What is your process?

Question

Hey all. I had a situation come up, which I will explain below, that made me think to bring this to the community to get your thoughts on it. I wonder what everyone's process is like when you do a short sale. I'm talking about once you have the contracts to begin the process, how do you market for an end buyer? Do you use a realtor or not, etc.

Specifically here are my questions on your process:

Here is the situation I had occur today. I have a property in a pretty desirable area in one of my farms under option contract. I have good rapport with the seller. I have sent the Authorization to Release to the bank, but nothing else yet.

The property has been listed for about 2 weeks at this time. My agent, who is a member of our team, received an offer on the property today, from another investor. In that offer, one of the contingencies was that a specific person affiliated with them handle the short sale negotiations. Basically, they are offering to the seller, precisely what my company is offering, however we generated the lead, built rapport, etc. This investor simply found a short sale listed on the MLS and submitted an offer, similar to how one might blanket offer on REOs.

The issue is this. The agent has a fiduciary responsibility to the seller to present the offer. He of course is in good rapport with us, and will reject it, as we are already doing what this investor intends to do anyway. However, here are my many questions.... when listing the property, and we have a vested title interest (our option contract and recorded Memorandum of Option) do we have a right to reject the offers? Can we list the property ourselves, and have the seller simply sign the listing agreement for their title interest? Who is the agent's fiduciary responsibility to, us, the owner in trouble, or both?

This is why I ask above, what your processes are, and if you do use Realtors, when specifically you list. I've done about 8 short sales, and I've never used agents until now. I either bought to rehab and sell, or found buyers for simultaneous closings via our own means.

Thanks in advance for your responses!

Minna Reid · Answer

Phil - when the bpo agent sees you have the property already listed on the mls obviously for more than you are trying to bring the bpo to, doesn't that create a problem?
I always assumed listing after you have the bpo, or even approval would be the only option, if you want to sell it on the mls.
If the bank knew you were the buyer, seller and agent wouldn't they consider that fraud somehow?
I've been thinking about options on shorts lately and those points always come to mind.
My thought was that it would be a safer bet to have someone other than me (someone I trust) take the option in their name so I'm "separated" from the transaction, get the short approved, then list the property to find the buyer. Would just taking the option in my llc's name solve it?
How do you work that?

Phil * · Answer

The easiest method obviously is to do the short sale (for a fee) and list the house to an end buyer (for a realtor fee). But obviously thats not enough for us, esp. when we advertise that we are BUYING HOUSES CASH, so just listing everyone's house would be quite the gimmick.

Heres what I do for a short sale that I need to wholesale.

ex: Seller contacts me to buy house cash, but over leveraged with mortgages/liens.

1) Check the comps

2) Visit the property, estimate repairs, condition and estimate current and ARV values.

3)Present my offer to the seller (Which they usualy accept), and get the POA for the short sale.

4) Submit the offer and short sale package to the bank.

5) List the property on the MLS (I am the seller and is subject to my short sale purchase approval, and must be cash, hard money or conventional - title seasoning issues)

6) Put the property under contract with end buyer with attached 'subject to my pending short sale purchase addendum.

7) Wait for and meet the BPO agent at the property (have key to property and let him in with you present). Show the BPO agent your comps, and an elaborate break down of repairs/upgrades needed and how much it will cost to repairs, so they understand the houses true value. *MOST IMPORTANT PART OF DOING A SHORT SALE*

8) Bank accepts offer, provides Acceptance Letter and you tell your end buyer to get ready for closing in 30 days or less.

9) Double Close if your end buyer uses a lender, or Simultaneous if they use cash and you get there permission.

Steve Londeau · Answer

Hi Phil, thanks for the reply.

We used an agent friendly to what we are doing on the listing, however, the seller actually listed it. We didn't sign the listing agreement (yet). I think this was our mistake, and how we will proceed from here on out. WE will be the ones to list it, and the seller will only sign the listing to sign off as a title holder. All offers will be presented to us. We do have an option on this house and we have recorded the Notice of Option as well. We've rejected that offer, but I just wanted to get other investors who do short sales ideas on how they go about this. Listing or waiting until after the BPO is in to list, etc. etc.

Thanks again Phil for your reply.

DemosL - We are not looking to assign this to another investor. Thanks anyway for posting. I appreciate any and all responses. We are very good at doing short sales, however this is just the first time I've used agents to try to find end buyers. We had either found them on our own, or bought and rehabbed the houses to resell. No need to refer the deals to other investors. In fact, other investors refer deals to us for short sales.

Thanks all. Still want to hear from other short sale investors on just what your processes are from the time you have the contracts to the time you sell. (as far as marketing to sell and finding buyers, not the actual short sale process) Thanks!

Hope everyone had a good holiday!

Phil * · Answer

Hi Steve,

#1 - If YOU have it listed on the MLS, and YOU have the contract on the house, then I assume YOU are the one who the incoming contracts should be presented to. (Your end buyer)

#2 - Most investors (including myself) will not want to put a short sale approval in the hands of a conventional realtor. The investor will work the bank and the BPO agent with negative property features and presentations to make sure they get approved. A realtor will not. If you explain an investor is doing the short sale and knows how to do it 'the investor way', they will prob. waive the terms of having to do the short sale themselves.

Ideally your end buyer will be paying cash to steer away from lender 'rules' and such like seasoning and you not being on title yet. But if you are selling to an end buyer with a double close, than make sure they dont use a gov. backed loan (b/c title seasoning) and let them know that you wont be on title until the day of closing.

Ideally your end buyer will be paying cash to steer away from lender 'rules' and such like seasoning and you not being on title yet. But if you are selling to an end buyer with a double close, than make sure they dont use a gov. backed loan (b/c title seasoning) and let them know that you wont be on title until the day of closing.

Demos Loizides · Answer

As a wholesaler, I'm no short sale expert. If this was my deal, I would wait until the bank approved the short sale before trying to assign to another investor. Either that or just refer it to another short sale person to get it done and collect a referral fee. Just my 2 cents.

Steve Londeau · Answer

Nobody wants to share? I'm disappointed. 60 views and not one post. :(

What is your process?

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