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.
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.
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:
- Massachusetts short sale Realtor
- Strategic foreclosure vs short sale
- Moving out of home during a short sale
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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.
News, views, opinions and happenings for Real Estate throughout Metrowest Massachusetts and beyond including: Ashland, Bellingham, Blackstone, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northboro, Northbridge, Shrewsbury, Southboro, Sutton, Wayland, Westboro, Whitinsville, Worcester, Upton and Uxbridge MA.
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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.
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.
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.
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!
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!
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!
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.
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.
Charlotte the examples I cited are short sale investor fraud. I really don’t know what you are looking at.
Renee thanks for the links. Who knew that short sale mortgage fraud was happening in America. I really can’t believe it!
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.
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.
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.
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.
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.
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.
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.
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.
This is great! Agents telling investors the “right way” to conduct business (buy, fix up and sell) ROFL
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?
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.
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.
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.
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
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.
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.
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
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
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.
Excellent information for someone like me who is just learning about short sale investing. Great analysis!
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.
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.
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
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.
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 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.
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.
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!
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.
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.
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.
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.
In Nevada a principal in the transaction may also negotiate the short sale whether seller or buyer.
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.
Great article and discussion Bill. Well done.
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.
Bill, another well-written article. We always appreciate reading your posts as you have so much great information to share.
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.
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………
Thank you for bringing up such a timely topic. Short sales are very common over here and I hear of this all the time.
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