negotiating and assigning a short sale
Any advice would be greatly appreciated on the following scenario:
I am negotiating a short sale with a bank on a property. The mortgage amount is $40,000. Back payments and taxes are about $10,000. I just had the property listed with a realtor for $54,000 to include closing costs and realtor's commissions.
The property is an absolute dump but since it has been listed, the realtor has received several offers around $50,000. I am negotiating a short sale for about $20,000 with the bank and at the moment I am waiting for their counter offer.
My question is: Can I sign a contract to purchase with the bank and then close with the buyers first so that I can pay off the bank? If so, what would this process look like? Thanks so much for all the replies!!!!!
The simple answer to your question is no, you can't sell a property that you don't own yet.
What you are referring to is a double close, or more specificly a guru double close where you use the funds of the end buyer to buy the property from the seller. I'll save you the time. It doesn't work like that.
If you're negotiating a short, then you must have already been qualified for a loan or have cash on hand to buy because most banks won't speak with you unless you do.
Another curiousity, how did you get a realtor to list this property for you when you don't own it? This could also cause a problem with the SS because if the bank finds out that there have been offers of $50K, they won't short.
Roger
Allow me to clarify for a moment:
The homeowner (seller aka borrower) had the property listed with a realtor (who is on my team) for $54,000.
As far as the double close is concerned - I thought this was something that real estate investors do all the time? Also, can't I just assign my contract with the bank? So if the bank agrees to "sell" me the property for $20,000, cant I assign that to the "end purchaser" for $50,000? Why or how would the bank know that there are offers on the table for $50,000?
There is no obligation to disclose that information, correct?
Okay if I understand correctly,
the homeowner, and not you, has the house listed with a realtor, and they are trying to sell it before being foreclosed on.
If you try to do a SS with the bank,
first, there is no finance contingency with a SS package. You either have the money or not and the bank will want to have a proof of funds letter included with your package.
second, most banks/lenders will not allow or accept any contracts, etc. that have any assignablity clauses in them, so no, normally you can't just assign your contract.
third, when doing a SS, you bring the bank into the picture. To consider a short, they will most likely ask the agent if any offers have been made on the property and how much they were for.
"As far as the double close is concerned - I thought this was something that real estate investors do all the time?"
Where did you hear that from, a guru book/course? If so refer to my post above.
Hope this helps,
Roger
OK - so let me see if I get this.
If the realtor gets offers, she has to disclose it to the bank. Obviously the bank wont want to short sale it for my amount, in this case $20,000 cuz obviously there is a higher offer on the table.
When would a short sale work then? If there is a property that is listed, that NO BODY WANTS, and I do a short sale with the bank, pay for it with my own money, cash or financing, fix it up and then resell it.
WHere did I go wrong here? I had the homeown list it - but the realtor got offers - so this is a bad thing????? I thought it was a good thing since I can then sell it.
I do have the cash to close by the way - I was just hoping not to have to use it since I thought I could do a double close guru real estate investor style since both offers were cash offers from the buyer. No seasoning issue here.
Thanks again for your replies!
Hopefully ShortSalePro will step in here to better clarify the situation for you, but in his absense:
Any offer lower than the mortgage lien against the property the bank would have to approve (unless the sellers can fund the difference, but if they could do that, we wouldn't be talking about this, right). So that would get the bank involved. Now, if you were the bank considering reducing the debt owed against a property to avoid foreclosure proceedings, wouldn't you want to know if their is or have been any higher offers made?
Most lenders probably wouldn't consider a short sale unless the property had been listed, so I don't think you went wrong there. Sounds like the biggest problem is that it will still sell for the amount owed.
That is the best scenerio for a shortsale, btw, when the property won't sell. It is either overfinanced or FMV is less than payoff due to needed repairs, etc.
As far as the double closing stuff, you can check with your attorney/closing agent. Find out if they can do it (or know what it is) and how they do it, in detail so you will understand completely the process.
good luck
Roger
Thank you Roger for your post. I am glad to know I didn't do anything wrong except get try to short sale a "hot" property.
So, the best kind of property to short sale is one that is in distress that nobody wants at retail and then rehab and resell it.
With banks requiring seasoning, this is getting trickier and trickier.
I would love to see more posts and replies though. Anybody want to add their 2 cents?
I am not sure I am understanding th epost. If you are doing a short sale then you are not signing a purchase contract with the bank. You are siging it with the owner. The bank does not own the property. You are trying to get the bank to take less when the property is sold. So you can have a purchase agreement with the owner and then find a buyer while you are trying to get the bank to take less. You can do a double closing or assign your interest to your buyer at closing.
Tom
You guys are terrific. I think I'll take a few days off. Actually, I am going to a world with no cell phones, no faxes, no electricity, and no running water. No, not Iraq. This will be the 20th year our group goes tent camping on the shore of a lake in Vermont.
As a marketing advisor for james "short sale" bayfield. I need to answer some of these misconceptions of short sales before you get yourself in some serious trouble.
NO YOU CANNOT ASSIGN A SHORT SALE CONTRACT!!!!!
It is illegal!!!! In all states
The bank doesn't want anyone to make a profit discounting the mortgage. Usually the only person the bank will allow a profit is the broker.
You can set up a company acting as the participating broker to keep all the funds "in-house"
***Please contact Joel about any advertising***
Happy investing,
Yann Faho
***Please See My Profile***[ Edited by rajwarrior on Date 06/21/2003 ]
Didn't know who's forum he was marketing on, did he...?
blkMillioaire,
Prove that it's illegal to assign a short sale contract. I've seen it done more than once. I think I even remember "ShortSalePro" saying that he's done them, himself. Let's get this cleared up right now!
clear2close
[addsig]
Have a great trip SSP. Don't miss the technology too much.
Tom
I'm wondering why the owners aren't considering these offers of over $50k. That would get them out of the hole and with out a defiency ...Right?
Also if you've got your offer accepted by the owners then you should make sure the realtor puts it "pending " so no more offres come in
Just my 2cents
L
I would love to know for a fact that it is illegal to assign a short sale contract. If the bank accepts a contract signed by John Smith and/or assigns, it is on notice that the contract may be assigned. If it agrees not to accept any assignment , it just wont close that way.
Also, my understanding is that, and I would LOVE verification, that the best properties to short sale are the ones that NOBODY wants.
The property I described above is an absolute dump in a fantastic location, which also has an extra buildable lot.
The property is listed at $54,900. If we get offers above $54,900 than the sellers problems are over. All the work I did on this short sale is for not except that the seller is out of trouble and that is a great thing.
Don't think I saw this answered, but isn't it better to shortsale a property that is already listed that no one else wants?
Don't think I saw this answered, but isn't it better to shortsale a property that is already listed that no one else wants?
It is not illegal to assign a contract. It is like saying that taking a property subject to is illegal because of the DOS clause. I would like to see the federal law that states it is illegal to assign a contract. You can assign a contract as long as it does not state that it is not assignable.
Tom
"NO YOU CANNOT ASSIGN A SHORT SALE CONTRACT!!!!! It is illegal!!!! In all states"
I've observed that when anyone makes an outrageous statement, such as the one above, it's usually the result of a semantics issue, wanting to draw attention to oneself, ignorance, or all three.
Perhaps, if the self-proclaimed NY short sale expert can explain what his marketing advisor meant by the statement as quoted above, it will clear things up.
On it's face, I don't agree with it. Perhaps there is more to it. In this business, if nothing else, one must be open to changes in the law, procedures, and ideas.
And above all, don't believe everything that you read.
[addsig]
I know of investors who 'wholesale' short sale' deals all day long. In fact they have courses on the subject and mentor others on how to do short sales.
It is their suggestion that you use a double closing on a SS wholesale, because the bank will not want to see any assignment fee profits being made on the deal, when they have agreed to accept less.
I tend to believe they (the expert women dynamos of short sales) are right since I have seen evidence that they have done what they claim they do!
Happy Investing,
Monty