BiggerPockets

Hello, quick question to all the EXPERTS out there...I was approached, on my own residential property, by a Realtor, who was showing a client a short sale across the street. When the Realtor got to speaking to my husband, he realized that we were also in a Foreclosure situation, and that we're going through a loan mod. Well, next thing I know, this guy sends us an offer, for about $25k less than the neighbors short sale price ($425k), with $25k BACK ....TO US????!!!! Is such an offer even ethical? Can it be done? We were going to hold the property as a rental, but wouldn't mind getting a lump sum in cash in return (to invest elsewhere) if we could.

Thanks for anyone's expert opinion in this.

BTW, I just spoke to an investor this weekend, someone from American Investors Network (Jim Shead's group) who said it could possibly be done, if done right.

NO, of course not...that it is not worth the risk, or the "black eye" it creates to the rest of us, as investors. I was just curious, because, as a novice...I didn't know if there was some other technique out there, that was legal. I'm glad I asled, because this guy hasn't been able to answer our simple "playing dumb" question about "how is this done exactly". As an investor myself, I always want to create a win/win, and never get too greedy..this sounded weird, and I suppose, if you really think about it, the whole reason that a lender would "short" in the end, is that the borrower can no longer pay....why then should a borrower be rewarded with cash back, Thank you for your time in answering this.

Mamaof4Inevestor

Thank you Larry. Y'know what, interestingly enough, as I played dumb, asking the Realtor to explain the process, he never did answer back. Here's the latest for us...we just got word back from our lender, who not only reduced the mortgage by $1000, our atty.'s were able to get the principal balance down, so, in effect, the bank just gave us a "short sale" on the same property. Now we can just flip this to a nice family, make a little bit extra on the deal, and start fresh. Sad thing though, we had to dilerbaretly go late, just to get the lenders to help us..then, at the cost of our FICO's tanking, all the house of cards came tumbling down (credit card apr's went up-no surprise-refi's we were in the middle of-other properties-went
South, etc..)...at least for all that pain, and suffering, this is a nice little surprise.

Thanks for your reply.

Vivienne

Arlene,

Thank you. I guess that is the equivalent of "cash for keys"...

Happy Investing! This is still the BEST TIME to stay in the game!!!!

Tom,

I understand your finding my situation "ironic", and I would be pissed if I thought someone, as many in the biz do, were taking advantage of this system, but you either didn't read my previous posts, or are making some rather harsh ASS umptions. I never judge anyone without hearing ALL of the details FIRST. In a nutshell, and I don't know exactly what part of the financing fence your on (investor/banker, etc..) BUT isn't it TRUE that in order to get help from the lender FIRST (and maybe you haven't gone through this persoanlly)...you won't even get the time of day, UNLESS you go late. Do you think I wanted to ruin my credit, which is now 500 something, due to the fact that credit card companies (who played a factor in my dismal rating and led to this current situation we found ourselves in) and lenders were too STUPID and or TOO GREEDY to help out honest folks who think they're doing the right thing in the first place, by making the "help, I'm going to be in trouble phone call". Long story short.....We have a few properties, or actually, now we're down to 2, as one actually went through foreclosure, because we let a friend stay in this place, and he couldn't pay the mortgage, due to job loss.
That particular lender wouldn't speak to us until we became late...so, to play this idiotic game, we didn't pay for 3 months, THEN they turned us over to loss mitigation, THEN they got bought out...THEN BEFORE WE KNEW IT...we got foreclosed on, just like that. So, as far as our residential goes, which is now in foreclosure, because we did the SAME EXACT THING...we called, explained that we wouldn't be able to make the new payment that was coming soon, and we were told "sorry, can't help you..you are NOT LATE".."you HAVE TO BE LATE in order for us to help you"....My husband and I were dumbfounded...but, we asked around, and everyone in the biz said the SAME THING..."yup, that's about the crux of it..you have to be late"...SO, this was with WAMU, who then got bought out by JPMorgan Chase, and before you knew it, one department didn't know what the other one was doing...We must have sent in 6 hardship letters...before finally coming to our senses and retaining an atty...Kid you not, at some point, they didn't want to take our payments anymore, because now we were past the N.O.D. point of no return....and NOW we have been fortunate enough, to have had some real action take place, on behalf of a hard working family, and YES, an "investor", who is learning how GREEDY this industry can be. Sometimes you win, and sometimes you lose...and in our case, now, we can probably reap a little reward for such an ordeal...You would probably do the same, would you not? Why do you think I came to this site in the first place? I came to ask about something that smelled a bit fishy, regarding getting cash back at closing, if we were to short sale that same property, as a Realtor had offered to do so. Now that you have some of my facts, please feel the freedom speak your mind.

Vivienne

Tom K.,

With all due respect, your doing it again. Your presuming you know the facts, and now you think enough to know about my personal business, that you can now say, in this forum, that I have, no doubt, overextended myself, "same story, different peoplel", etc...I'm so glad that you have been responsible and fortunate enough to have enough wealth about you that you are not caught in the downturn of a global economic storm. It must be a grand feeling not to have to choose whether you pay this bill or that bill, because your well off, and responsible.

Tom K., correct me if I am wrong, but don't most investors, who really understand how to create wealth, usually don't outlay their own capital, but use OPM, and in return, those lending investors , who loan their money, get a nice ROI for lending. Yes, no? Yes. Ok, most investors also have corporations, in one form or another, and try to start building their lines of corporate credit, as I have tried to do. Some of us have to wing it, and we try to do due dillegence by learning what to do to even get started...By faith we take a leap, to financial freedom, and to learning about financial literacy, unless we've inherited our wealth. Many of us learn, by the school of hard knocks, while building our wealth, and we may succeed, or not...but I'd venture to say, that many of us, try and try again.

Many millionaires have actually claimed BK, and start over. I haven't been able to bring myself to do this yet, because I am, actually trying to do the right thing, and pay back my debts, even if that means living from paycheck to paycheck.

I wish I were a major bank, that way I could just get a large bailout, while sitting in my private jet, and and just start over, but such is my luck...I'm just a normal hardworking, mom of four, living on mainstreet, while homeschooling my children, because I believe in family and I believe in helping friends in need, and I want to help supplement my hard working husband's two jobs. Not all of us taxpayers are as fortunate as you. I had immaculate credit, unitl circumstances, which were beyond my control, created a financial crisis. The crisis, in which created a need to obtain help did not come because I was negligent in paying my bills, nor because I over leveraged my self, but just because LIFE HAPPENS. If you are in this industry, funding the "foray", as you say, perhaps not all are in the mess you seem to think that we've created. Many people tend to jump on a media band wagon, with their pompus pitch forks, because they have been good stewards of their tax dollars. GREED & FEAR in the credit industry, created my unique circumstances, and not a friend who took advantage of us, nor my inability to calculate risk, while investing.

I will share one fateful day with you and this forum. One day, with our credit union, on a Nov. day, in 2006, I wrote a series of letters, to my creditors, while being a "responsible"...tax payer, and debtor...mind you, I wasn't late on a SINGLE credit card or mortgage payment...BUT...JUST BECAUSE I WROTE A LETTER....THAT PRESENTED RISK TO MY LONGEST STANDING CREDITOR....THEY DID THE WORST THING IMAGINABLE TO MY CREDIT AND MY HUSBANDS....THEY CANCELLED OUR ACCOUNT...and we were CURRENT!!! What do you think occurred next, within a month's tme???? ALL of our other creditor's decided that we were now a risk, and JACKED UP OUR APR'S from what was a decent 5%-10% at the most, current (then) APR, to upwards of 25%-29% on ALL of our cards....You do the math....along with that..some of our creditors even REDUCED OUR LINES OF CREDIT...further making it IMPOSSIBLE to refinance a current property to fund another deal, THEN THE MARKET WENT SOUTH...and REAL TROUBLE CAME that wasn't due to my negligence, but was due to a MARKET on Wall Street that had gone CRAZY...due to their own internal greed, etc....It's sooo hard to judge the masses, when your living above the clouds, to even mind or care to listen even, to the finest of details that occur in most of the lives of us little people, below the clouds.

Luck will have nothing to do with me getting my family out of this mess, but my faith in God, and my hope in that most people are good and decent, and willing to help, will.

Tom K., I hope, sincerely, that you never have to go through what most of my clients and family and friends are going through (who are responsible individuals becoming the scape goats in this society of late)...but if you do, God forbit, I truely hopt that you will have a network of friends and family that will not judge you, and some folks do, and will support you, and hopefully, you'll know a banker/investor/broker, someone...who will at least give you the time of day, to listen to your "story".

"Do not judge, lest you be judged" "By the measure of mercy you extend, by that measure, you shall receive".

Vivienne PIna.

Hi Mitch,

Thank you for chiming in. Actually, fraud would be the act of doing something and trying to hide the facts, yes? Yes. Just for your info, and anyone else's...this loan is now being modified as a non-owner, just because we are now thinking of moving, since we can actually rent a bigger place, for a couple of hundred dollars more a month, instead of craming my family of 7, into our present 2bd/1ba home. I told my attorney of our intention...Who am I committing fraud against at this point? You all know that when the lender knows your doing a non-owner occupied, everything about that deal is going to cost more. They're still wiling to modify the loan, knowing that this will be an investment. If I decide to sell my investment, once the deal closes, is this FRAUD??? I think the problem here (this forum) is that all the facts, of my particular case couldn't possibly be listed, as it would take much too long, to detail and write about , I can understand, how it might come across, if I were reading bits and pieces too, and I were on the outside, looking in at this posting. I miight form an opinion as Tom K. did, and as you have as well. I feel like I'm getting a flogging..and I know I might see some irony if I didn't have all the facts of this given case.

If anyone out there would care to hear all the particulars of my case, before passing any more judgement, please, send me a personal email, and I'll give you the full 411, otherwise, DON'T JUDGE!!! It hurts a bit, when someone, who doesn't know me, would judge this situation, without having all of the facts.

Vivienne Pina

Tom K.,

Let me ask you a simple question: If you were trying to hold on to your assets, (no matter how you got into your financial crisis-assuming that you tried all you knew to do to stay afloat, and you did NOT PREMEDITATE the circumstances) and in the end, the bank was still giving you a break (as you disclosed your intention to the bank-as I did via my atty), then how would you, keeping your home, as a non-owner occupied, at this point, be immoral or unethical, if you decided to sell it or hold it for cash flow? That's one question. Please think carefully before answering in such a smug way..I'm sincerely asking this question, one investor to the other.

Second: Who said I was on the brink of financial ruin? I currently have a net worth of about one million in paper assets, and some assets in actual physical metal holdings. Ok, so that's not as liquid as I'd like it to be, but I've been preparing for the inflation to come..I've been following the markets, and stayed informed as we probably all do, as investors...Look, what is the difference between GM declaring BK today (and losing assets) than me, losing an asset, or two, (my properties). At least I didn't, nor intend to, file a BK, and I am trying to CONTINUE to invest, with what I can. Who said I was going to continue getting into "debt"...As an investor, surely you also know the difference between "good debt" and "bad debt"...I'm not looking to leverage anymore "debt", than say Donald Trump (of course, I'm no where near that scale of wealth), but in principal, what is the difference? I don't know ANY investors who use much, if any, of their own cash...they all (those whom I know and respect) use OPM...and if you happen to want, as an investor, to lay out all of your capital, to aquire and asset, well then, more power to you..you must have "Bigger Pockets" deep enough to do so. Look, since I don't know how you invest, or how you set up your capital to do so, unless you were BORN INTO WEALTH, most of us, have started out, trying to leverage our way into this "game". I love RE..it's the quickest way to build financial freedom. Nothing ventured, nothing gained. Some investors, I suppose, are more calculating than others, and some of us...just jump in and TRY...and when we skin our knees, because we didn't, perhaps do ALL of our due diligence, we LEARN..and go on.

I wish you luck in your RE holdings, and I only hope, as a funder (I'm assuming, based on your first email that your a banker of sorts, or a capital investor) that you would, at the very least, try to listen to the details of potential borrower's, and not be so harsh against those that are so entangled in this mess. Not everyone is negligent. By far, in my opinion, KNOWING this business (mortgage financing)..MORE GREEEEED than anything else...led more consumers down this financial hell we are all witnessing. When I was doing loans, as a LO, my greatest "commission", was being able to educate my clients, who were prime targets for the scam of the century. (sub-prime mortgages/Flex Pay). These were hard working individuals, who needed help, for one reason or the other, and I wanted to educate them first, in hopes that what got them into their mess's wouldn't occur again. I never made more than $500 (most of my loans) - $1000 on my pipeline..NEVER...because I wanted to sleep at night. I know brokers, and LO's, and everyone else, in the game of Mortgage Financing that RAPED EQUITY from non suspecting consumers. We have to feel for them, and take our knowledge, that we've been blessed with, and HELP and NOT judge with such arrogance.

V.P.

Tom,

I am NOT declaring BK. That's not what I said. Also, when you said: "I'm funding your little foray into investing"..I made the assumption (as you made assumptions) that you may have been in the mortgage biz. I am sorry if I misunderstood.

It would disturb me too, if I thought someone with one million is assets, were declaring BK...but now, we have that straight, right..I am NOT. Now, just so you know, since I, as a borrower, can't speak to a loss mitigator myself (the whole reason I decided to retain an atty., because we kept getting transfered to "Larry, Moe and Curly", and we were getting dangerously close to foreclosure)..we disclosed ALL of our info to our atty...so, I know the bank knows our intentions, as we are looking at N/O/O rates..so, there again...there is NO FRAUD going on..the bank is willing to still work with us, as in our other investment property.
Also, I am not claiming to be a "victim"...I know how the game is played, (with the banks/lenders/creditors)...even if it's incredibly STUPID.to me, to ask for help, and not get it, because your current (responsible and not over-leveraged). However, we are all "victim", during one time or another, when our creditors decide, sometimes without our knowledge, to either reduce our limits (harmful to our FICO's), or decide to raise our APR's (harmful to our FICO's) without cause. This happens to ALOT OF AMERICANS...thus the Obama credit card bill of late that he is trying to push through. If your out driving, Tom, and you get his from behind, are you then "irresponsible", or guilty of not being able to know better to get out of the way fast enough so as to not get hit??? Of course not. NO DIFFERENCE HERE...to those of us, me included, who got caught in the eye of the storm.

Your right, we may have both gone off the original subject matter of my original post....remember, I was coming to this forum, questioning something I knew nothing about, because something sounded fishy about the proposed offer. I love a good debate as well, but I believe you must always respect people, when doing so. We are all different, in our upbringing, our knowledge, or ethics, etc...I'm glad that you seem to have such a high standard of ethics..we need more individuals with such ethics. Also, Thank you for sharing that you also have made mistakes...This is what I'm speaking to...we make mistakes along the way, because we don't know everything..we learn as we go along. Just a side note, not all folks, that have one million in assets, can access that money to make monthly mortgage payments. If you have a savings, like a million..the whole idea in keeping it in other assets, is for diversity and in the hopes that in the end, when we reach retirement, we'll have something to cash out and enjoy. I wish you well Tom K.. Maybe I'll catch you on another posting.

Regards,

Vivienne

Lee,

First, and foremost, I am sincerely sorry for your loss. No words can properly convey condolences. Yes, indeed, that is a hardship. Well, let me now reply to your "2 cents". First, I don't know why my story is being viewed like I am a "victim"...I'm no different than anyone else who falls into a variety of hardships and I was ust denoting what happened.

I would be a "victim" if I complained and did nothing about my problem. I am articulating the vast problems that exists in our mortgage industry. Perhaps, because I ddn't speak to my "harship/s" in detail, those following this post think I am taking advantage of a system already broke, or am claiming to be a "victim".

I did experience a series of hardships, starting in Nov. 2006 (this is when I started doing what I thought was the responsible thing to do..and write all of my creditors asking for help - the problem with that , was that we were current with ALL of our bills, 3 properties, 4 mortgages, a coporate truck payment, etc...)...Just so you know also, and anyone reading this thread, my family and I do not live beyond our means...we shop at thrift stores, have 1 beat up car, take clothes from neighbors, family, etc...if you met us, you'd think we were, well, not investors for sure.

In Nov. 2006, we incorporated our business...we foolishly, looking back, made a bad $10k mistake...at that same time, we had to evict a tenant, which became costly, and then we had to rehab that place, because the place was trashed...., when we finally evicted this tenant, the tenant in the back (as this was a duplex) moved out...we were now having to hold the property through rehab, which took way too long to finish (4 months)...yeah, it was that messed up...we learned a costly mistake...not periodically checking in on tenants...we should have...now we do...once a year...we started to "bleed", financially, we were also in the midst of a refi that fell through, and then my husband had a motorcycle accident, which then kept him out of work...we REALLY started to feel the pinch...that's when we started getting behind on our mortgage/s...and then it just got worse....our 2nd property all of a sudden got the attention of the city, and we were dragged into a hearing for a sub-standard on the property that we didn't even know existed during escrow (yes, again. we learned more about "due dilligence")...so, more money out of pocket, and another lost tenant.., now we were BLEEEEEDING...really borrowing from Peter to pay Paul...Well, if I go on, you'd think I were lying..In 2007 I had to now fight against our school district, because we have a special needs child, who was given an inappropriate education, for a year, and that cost money as well (to retain a atty.)...just too much...I ended up in the hospital, heart problems....of course, my husband took time off of work, more loss of income. In the end, we lost two tenants, lost one job, and we were trying to HANG ON for deal financial life...so, now we're here, waiting on a broken system to work itself out. We NEVER intended for things to be this way...It would have been great if the lenders would have wanted to help us out or loan, at the time we came to them...but they "couldn't" help, because we were current, and we couldn't refinance anything anymore because our credit scores were now taking a hit....I would rather be able to keep my home...I love my neighborhood, etc...but in the end, as a true investors, you calculate the numbers out, and if the numbers work..you act on a deal...if they don't...you walk.

Lee, if you'd like to continue sharing, as we have strayed so way off the topic here, please feel free to email me at [EMAIL REMOVED]

Regards,

Vivienne