1st shortsale... Alot of questions.

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1st shortsale... Alot of questions.

Jahvin Bowman
San Diego, CA · Member since 2012 · 24 posts · 1 vote

Hey team!

Heres the basics:

SHORTSALE

ARV: 155-160k

BPO target: 140k(I will be there to do everything I can to influence price)

Target purchase price:112k.

1st of 220k (WF) and 2nd of 60k (handled in bankruptcy court and home owner currently paying it down)

I am pleased to say a family friend has chosen me to handle their short sale. As you can imagine I have quite a few questions. So far I have called the bank (Wells Fargo) and asked them what they would like to have signed so that I may speak on their behalf... The one individual I have spoken to thus far claims "for certain loans the home owner needs to enlist the services of an agent" although he has no idea which loan my seller has nor which state the home is in. At this point I'm thinking I should call back and find a different person to get information from, because my understanding and please correct me if I'm wrong is an agent is NOT required.

Where should I go from here?

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  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    12y

    Are you an agent? Short sales do often require the property be listed before the lenders will approve the short. If not, what's the basis for them choosing you to deal with this? That is, what are they expecting you to do? There's certainly a process around getting a short sale approved.

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  • Jahvin Bowman
    OP
    San Diego, CA · Member since 2012 · 24 posts · 1 vote
    12y

    Thanks for the response.

    I'm not an agent. Though my father is an agent here in CA. The property is located in MN. They would like for me to get them out without a massive amount of debt while sharpening my teeth.

    My intent with this property is to get it at ideally 80 percent of the BPO and make a profit by quickly reselling under market value.

    This is probably a very newbie question but can a CA realtor handle the listing in MN? I'm thinking no but hoping for otherwise.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    12y

    No, you need an agent licensed where the property is located. Your role will be as buyer only. BPO agents have had buyers/agents trying to influence them for the last 87 years, and they may appease you, but they'll also ignore you. Don't expect to get the short sale at a flappable price...also many will have resale restrictions. The best thing you can do for your friend is maybe help them find an experienced short sale agent, then Stay The Hell Out Of The Deal, in all seriousness.

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  • Derek Faller
    Rental Property Investor · Bend, OR · Member since 2013 · 81 posts · 24 votes
    12y

    A realtor can only handle sales in the state they are licensed. I have never heard of a bank or lender doing a short sale without a realtor involved in the process. The bank is looking to recoupe as much of their money as they can so they usually have a realtor list it at the highest price they think they can get, which is usually around market value depending on the condition of the house. I don't see a lender agreeing to sell to an investor for 80% market value if they think they can get more for it.

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  • Ed Wood
    Real Estate Broker · Orange, CA · Member since 2008 · 380 posts · 87 votes
    12y

    It will be interesting if you can complete the short sale without a agent. I agree with Holdman's comment.

    In my experience banks maximize their sales prices this includes a properly marketed property and a bank ordered BPO or appraisal to verify the price of any offers presented. I think you'll find that banks will only accept offers close to market value and counter to those that are too low.

    Just the basics Wells requires are:

    1. Wells Fargo short sale application

    2. Fully excuted listing agreement and Wells Fargo listing addendum

    3. Fully executed purchase contract

    4. Estimated HUD

    5. Equator.com access (which you may have to be a agent)

    Then the buyer signs a agreement with Wells Fargo they can not sell the property within 90 days. Here's the Wells documentation.

    http://reo.wellsfargo.com/docs/104567_122011.pdf

    ... and other info

    https://www.wellsfargo.com/homeassist/shortsale

    Ed

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  • Jahvin Bowman
    OP
    San Diego, CA · Member since 2012 · 24 posts · 1 vote
    12y

    Thanks for the info Wayne. I am aware of the resell restriction of 30/60/90 days beyond that I am not familiar with any other restrictions. I am not at all convinced that the home cannot be purchased at a deep enough discount to resell the property because many have done just that in the past. Furthermore how would you expect me to learn if I simply give up deals? Reading only takes a man so far and I'd like to learn the ins and outs of short sales by being involved.

    I do agree with you that I should help find an agent in MN that is willing to work both on behalf of the seller and myself for the resell. One with a good track record and can keep me apprised of the situation. If it turns out that the home cannot be purchased at a deep enough discount for me to flip, the buyer can sell to someone else interested in the listing... of course after several purchase price negotiations. Does this sound reasonable?

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  • Jahvin Bowman
    OP
    San Diego, CA · Member since 2012 · 24 posts · 1 vote
    12y

    Thanks everyone for your responses. @Ed Wood, I certainly do appreciate your detailed and cited response, I will put it to good use. My understanding of the equator system is an r.e agent must log in with his license number to access it so yes, my hopes of negotiating this without an agent are shot so on to finding an agent.

    I understand banks trying to get as close to market value as possible but isn't our goal to point out all the costs the bank will incur should the home go into foreclosure and painting the investor purchasing the home the better option? The home owners agent is the one recieving offers... can they not simply put my offer in and reject all others during the negotiation process with the bank on price? Forgive me for my newbie-esk questions...

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    12y

    @Jahvin Bowman

    Sure, after you've eaten up a few months trying to get it for a deep discount, your "friend" will be that much closer to a foreclosure auction, and have less time to possibly get the short sale done.

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  • Jahvin Bowman
    OP
    San Diego, CA · Member since 2012 · 24 posts · 1 vote
    12y

    Wouldn't that be the motivation for the bank to sell the property at a discount? to avoid auction?

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    12y

    If they don't get the price they want with a short sale, they send it to auction, where in a lot of places they get more than in a short sale, and without any selling expenses.

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  • Jahvin Bowman
    OP
    San Diego, CA · Member since 2012 · 24 posts · 1 vote
    12y

    Depending on the state that could take months to years... Lost revenue and then there is chasing the home owner for the amount that is still owed on the property which also costs the bank money and from my understanding looks bad on the books. Maybe I'm just hard headed but I still see value here.

    Wayne have you ever profited from the purchase and resale of a short sale? If so how may I ask did that happen?

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    12y

    I don't buy short sales. I list them as an agent, and negotiate them. I buy and sell, but I focus on properties with lots of equity. If you want to put your friend at risk, which you seem determined to do, go ahead. I don't know what the time line for the process in MN is. Hopefully the agent will look at your offer, if it's too low, and convince the seller not to take it. These days, the biggest discounts on short sales would be one with severe damage, not financeable, and therefore not salable to the typical homeowner, using financing.

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  • Laura Marshall
    Residential Real Estate Broker · New Bern, NC · Member since 2013 · 31 posts · 20 votes
    12y
    Originally posted by Wayne Brooks:
    If they don't get the price they want with a short sale, they send it to auction, where in a lot of places they get more than in a short sale, and without any selling expenses.

    And...may I add....the "bank" is most likely NOT the underlying investor, so they will be reimbursed 100% when they re-convey the property back to the investor after a foreclosure (if there is one). Just because Wells Fargo is the servicer, does not mean that they own the loan. I have negotiated and closed more than 120 short sales as a real estate broker. The property MUST be listed with a real estate agent. Part of the required short sale package will be a copy of the MLS printout. Although "most" Wells Fargo loans are processed through equator, some are not. I have one right now that isn't. It is a former Wachovia loan, which is handled by a different department within Wells Fargo. If you intend on moving forward, please make sure that you are working with an agent that has successfully negotiated and closed MANY short sales in your state. There are so many variables, and the agent needs to know how to handle them....such as...who is the underlying investor? is there PMI? If so, who is the PMI company? They will have to approve the short sale too. The list goes on and on. Good Luck!

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  • Jahvin Bowman
    OP
    San Diego, CA · Member since 2012 · 24 posts · 1 vote
    12y

    Thank you for the detailed input Laura.

    Wayne I don't feel I am putting anyone in harms way but you are entitled to your opinion. I'm not sure why you would hope I don't get my offer accepted but I do wish you the best of luck.

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  • Holly Baldwin
    Realtor · Layton, UT · Member since 2013 · 84 posts · 37 votes
    12y

    Hi @Jahvin Bowman !

    I like your determination and quest for hands-on knowledge! That is an excellent quality to have in REI.

    In your initial description you said, "I am pleased to say a family friend has chosen me to handle their short sale" This threw up red flags for me instantly. Let me explain why:

    I am currently in Real Estate school to get my sales license and just tonight I finished my course on Short Sales. Here in my state of Utah, any person who is hired to work with the negotiations of Short Sales must of have an active Real Estate license. [Utah Code 61-2-2(12)d].

    Your friend may have not technically "hired" you, but you really need your friend to hire licensed professionals. You can learn right along with her, but don't be her advisor, negotiator, etc. because your lack of knowledge and inexperience with Minnesota law may very well may put your friend in harms way by accident.

    Sure hope it works out okay for your friend! And have fun learning along with him/her but not overstepping your bounds.

    Cheers!

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  • Phil Z.
    Real Estate Broker · Orange, CT · Member since 2013 · 951 posts · 218 votes
    12y

    I would refrain from "influencing", especially on a public forum. However, If you want to make sure they are aware of needed repairs, that should be fine.

    Your BPO goal is too high for your offer. I would want the offer closer to 88% of the BPO value.

    Are you aware from lenders have anti-flip clauses in their approval letters?

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