Short sale in the Phoenix area

[traderjphx]

Hello,

Just wanted to inform our investors that some banks are finally dealing on short sales. I recently obtained a short-sale in Mesa, Az with the following parameters;

1. Original Loan Amount: $260k, Dec. 2006
2. BPO (the lender's estimated value of the property): $210K, May 2008
3. Accepted Payoff: $148k / Contract Price: $160k

I did this as the listing agent. End buyer is a retail buyer using a conventional loan. I am getting a commission on this property based on the $160K purchase price. I didn't expect much since the seller called one week before the auction date. I was able to post-pone the auction twice already as one buyer fell through. This discount is only about 75% of value, but the house was newer and needed very little work.

 

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[Analyzer]

Could you give some more details on this?

Why is this short selling? When you short sell you are betting on prices going down. For example the bank would lend you the house -> you would sell it know for X -> you would wait for market prices to go down - > bought the house back for x minus y -> and gave it back to the bank (Y would be your profit). Am I missing something?

 

[biophase]

Could you give some more details on this?

Why is this short selling? When you short sell you are betting on prices going down. For example the bank would lend you the house -> you would sell it know for X -> you would wait for market prices to go down - > bought the house back for x minus y -> and gave it back to the bank (Y would be your profit). Am I missing something?

It's not a short sale like in the stock market. A short sale is when you are able to purchase a home for less than the loan on the home.

If a homeowner owed $300k on a mortgage and you buy the home for $200k, the bank's loan payoff will not be covered by the purchase price. Therefore if the bank agrees to the sale it only gets paid $200k. The payoff is short $100k.

 

[kurtyordy]

traderjphx,

Can you go into a bit more detail on your role on this? Did you lock the property up with an option? Or did you actually sign a purchase agreement?

Did the owner walk away with nothing (other than his credit almost intact), or did you offer him something?

It sounds like you bought the prop fro $148K and are selling it for $160K, correct? Is there two closings? Or a double close?

How did you get the bank to postpone the foreclosure?

Thanks for the info...I think a lot of us here aren't very familiar with creative deals like this, so more detail helps our brains get around the process...

From what his first post says, he is the listing agent, seller called him to list it. Purchase price is 160, after fees and commissions, bank is accepting 148. Not to diminish the work done with the bank, they can be very difficult. Now is the time to parlay this into deals of your own.

 

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[traderjphx]

Hello All,

Stepped away to run a few errands. Here is what happened;

1. As the listing agent, I called the lender and asked for their short-sale requirements and what it would take to stop the auction.
2. Lender wanted an executed contract plus the usual short-sale documents (seller financial statements, hardship letter, bank statements, the list goes on).
3. I called a few investors who have "proofed up" cash and one made an offer.
4. I submitted all the paperwork and documents to the lender along with the offer and this was enough to stop the auction for 60 days.
5. Investor's offer was rejected for being too low, but I placed the property on the Multiple Listing Service.
6. All new potential buyers were informed that the sale was subject to the lender approving the offer
7. Finally received an offer the bank accepted and the rest is a standard transaction.

In short sales, the seller is aware they will not be receiving any proceeds from the sale. This is disclosed up front. The only service we are offering is to keep a foreclosure from appearing on their credit report.

There are some pitfalls, as some lenders may pursue a deficiency judgment against the seller for the amount of the loan that was forgiven. In Az, if the loan was used to purchase the home, they cannot pursue this. If however, you are an investor or had to short a HELOC, a deficiency judgement can be pursued. As for taxes, congress last year passed the Mortgage Forgiveness Act, which no longer allowed forgiven debt to be taxed.

One thing I learned, a lot of agents do not understand short-sales. So naturally, I wrote an e-book for agents on short sales! I learned them a long time ago in my real estate investment seminars that I attended.

Hope this clears up a few questions. Let me know if you have anymore.

 

[njmurphy]

Congratulations on your short sale. Who was the lender? We are working quite a few short sales right now and finding some lenders are easier to work with than others.

 

[minty99z]

I am working on purchasing a short sale myself. Property Comps at around $325k, the owners have a loan of 335K. I have offered 230k with a very good chance of getting it. The bank was at 240k as their "final offer" but have since re-considered to get it moved. Should know in 2 weeks.

 

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[traderjphx]

njmurphy,

The lender on that one was Wilshire Bank. I think they were servicing the loan for Deutsche Bank. I just closed another one this week, lender on this other one was Suntrust Bank.

You are right, some lenders are easier to work with than others. Countrywide has been the most difficult.

There is an unsubstantiated rumor going around that some banks would prefer to go to auction than short-sale due to their (the banks) tax implications on the loan are better if they go to auction. I think if the loan had PMI insurance, a lender would have no incentive to short-sale. I can't prove this, but another investor working REOs told me of this. Have you heard anything regarding this?

 

[njmurphy]

traderjphx,

Congratulations on your newest short sale. They are a ton of work but can really pay off.

We closed 4 short sales this week, and 21 this month (as a company). We have definitely found Countrywide to be the most difficult to work with. One of our criteria before we take on a short sale is to determine the lenders and if it's Countrywide, the deal better be a good one otherwise it's not worth our time.

I have not heard anything about lenders preferring to go to auction for tax reasons, but I know that we have gone directly to the PMI company to work a short sale when the lender has been uncooperative.

Are you doing short sales on your own listings or do you take on short sales as an investor as well?

 

[traderjphx]

njmurphy,

Thanks.

I am only doing them as a listing agent. A couple of years ago I was trying them as an investor and taking the wholesaling route. That didn't work out too well. I am much more successful now as a listing agent with them. It's the current conditions and the fact that I don't need to ask for as large a discount under FMV as I used to try before.

21 this month, that's impressive. I had 15 short-sale listings at once this year. Not too much fun.

 

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[MsMoney]

When dealing with short sales...it's almost always the same for each bank with minor variances.

All banks want the following to begin with:

1. Purchase or Option Contract (we usually do an Option)
2. Listing Agreement (with the homeowners signatures on it)
3. Hardship Letter from the Seller(s)
4. Letter of Authorization (allowing you to talk to the bank(s) on the sellers behalf for their loan(s))
5. Last 2 years of Tax Returns
6. Last 2 months of paystubs ... or a letter stating why they DON'T have paystubs
7. Last 2 months of bank statements from all bank accounts
8. Comparables and/or BPO(not necessary...but sometimes can move it along faster, otherwise you could be waiting longer for a decision)
9. Freddie Mac Financial Statement (If you want one...I can email it to anyone interested...sorry I don't know how to upload it onto this note)
10. HUD1 (make sure to be as accurate as possible...like delinquent HOA dues, delinquent taxes, etc...)


Also, I always get copies of the sellers mortgage statments (as current as possible) as it makes it easier to figure out whom to call & you are able to make sure that you have the correct loan #'s on everything.

ALWAYS MAKE SURE TO PUT THE LOAN #'S ON EACH & EVERY PAGE YOU SUBMIT TO THE BANK! I put it at the top of each page ... if there are multiple loans then I put both loan #'s at the top.

Another word of advice. Some banks want you to fax SEPERATELY the LOA (Letter of Authorization) to a totally different fax # ...or to the same fax # as the package goes to, but they want it seperate.

I've found to just work with the banks. Give them what they want up front and everything moves faster!

Once you have all the paperwork submitted, then it's just about continuous follow up with the bank. Always make sure to ask if there is a sale date set. If there isn't....the file moves slower. If there is one set, typically they will review it faster or if they can't get to it...they will postpone the sale.

Steps to do once the package is received by the bank are as follows:

1. Has it been assigned to a Mitigator? If so, what is their name & extension #? (get any contact information you can on that person)

2. Has an appraisal and/or BPO been ordered? If not, why not? If so, when? Do they need you to give them a contact name & number to get it done? (Make sure you have someone available to do that)

3. Has the appraisal been rec'd back yet? What did it come in at? (They almost always WON'T tell you, but I always ask and see if I can get that amount). If you can get that number, then you know how low you can go on your offer/negotiation.

If your original offer has been approved...then you want to make sure YOU get a copy of that acceptance letter. (Side note: You need to make sure if there is more than one loan on that property that all banks are in agreement on the price and their payoffs...so everything you are doing for the first, you'll have to do for the 2nd and/or 3rd)

If they decline your original offer because "it is too low"....ask what's the minimum amount they will accept. Some banks will tell you. Others will say "we can't tell you, you need to just bring in something higher". It's a numbers thing. Sometimes you win some, and others you will lose. Ultimately, it comes down to how much of a loss the bank is willing to take.

I know I've given ALOT of information here. It's not really rocket science...just alot of detail work and knowing what to say & not to say to the banks. If anyone wants anymore information, or has questions....I am happy to give any advice in this area.

 

[minty99z]

Are Banks retarded? After making an offer on a house that was about to go Sheriffs Sale/Foreclosure, the bank decided to accept my offer being it was within 10% of their "final price" and my loan is Solid(their attorney called my lender on the spot to confirm) they want to close in 7 days!!!:coco:

My Lender told him, 3 weeks is doable, 7 days is not. I would barely have time to get an appraisal/inspection. I was laughing because they actually might be stupid enough to lose a sale on a house thats been for sale almost 2 years.....when they have a GUARANTEED sale with me....all because the bank "isn't sure" about getting an extention filed to postpone the Sheriffs Sale/Foreclosure!!! If the bank is this stupid they DESERVE to go under......lose 2 years for 2 weeks?!?!? Keep you post on situation AND the bank when I find out......All I know is that their Attorney AND Realtor BOTH hate this bank.

 

[njmurphy]

njmurphy,

Thanks.

I am only doing them as a listing agent. A couple of years ago I was trying them as an investor and taking the wholesaling route. That didn't work out too well. I am much more successful now as a listing agent with them. It's the current conditions and the fact that I don't need to ask for as large a discount under FMV as I used to try before.

21 this month, that's impressive. I had 15 short-sale listings at once this year. Not too much fun.

traderjphx,

I know what you mean. We're not getting too many done in order to wholesale. The banks are not taking the large discounts yet but our feeling is that they will in the next 6-12 months. We're retailing our short sales on the MLS. 15 short sale listings does not sound fun. Are you turning away listings at this point? There are so many short sales we've had to start picking only the best ones.

 

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[njmurphy]

Self-promotion alert:

There are some upcoming events in Phoenix that we are putting on to teach agents and investors how to do short sales. For those not in the Phoenix area, we have events all around the country but also we're doing an online webinar. If you'd like to learn how to do short sales, as a real estate agent, lender, or investor visit LiveFreeInvestmentGroup.com

 

[ptiz]

this is exactly the type of deal im looking for. do you know of any in california?

 

[njmurphy]

this is exactly the type of deal im looking for. do you know of any in california?

ptiz,

We're doing 3 events in California in October.
San Fran on Oct 28,
San Diego on Oct 29,
LA on Oct 30.

If you aren't able to make it to one of our live events, you can register for a free online webinar.

It's all on the website at livefreeinvestmentgroup.com.

These events are focused on getting short sales done using the techniques that we are using everyday in our own business.

 

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[SteveO]

Don't get me wrong on this. I am truly interested.

Why would someone that is successful with in the short sale business need to sell their techniques? I would think that if you business is so good and profitable, that doing sales seminars would detract from your focus.

This is an issue that I have not been able to grasp the concept of.

 

[MJ DeMarco]

Don't get me wrong on this. I am truly interested.

Why would someone that is successful with in the short sale business need to sell their techniques? I would think that if you business is so good and profitable, that doing sales seminars would detract from your focus.

This is an issue that I have not been able to grasp the concept of.

Follow the money. It is more profitable to do seminars that the stuff they are selling. It doesn't get any simpler than that!

 

[SteveO]

I had someone that wanted to partner with me to do seminars on apartments. The business model that I looked at only showed decent returns if there were strong sales on boot camps or other more intensive training programs. There was a lot of "up front" work that needed to be done for a model that would rely on continued involvement.

My decision was to pass on this. The model that I was following for my investments showed a much greater return. It also showed the ability to step out at some point and let the business run.

So, my question here is an effort to understand. There are a lot of people that do these seminars. Is it lucrative? Is there more to the business plan that I don't understand?

 

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[andviv]

I guess it is lucrative. There are just too many people doing it, so clearly there is a demand for the product.

In my area I've seen a few of the top performers in the SFHs going into that direction. I am also intrigued by this... probably it is more profitable for them, their income per hour probably is higher that way.

 

[RealOG]

Someone needs to come up with seminars and bootcamps on how to put on seminars and bootcamps.

 

[MJ DeMarco]

Someone needs to come up with seminars and bootcamps on how to put on seminars and bootcamps.

 

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[njmurphy]

Don't get me wrong on this. I am truly interested.

Why would someone that is successful with in the short sale business need to sell their techniques? I would think that if you business is so good and profitable, that doing sales seminars would detract from your focus.

This is an issue that I have not been able to grasp the concept of.

Great question.

For us, there are many reasons.
1. There are so many short sale deals out there, we obviously can't do them all. If we can teach other investors and agents how to do short sales successfully, there will be less REOs dragging down the market.
2. We're an expert in the short sale market and we can offer our service to those that have taken our workshops but find it's too time intensive and would rather focus on their strengths and let us focus on our strengths.
3. There is a demand for the knowledge that we have and there are so many people out there just selling information, and not actually doing deals. We're doing deals and willing to share our real life expertise.
4. We can build a community of educated real estate professionals to network with and partner with. As the community grows, our business will grow.

Seminars and related products are great sources of residual income. Every time we close a short sale deal, we have to go out and find another. We don't make any more money from that first deal. If you can do a seminar, it's easy to follow it up with a home study course, dvds and cds, subscription based websites, coaching, etc..

There are a lot of people that just sell information and are not out there in the field, doing deals.

 

[DocWorker]

Hi everybody,

I love everything I'm learning on this thread, and would love to profit from the info, however I'm embarrassed to jump into this conversation from the other side -- as an owner who's underwater on an investment property I have in Casa Grande.

I bought at 165k with 10% down, 80% of the price on an ARM that's fixed for 10 yrs, interest-only (adjusts in 2015), and a 2nd loan for 10% of the price.

Thus, I owe just under 150k, and I'm told the property's worth only around 100k. To make things worse, I have a monthly negative of almost $400 (rents have gone DOWN in Casa Grande).

The idea of paying $400/month for the right to control a property that I'm not building equity in, and which probably won't break even for me until 2025, is not fun. I'd love to walk away, but wonder what the credit consequences are... I'd also gladly submit to a short sale.

Anybody know is either a good idea, or is there another solution?

Thank you!!!!!:coco:

 

[Runum]

I don't think you are going to get many people here to tell you to walk away. Have you even attempted to sell it or even have it appraised?

 

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[DocWorker]

Thanks Runum, for responding! I've not had an actual appraisal done, but my mgmt company tells me that comps in the area are around 100k. I haven't listed it for sale yet, only because I was trying to learn about short sales, and didn't know whether there was some special listing process that had to be followed...

When I say I'd love to walk away, I mean that I'd love to not be paying 5000+/year to own something in which I have no equity growing. I just want to move on, and "live to fight another day..."

 

[DocWorker]

JScott,

Holy cow! I didn't realize that I could still get a "deficiency judgment" against me for a short sale. That certainly makes it seem like a worthless pursuit.

So, what does an investor in my position do?? My loan is to adjust upward in 2016, do I just hold until 2015, and hope that prices are up enough by then that a sale is less painful? Or I suppose if I calculate it out, it might still make sense to sell and (spit) write a check to the bank for the difference (spit again)... Yeesh!

It seems kind of crazy, but do you think, instead of selling, it's possible/advisable to buy another property that cashflows enough to offset the $400 monthly negative on this house? It still doesn't solve my 2016 problem, but I have some time on that.

Thank you from the bottom of my heart for taking the time to share your expertise with a first timer like me.

 

[biophase]

I believe that in Arizona that you can let the home go into foreclosure and that the bank cannot come after you for the balance of the loan. Arizona is a non-recourse loan state for most residential loans.

 

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[andviv]

this page lists the states... I don't know how reliable is the info though...

List of non-recourse mortgage walkaway states