’s money to fund his purchase. This is called a simultaneous closing. The title companies will no longer insure the “simo” and require the investor to close on the first transaction (fully funded) before completing the second.

    Investors are in the business to earn a good reputation and show that they can perform. If they can’t their business will be short lived. It is no different than any other business. Same rules apply.

    The important part is that the investor includes a statement of intent to resell immediately for a profit in the addenda sheet of the contract that is sent to the (lender and seller) and that they don’t do 2 listing prices UNLESS the second listing is lower than the first. The intent is to move the property quickly not wait for a full market offer. If the investor can offer the property at a discount and take a lesser profit from the deal it gives an end buyer some incentive to wait around. They are also in first position contract with the investor so no one can bump them out by submitting a higher offer without breaching the contract.

    The other significant part is that if an investor knows what he is doing and cannot create a spread they will turn the deal over to the end buyer and submit an offer for them. The investor does not make any money on these deals (sometimes a negotiation fee) but he protects his reputation as well as showing that he is willing to work to protect the owner even if it means receiving nothing in return.

  • Sam August 25, 2010, 8:46 pm

    The first line was supposed to read: The investors who do not hold the capital to back their purchase are partnered with people who do.

  • Sam August 25, 2010, 9:07 pm

    A lot of these deals are actually held for 31 days anyway because the negotiator cannot get the lender to remove their (no resale for 30 days) restriction in the acceptance letter (it can be removed in a lot of cases). The other reason to hold is if the secondary buyer’s lender requires a 30 day hold. This just requires the investor to get everything lined up (sometimes you have to scramble) It is just part of the business.

  • Ryan August 26, 2010, 4:14 pm

    Bill,

    I’m going to keep this brief since it might be deleted again…

    Perhaps you should update your article and make it clear that the examples you provided are fradulent, however, not all short sale transactions involved with investors are fradulent? Wouldn’t that be more fair, moreover, TRUE?

    For the investors on this board who have done a good job explaining the benefits of a how to ethically do short sales with an investor, there’s something I learned not too long ago. You will not convince every realtor to do business the way we do. Some “will get it”, others just “won’t get it”. Although I’m guitly of trying to explain what we do, and how it benefits all parties involved..until I’m blue in the face. Truth be told, our time is better spent on those who BELIEVE what we do.

    If my post won’t be deleted, I would be more than happy to post an example of deal I’ve done. I’d like the original poster to tell me how:

    1. Fraud was involved
    2. How I didn’t act in the best interest of the homeowner
    3. How the bank was defrauded
    4. How the agent violated their fidicuary responsibility.

    All the best,
    Ryan

  • Bill Gassett August 26, 2010, 8:47 pm

    Ryan you must have not read the article fully because I do not say that all short sales with an investor involved are fraudulent. That is clearly stated in the post as well as the numerous comments that have gone back and forth between myself and many investors that have visited here. In any business including mine and yours there are good and bad eggs.

    The article clearly states that is a seller is approached by an investor who wants to buy their short sale home they should do their due diligence.

  • Lisa Udy August 26, 2010, 8:55 pm

    Quite the discussion here Bill. You are being eaten alive by these investors! I do agree with them that short sale agents may be as much to blame as the investors, especially if the investors know what’s going on.

    However, you are not one of these agents, and I totally agree that your only job is to get the best terms for your sellers and an investor may not be the best buyer for your sellers. I wrote a post on my blog, sorta stealing your thunder, but I defended your point of view. You should check it out.

  • Short Sale Software August 26, 2010, 8:56 pm

    There was another case not too long ago in Nevada. I wrote about it on my own blog. I’ll see if I can dig it up.

    The case in CT though was clearly fraud, because there was no disclosure or an arm’s length transaction. I actually wrote about this in REIClub and advocated it as bad practice for investors (duh) … no disclosure

    http://www.reiclub.com/forums/index.php?topic=45837.msg223410

  • Ryan August 27, 2010, 4:21 am

    Bill,

    I have read your complete article, but I still have an issue with it’s generalization. Two examples:

    “A short sale investor has one goal in mind and that is to buy your short sale at the lowest number they possibly can”

    -While this is one of the main goals, its not the “only” goal. What about getting the homeowner out of possible deficiency, possible 1099, signing a promissory note, avoiding foreclosure, getting agents the commission they deserve, getting the end buyer the home they want…the list goes on.

    “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”

    -I’ve let homeowners out of my contracts. My first deal to be exact. No risk? Time, money, relationships with other professionals, my agreement to the homeowner (yes I value my reputation greatly)…no risk here?

    “Your home will be off the market tied up for months with this investor while you wait for the banks reply”

    -Wrong here as well. We have the property on the market the entire time of the short sale.

    The problem I have is your language used is misleading and will set a bad tone for investors. Based on the responses, you’re completely aware of this. I believe the article would have been better suited for informing the public of the types of scams to watch out for instead of generalizing. That is why you’re getting the type of hostile responses posted above.

    Ryan

  • Wendy Rulnick August 27, 2010, 10:45 pm

    Bill – This is a brilliant article. Undisclosed flipping schemes can be criminal. Worse, some agents act as the “investors” themselves with simultaneous closings in mind after they find a substitute buyer. It’s best to stay away. Thank you for spreading the word.

  • short sale investing student August 28, 2010, 1:09 am

    Excellent information for someone like me who is just learning about short sale investing. Great analysis!

  • Bill Gassett August 28, 2010, 4:21 pm

    Wendy – Thanks for the compliments on the article. I know you close quite a few short sales and may have even been approached by someone who did not want to disclose to the lender what their intentions were in the property.

  • Bill Gassett August 28, 2010, 4:35 pm

    Ryan – You are speaking for yourself when you mention that the investors only goal is more than just buying the property at the lowest price. I hate to break the news to you Ryan but without a great deal most investors could care less about the rest. I am sure you are good at what you do and probably are an ethical person but you are generalizing far more than I am when you say every investor operates like you.

    As far as letting people out of contracts, as an agent for the seller why in the world would I want to take that chance when I don’t have to? It is YOUR last statement that is misleading not mine. The home is only on the market because you are looking for another buyer to flip the home to make a profit. 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.

    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.

    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.

  • Sam August 29, 2010, 12:46 am

    Wow Bill! You are getting more worked up! Your article does not tell the whole truth and there are several misleading statements. I commented over on Bigger pockets as to the actual untruths in your article.
    Cheers

  • Bill Gassett August 29, 2010, 2:46 pm

    Sam – Getting worked up? Nah the only ones that get worked up are you investors who hate the fact that more and more people are realizing that you don’t need a middle man to successfully close a short sale.

  • Jackie P. August 29, 2010, 3:02 pm

    Posts from my computer are not being accepted, so I’m using a back door…Jackie’s computer!
    Bill,
    That should be a “White horse” you are riding and a “White hat” you are wearing while being the only one that has the seller’s best interest in mind.
    When a Realtor deserves to have someone stick up for them, I do so. You don’t deserve it! Actually, I never said you were “dumb”. You just refuse to listen or consider that you may not have all of the answers. As I have said, I posted on your article comments, some misleading and some false statements. The post said it was being moderated. Well I guess it got moderated right out of the site, just like Ryan’s post did. I will give you a couple of more examples. Sam has already done a good job!

    “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.” False! If the lender rejects an offer, the investor or any other buyer can respond to a counter from the lender. Most investors will continue until an agreeable price and terms are obtained. Many “retail” buyers will not, with the one that is accepted. This is where the seller loses and the process starts all over because they have been advised to place multiple offers on different short sale properties and go again.
    “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!!” False! False on one count and misleading on another! First, Realtors livelihoods depend on referral business and there is nothing wrong, unethical or illegal about referring business to an agent that is doing business with you and performing in a competent and professional manor. To call this a “short sale scam” (using your words) is ludicrous! The second thing is misleading. Getting the seller “the best terms and conditions” in a short sale means no or as little deficiency as possible. The homeowner gets no benefit from a short sale, so a sale price of $100,000 with no deficiency on their personal residence is as good as a sale price of $125.000 with no deficiency!
    “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”. False! BOA does not always have this language in their approval letters. In addition, FHA has placed a moratorium on their 90 day no re-sale requirement to allow investors to flip properties.

    The title of your article is also misleading. “Beware of The Short Sale Investor|Short Sale Fraud” In the whole article, there was one correct example of short sale fraud. The rest was misleading and / or false information that was intended to cast a disparaging light on legitimate short sale investing and to market your business. I have expressed disappointment at your condescending remarks to me as well as your personal attacks on others that disagreed with you.

    Now that you have moved to Bigger Pockets to continue this discussion away from the eyes of your readers, I hope that you will consider the input of the investors that have commented. I think I will also place this post as a comment on your article and see if it passes moderation.

    Bill

  • Bill Gassett August 29, 2010, 4:49 pm

    Bill you continue to amaze me. The fact of the matter is I can debate you all day long and the general public is going to see you for what you are… an investor who is also a Realtor making a profit on someone losing their home. You know what Bill that is perfectly fine with me. I have no problem with you making a profit. You can do that all day long as far as I am concerned on any home that is not listed by a Realtor already.

    I am not going to continue to debate you on the merits of why a Realtor who works for a seller would not just hand over a transaction to an investor they don’t know to negotiate the short sale! The client hired ME to sell the home and my team which consists of a lawyer to negotiate the short sale with the lender. The seller didn’t hire YOU or another investor to negotiate the deal for them. If you can’t get your brain wrapped around the fact of why that could be an issue for a Realtor with a lawsuit in the future then I guess you don’t understand the world we live in. If anything goes wrong it would be very easy to point a finger at the Realtor. Lawyers are going to be having a field day with this kind of thing.

    Turning a deal over to someone I don’t know is not being a fiduciary for the seller Bill. I guess in your world I might as well let a buyer’s agent negotiate the deal for the seller!!! I am quite sure the buyer’s agent will also be changing teams and helping my seller too.

    There is a distinct difference in you helping a seller avoid foreclosure prior to a home being listed with an agent that knows what they are doing. All the power to you in that scenario. A short sale Realtor that knows what they are doing does not need a middleman though Bill and all the things you mentioned above is avoided when a home is priced correctly and the buyer selected has a high probability of getting to the closing table.

  • Sam August 29, 2010, 5:33 pm

    The fact is that you Bill do not need a middle man to close a short sale. The problem I have is an agent who can only close 13-23% of their deals thinking they don’t need a middle man and getting it in their head from people like you that working with an investor is not a viable option.

    BTW, what is it about the sales commission that does not fit in the category of profit? Technically you are profiting from a distressed seller.

    I like how you say it is OK as long as the deal is not listed with a Realtor.

  • Bill Gassett August 29, 2010, 5:53 pm

    Sam I guess we can agree there are lots of Realtors that should not be taking short sale listings? I know many investors in their comments were bashing me for saying that. The fact is it is the TRUTH! In any business people should do their home work in who they are going to hire.

    As I mentioned above and will continue to repeat I have no problem with you making a profit.

    Can you see that there is a difference in you meeting someone before it gets listed with a Realtor and providing a service? Can you see where a Realtor who was hired by a seller could get themselves into trouble by allowing an investor to take over a transaction?

    I know you are not a Realtor and may not understand the fiduciary responsibility we take on but lots of lawyers certainly do!

  • Sam August 29, 2010, 6:07 pm

    I do see how an agent could get into trouble if they made a decision to work with an investor without having the home owner on board. Working with an investor is not something the agent decides to do because the contract is with the seller not the agent. The seller must be fully aware of what is going on. Like I said, no wool here.

    The contracts I hold are FSBO. I have yet to have an agent even let me put an offer on their listing even if their track record is only 10% and my negotiator runs 70% (at wholesale price not retail) They still would rather see the property go to foreclosure than work with an investor mostly because of agents like yourself who spread fear and say an agent should never work with an investor.

  • Bill Gassett August 29, 2010, 7:36 pm

    Sam when a client hires me they usually have done their home work. They see me and the attorney I use as trusted advisers. If I said to my client go ahead and work with this investors offer and let them take over the negotiations and something went wrong I would be screwed! It has nothing to do with pulling the wool over someones eyes. The seller hired me and my attorney to get the job done!

    I can just hear the seller’s attorney in court….the Realtor said this was a good idea and told you should let the investor take over the short sale negotiations Mrs. Jones. Is this correct? Yes sir it is.

    Did you not hire this Realtor and his team to help you with your short sale mam. Yes I did sir. Did the Realtor advise you to work with this investor mam. Yes sir they did.

    No thanks Sam. This is the kind of lawsuit you will be seeing in the future.

  • Sam August 30, 2010, 2:35 am

    Did the Realtor advise you to work with this investor mam. Yes sir they did.

    Ahhhh, giving advice! Yesiree Bill! That’ll get you into trouble. Do you ever advise your client? Hmmmmm………Giving an opinion is one thing but advice.

  • Renee Burrows September 1, 2010, 2:42 am

    In our state, it is illegal for non-licensed individuals to negotiate a short sale or loan mod. It’s still going on but the call volume from the “investors” has dwindled to almost nothing.

    Just felt like I should chime in because some of the chatter above.

    I would never put a buyer in charge of a seller’s negotiations. To me that is not ethical.

  • Sam September 1, 2010, 3:42 am

    In Nevada a principal in the transaction may also negotiate the short sale whether seller or buyer.

  • Andrea Swiedler September 8, 2010, 1:24 pm

    Bill, interesting, to say the least. The comments are …. amazing…
    I will pose a different twist to those that are adamant there is no problem with this.
    When I work with buyers and we are looking at short sales, I always find out if there is an offer in place from an investor who is waiting to close when a buyer comes in that makes him/her a tidy profit.
    If the answer is yes, I inform my buyers.
    Hey guys, NOT ONE OF MY BUYERS WANTED TO SEE THESE HOMES. They were not willing to pay more than the lender had already agreed to take for the home.
    And not once have I seen in the listing that this is the case. I may see the tell tale “short sale approved”. If you want to disclose, then man up and disclose that the short sale is approved for 150,000 but we are waiting for an offer of 180,000 so the investor can sell it to you the same day for 30 grand more. I DARE YOU! That, in my humble opinion, is full disclosure, up front.
    Thanks for winding me up today Bill.

  • Broker Bryant September 8, 2010, 2:38 pm

    Great article and discussion Bill. Well done.

  • Petra Norris September 8, 2010, 5:14 pm

    Bill, it is sad that the investors here commenting don’t see your point that being a REALTOR you have fiduciary duty to your seller, hence acting in the best interest of your client.

  • Dan Schuman September 9, 2010, 4:41 am

    Bill, another well-written article. We always appreciate reading your posts as you have so much great information to share.

  • Christine Donovan September 9, 2010, 5:01 am

    Bill – This is one of my biggest concerns for my clients when I hear from potential investors. I want to do my best for my clients.

  • Stock Fraud Attorney September 9, 2010, 12:22 pm

    Banking institutions are more dangerous to our liberties than standing armies. If the people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.

    Thanks for sharing………

  • Brad - Home Loan Artist September 9, 2010, 11:16 pm

    Thank you for bringing up such a timely topic. Short sales are very common over here and I hear of this all the time.

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

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

  • jay September 15, 2010, 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, 6:08 pm

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

  • Ryan September 16, 2010, 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, 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, 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, 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, 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, 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, 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, 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, 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, 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, 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, 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, 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, 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, 11:44 pm

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

  • John Larkin June 7, 2011, 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, 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, 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, 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, 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, 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, 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, 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, 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, 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, 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, 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, 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, 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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