In today’s real estate investing industry there are so many so-called “Gurus,” whether they are real estate agents or platform speakers, which are teaching the niche of short sale investing the wrong way! One of the things that they often fail to hit the mark on is the issue of when to list a property when working a wholesale short sale on it. The question that they seek to answer is, “Do I list it before or after the foreclosing lender does their valuation?” Well, the answer is not what you think because times are changing!

Here is the real scoop: More and more, lenders are requiring that a property be listed with an agent before they even start the short sale review. Some lenders are even requiring that a copy of the active MLS listing sheet (Multiple Listing Service) be supplied in addition to the listing agreement to prove that the listing is truly in place.

For those of you that are still holding to the belief that listing the property after the valuation is completed is the way to go, than allow me to present some arguments that may sway you in the other direction…

• Finding end buyers (especially if short sale becomes retail) – Whether you are doing a wholesale short sale or a retail short sale you will need an end buyer. But you’ll especially need one if you end up having to roll your wholesale short sale transaction into a retail short sale (remember whether you are buying with intent to resell for a profit, your duty to the homeowner is to get their property sold!). And since the market is still somewhat slow, then it’s all the more important to get the property listed sooner as opposed to later to give yourself more time to find an end buyer.

• List price can positively affect BPO value- In the same way that the current list price may negatively affect the value that the BPO comes in at; it can also work the other way. If the list price is at the right number, and has been reduced several times (more on this in the next point), than it will further validate your offer and show the BPO agent that the property really is worth what you are offering.

• List History- This is one of the biggest tools that you will utilize as a short sale negotiator. This especially comes into play when you’re working on a property that doesn’t need much in the way of repairs, but may still be in a region where the market is really slow. This is why it is not only good to list properties before the BPO; but in some cases even before you submit the short sale package. That way you can build a list history that will aid you in your negotiations by enabling you to provide written evidence of what the property is not worth.

• Government Loans- When working short sales on properties that are backed by government loans (for example: FHA), you may find that you not only have to list the property immediately, but list it under certain standardized guidelines dictated by the government agencies. FHA guidelines for example, dictate that the property must be listed at a given price for three months before the price can be reduced.

Here’s a quick story from a fellow ManageMyShortSale.com member (an online Short Sale and Loan Modification Training and Management Tool) and licensed real estate agent: they recently called a loss mitigator after the BPO had been completed to check the short sale status. The loss mitigator used a public online resource to verify the listing’s status. They saw that the listing had been withdrawn and threatened to close the file unless the property was immediately relisted. You must understand…lenders don’t demand that the property be listed just for the sake of being listed. For them, it serves as further evidence of local market conditions and helps give them an idea of what the property is really worth.

While some lenders still don’t care at the present time if a property is listed, or won’t waste the time forcing you to list it—most will. And for these lenders some of the old ‘tricks’ that you may have been taught may no longer work! So if you are an investor, working with agents could prove to be your best asset. They know the market, may have strong buyer’s lists, and can do a lot of the leg work for you. If you are a licensed real estate agent you can now get more business from investors that will now need your services in order for them to buy and resell homes at a profit.

Also, some of you may be concerned about re-marketing when there is an active listing in place…just remember that the offer you currently have into the foreclosing lender is a “signed and accepted” contract with the homeowner and that the property can simultaneously be marketed to re-sale buyers through your contractual right.

And so, make sure that you get your property listed right away because these days most foreclosing lenders require it, and because it will ultimately benefit you anyways. We encourage all our visitors to ask questions or leave a comment in the section below, We hope to hear from you soon!

Okay, so you are purchasing a short sale property and would like to resell the property fairly soon after acquiring it.  But, you are having difficulty finding a lender for your re-sale buyer that will finance the transaction due to the title having very little or maybe no seasoning. 

Whether you are a licensed real estate agent that does the occasional “buy low, sell high” short sale transaction or you are an investor that buys multiple short sale properties with the intent to resell for a profit, you will need to find a lender for your end buyers, which has NO seasoning requirements.  

What is seasoning?  Seasoning is the amount of time that title has been in the name of the current owner.  Some lenders or title companies will not finance or process a transaction when title has not met a certain minimum seasoning time.  For example, all FHA loans require a minimum of 90 days.

So how do you get the deal done?

1. Generally, direct lenders or portfolio lenders do not have seasoning requirements. Steer away from mortgage brokers due to the fact that they are getting scrutinized for every loan they write and are having a tough time getting these buy and sell transactions closed.

2. Always get the buyer’s written permission to call the loan officer processing the loan and ask them what the lender’s seasoning requirements are.

3. Always get the buyer’s written permission to allow you to approve or choose the lender they use should the lender they request be unable to finance the transaction. 

4. Once you have a list of preferred lenders, be sure you call regularly to re-verify their seasoning requirements.

5. For properties you will hold less than 90 days, be sure to always clearly market that financing needs to be cash or conventional.  You’ll save everyone time and frustration.

Remember, when you are working in the field of creative real estate you have to make sure you cover your bases, from acquiring a property to selling the property to closing and getting paid!  A good thing to keep in mind and a good motto to follow is “Start with the End in Mind!” We have never been in a better market to join the niche of short sale investing, just make sure you are well prepared from start to finish so you can maximize your profits whether you are a real estate agent or an investor when buying and reselling short sale properties!  

For additional information on closing with a short sale flip, check out our Settlement Manual which is part of our Short Sale Flagship System.  And for more real estate industry articles and videos visit www.RealEstateBusinessMentors.com or visit www.AskBobLachance.com for any real estate questions.

When doing a Short Sale: Stop Wasting the Foreclosing Lenders Time!

The real estate short sale industry is booming and lenders are so overwhelmed with new and existing over debted properties in default that they need our help! What I mean by that is, if you are doing short sales, please DO THEM correctly! I keep getting feedback from lenders that there are too many investors and real estate agents that are wasting their time because they don’t understand and don’t take the time to get properly trained.

If you are in the business or thinking of getting in the business of short sales, it is your job to make foreclosing lenders’ lives easier. If we take the time to learn and educate ourselves on how the short sale process works and we do it correctly every single time, then lenders will be able to do their jobs more efficiently and effectively which will allow them to get our deals closed quicker. Most of the time spent by lenders on short sales is spent wading through all of the packages that come in that are missing required documents, that aren’t filled out correctly, or that contain offers that aren’t even remotely close to market value! If you don’t take the proper steps and carry them out in a professional and methodical manner, you will be wasting their time and the time of all of the other professionals doing short sales.

Just to give you some rough numbers, which I received from a supervisor at Washington Mutual…the average loss mitigator in their company works on 200+ properties at a time. Now, that is a huge case load and if you don’t follow the proper steps in the short sale process you will NEVER get a property sold and closed! Instead, you will be wasting the time of other “professionals” that are doing short sales correctly, because the loss mitigator that should we working on your file won’t be. They will be too busy dealing with an investor or real estate agent who is simply wasting their time.

Since there is absolutely no barrier to entry in this business, the only thing we can hope for is that everyone gets educated and stays up to date with industry changes. With that being said, a lot of the time wasted for these lenders is wasted at the beginning of the short sale process. I will give you 10 very important questions to ask each and every lender when you are working on a short sale which will allow you to put together the proper information in a professional package.

Here are your 10 questions to follow on every single short sale you will work on:

After sending in an Authorization to Release Information form to a lender, be sure you follow up. Never send in an authorization and assume the bank received it, noted it on the file, or accepted it to begin with. Follow up is the perfect time to verify important loan information needed to process your client’s short sale.

Be sure you or your staff asks the following:

1. How long until the authorization expires?

2. Is everyone on my team authorized?

3. What is the loan type (ARM, Fixed, etc)?

4. Is there an investor backing the loan (FHA, VA, Fannie Mae, Freddie Mac, etc)?

5. We need reinstatement figures and a payoff—how do we get those?

6. What is the direct phone number for the loss mitigation department?

7. Do you have a required lender specific short sale package?

8. Where and what number do we fax our short sale package?

9. What is the timeline for your short sale review?

10. When should we follow up with you after we submit our short sale package?

***You should have this information re-verified several times throughout the process.

***Some lenders require a specific authorization form.

Once armed with this information, you’ll be equipped to not only set expectations for everyone involved, but also make sure to give the lenders what they want, and facilitate the process for them! We encourage all our visitors to ask questions or leave a comment in the section below, We hope to hear from you soon!

Whether you are the listing real estate agent or an investor, perhaps one of the most important aspects to a short sale is to make sure that the buyer on any given property can actually close, and that they aren’t just wasting everyone’s time. With tighter lending guidelines these days, buyers are not only taking longer to get mortgage commitments, but some are having a tougher time even getting loans to begin with. And so, it is very important that you make sure that your buyer is a legitimate one, and that you prescreen them accordingly. After all, what’s the fun in spending months on a short sale only to have it collapse because the buyer can’t close in time?

Prescreening Your Buyer

When making sure that the buyer can actually close, you’ll need to be aware of several different things, and have answers to the following questions:

• What type of loan is the buyer applying for?
• What types of repairs are needed on the property?
• If the buyer were to start working on their loan today, how quickly can they close?
• How much time will the foreclosing lender provide for the buyer to close?
• Is the buyers’ loan being originated by a mortgage broker or a direct lender?

Why are these important questions? Because their answers can make or break your deal plain and simple.

If you’re working with a buyer that is applying for an FHA loan then you’ll have to be aware that the homeowner may need to repair some things on the property prior to closing. Reason being, it is an FHA guideline that the condition of the property is to be up to their standards.

One important thing to understand…foreclosing lenders typically only allow 30 days for buyers to close after they issue their written short sale approval letter. And so it is very important to always keep that in mind as you prescreen each and every buyer you bring in. If you’re dealing with a buyer that needs 45 days to close, then you’ll need for them to start their loan application process before you get written approval from the foreclosing lender or you will find yourself asking the Lender for an extension to your short sale acceptance letter.

It is important to know if a buyers’ loan is being originated by a mortgage broker or a direct lender. Mortgage brokers are becoming an “extinct breed”! The bottom line is that mortgage brokers are being unjustly accused and are targeted as one of the main contributor to the housing crisis. The remaining few are having a challenging time getting someone to purchase the loans they originate. If the buyer is going through a direct lender the chances of closing have greatly increased! Keep in mind that direct lenders can either hold the loan themselves or sell it in the secondary market!

If you’re unaware of the answers to these questions, then the best case scenario is that you’ll get lucky and it will close. The worst case scenario…the deal will collapse completely with no hope of resurrection. And so, don’t assume that the buyer will always be able to close, and that your involvement isn’t necessary in their loan commitment process. Your involvement is critical! Keep in mind, the buyer has no idea how short sales work, and doesn’t understand that if they can’t close by a certain time then they won’t get the property.

Educating Your Buyer

In addition to prescreening them and making sure they can qualify for the home, it is also your job to educate them. Most buyers come in and submit an offer knowing that it is “subject to lien holder/short sale approval.” But most of them have no idea what that means, or what is involved in getting that approval. Nor do they understand that they can’t take their sweet time getting their loan commitment. Many of them may have only 3 or 4 weeks to close. This is also part of what you’ll need to do as you progress through the short sale. Make sure that every buyer you work with understands clearly that the foreclosing lender is in the driver’s seat. Too many buyers think that they’re running the show, but that is simply not the case. If the lender doesn’t like their offer, or feel that they’re taking too long to close, then they can simply squash the deal.

Additionally, you’ll constantly be updating the buyer as to the status of the short sale, and may have to explain with frequency that each step of the process takes some time, since most of the buyers you find will be extremely impatient. That’s no problem though; just make sure you clearly set their expectations up front. That way, you’ll get a sense of where they stand and hopefully secure them as a solid buyer or at least avoid wasting time if they aren’t all that interested in the property.

When getting a buyer prepared to close on a short sale transaction it is extremely important to set proper expectations and to make sure they have the ability to actual close the transaction! I know it is not supposed to be your responsibility to pre-screen the buyer but the unfortunately truth is that not every buyer’s agent knows that lending guidelines are changing a daily basis. We encourage all our visitors to ask questions or leave a comment in the section below, We hope to hear from you soon!

In the course of all the short sales you will take on, you will likely encounter some highly irrational real estate agents. But fear not! You can work successfully with them, despite all their grumbling! The key is to build rapport with them, to get the point across that you are all on the same team and NOBODY gets paid without the help of the other!!! That way you will establish a sense of togetherness, and not encourage a sense of “me against you.”

One of the best ways to establish a team atmosphere is to discuss the fact that everyone involved is working hard to get the deal done. As the short sale negotiator, you are working to build a relationship with the lender(s) and get the debt down so the contracted buyer can purchase the property (were it not for your negotiations the buyer would have to buy the house for the total debt on the property, not the discounted value that happens to be fair market value, which would cost them dearly). The buyer’s agent is working to get their client into a home of their dreams, and the listing agent is doing whatever they can to get a buyer. Make sure you stress the fact that everyone needs each other, and if they don’t work together the deal wouldn’t go through, and you want to make sure to use phrases like “we are all working hard” or “we’ll all have to make sure we continue to work hard so this deal closes.” That way you’re sending the message that all of you are equally necessary, and therefore all deserve to get paid.

Speaking of getting paid, you’ll want to make sure to explain to them, that again, it is your work in negotiating the debt to allow the buyer to purchase the property that is also enabling them to get paid! This is something that real estate agents easily forget. As soon as an agent you’re working with starts giving you an attitude, make sure to remind them of this!

Once they’ve realized that you’re responsible for them receiving a paycheck, they may still grumble about how much you may be receiving, when compared to them. If you arrive at this point, the best way to respond is to explain that on this particular deal you may be out-earning them, however on your last two deals you only made a few hundred dollars, while they likely cleared several thousand dollars. This is not merely to argue with them, but to make the point that each deal needs to be approached with the same amount of hard work. And the reality is, some will yield bigger checks than others, but it will all balance out in the end.

Remember, you will likely be seeing this agent again. The key is to get them to become a team member, not an opponent! We encourage all our visitors to ask questions or leave a comment in the section below, We hope to hear from you soon!

The Importance of prescreening your end buyers financing.

Hi guys, this is Bob Lachance from North Shore Enterprises with your Pre-foreclosure Tip of the week! This week I will be going over the importance of pre-screening your end buyer and their financing.

Just so I am clear, this blog has to do with a traditional short sale where we buy a property (via a short sale) then we resell it. Here are 3 points to look out for while pre-screening you end buyer’s financing:

Point #1

If you are buying a property with the intent on reselling it within 90 days of your purchase, then make sure your end buyer does not have an FHA insured loan. The reason being is that an FHA insured loan requires title to be seasoned for 90 days.

Point #2

If you are buying a property with the intent on reselling it within 90 days of your purchase, make sure you disclose to the end buyer’s lender that your intent is to buy it via a short sale and then resell it for a profit. This is exactly what we do and it makes the transaction smoother and it will allow you to make sure this does not blow up at the closing table because the end lender had an issue.

Point #3

If your client is only putting down 5% on a conventional loan, make sure to ask the loan officer if the county that the property is located in has been flagged as a “declining market”. Around 90% of all Counties are flagged as “declining markets”. The main reason we want to know this is because the buyer will have a very challenging time getting mortgage insurance (MI) unless they put down another 5%!

With that said, I’ll see you next week with the latest news from the trenches!