Reverse short sale
@Ben Jones, you "came across a new way to make money". Was that, by chance, being offered by a group who would like you to PAY to learn more?
Sigh...
My friend is a Cody Sperber clever investor student he was trying to put me on to the idea I'm very skeptical and wanted to know if anyone has actually done one of these deals ?
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#1 Foreclosures Contributor
- Real Estate Professional
- West Palm Beach, FL
Nothing new, but kind of a dumb idea. Since the bank established their acceptable number in the short sale process, they're unlikely to let it go for less money at the auction; there will be competition at the auction; the potential short sale buyer has likely long ago moved on to buy another property, etc. Let us know how it works out.
We do see inexperienced agents fail to negotiate short sales when a second is involved. These will disappear at the auction. If this happens there may be opportunities.
But Wayne is right, if the opening bid is attractive there will be competition. This seems like a lot of work with very low odds (finding the failed short sale, finding the potential buyer that doesn't buy it at auction, etc).
It sounds like the only difference that this strategy has is that it comes with an interested buyer. That really isn't the problem that needs solving. There are plenty of buyers for good deals.
He said he is focusing on higher end homes so the buyer is more motivated to stay with the house, because it is there dream house. I just wanted to see if this venture is plausible.
So I did some research basically it is a technique that can save the sale, commissions for agents and net you a good sum as well. You'd need to work with an agent to identify pending short sales that are within 30-60 days of foreclosure sale and working with the listing agent to explain that it is an extra tool they can use to save their commission if the sale at the bank appears in trouble. Takes some educating on your part but you basically buy the house at auction, sell at the same price already agreed upon by the buyer using their non-refundable earnest money, and whatever additional funding needed to make the purchase. Object is to get the home at a large enough spread to pay the investor, commissions, closing costs and of course, whatever you determine your cut to be. I.E. a short sale with contract for 350,000 falls through...you buy through the auction at say $1 over minimum which turns out to be 291,000. The 59k minus all expenses is yours because the buyer has a contract on the house for $350K. Do your home work on seasoning requirements, have inspections/appraisals done beforehand paid for by buyer and disclose, disclose, disclose.
@Ben Jones, seems to me, you would be "banking" on Lenders being incompetent at their job. But won't their own Contracts forbid immediate on-selling at a profit? (I may have missed some vital detail)...
Although your idea seems well thought out, and a "system" of sorts, here is what happens at a foreclosure sale. Here in Georgia, we have the unfortunate circumstance of having Auction.com cry the houses in 70+ counties, including here in Atlanta.
First, I agree that if you can do a short sale with the bank ( a big if, since many will fall apart before the auction ( I will explain the incentive shortly that the banks have to do this), you do have to worry about liens, 2nd mortgages, etc. Yes- the junior liens very often will allow a "short sale" to satisfy the lien ( depends on whether Auction.com is doing the crying), you must buy Title insurance to make certain the title is clear.
That said, here is what happens at the auction. I attended yesterdays auction- so this information was proved to me again, just 24 hours ago from writing this. Actual examples I noticed by pulling out my phone at the auction and researching quickly: Listed on MLS: $55,000. Sold at Auction: $97K. Another: Listed MLS: $48,000. Sold at auction $87,000. There were five such houses that were listed on MLS before the sale out of 40 that I watched being sold. I was with two other real estate agent/investors - and we we couldn't believe the stupidity of the bidding wars going on. There were 150 people watching the 50 or so homes being cried ( I left in disgust after #40 or so). Another house was bid all the way within $3k of ARV. Without being able to step foot on the property!
Now- the incentive of banks to not allow a short sale when the foreclosure sale is imminent: First, they hired the foreclosing attorney to begin the paperwork and calculate the costs needed for the bank at auction ( costs money). Second: If the foreclosure process has begun, see above. Why would they sell it to you at a loss, when they just have to wait for the auction ( if the process has already begun) to recover everything?
The problem here is way too many investors watching the flipping shows on TV. The real investors that have been doing this for a long time just watch in disbelief. I see a lot of the same faces - and they started bidding, but stopped at their "number". Amateurs don't because they KNOW they can get more for the house ( since it's theirs I assume!). Yes- home values can be improved to a point- based on the upgrades, but this costs money. If anyone buys within $15-20K of the market value - and the house needs $5-10K in upgrades ( assuming the roof or air cond. is good - rare!), then assuming their goal is to sell the home, unless they have a buyer waiting they will have to pay either marketing and holding costs, and/or real estate fees, selling costs, title insurance, etc. Good luck with this.
Now- if you are able to find this house before any action is taken by the bank to foreclose - there may be a deal waiting, depending on liens on the home. A bank may deal with you on a short sale if they still have months before auction ( in Florida it can take 6 months waiting for the process, have a judge sign off, etc). In Georgia - we are not a judicial state- it is 4 weeks of advertising, and off to the steps. I have done a few of these myself - its inexpensive fast, and efficient.
So- in theory - you may have a plan. If the bank is willing to deal - jump on it now - don't wait. The auction (thanks to Auction.com and their bank clients) will jump the bid process and get the crowd into the buying mode they know can occur. I see it every month.
There is even more competition around here in the auctions than there are on short sale listings, good luck with your plan. The banks don't let most houses go for peanuts at the auction, every once in a while one will slip through but either the plaintiff max bids are high or 3rd party bidders drive the price up. All of the Tampa Bay counties are on RealAuction so bidders from all over the world can drive the price up.
Yes! Believe it or not, Cody Sperber Team has made me over $85,000 last year between my wife and I in assignment deals and fix and flips.
His tools and teachings aren’t a joke and NO I DO NOT WORK FOR CLEVER INVESTORS. ALTHOUGH skeptical at first, I joined the mentorship and this dude actually called me! Basically taught my wife and I tons assigned us to a area in our stage of MA and gave us a platform with access to a ton of leads. We just sent out mailers and follow ups
After 2 weeks, our Google VoIP operator was fulls?’ Basically from the influx of calls of responses. 100 messages along with 250 additional sent to our funneled Voice recording. So our live operator Recieved a influx of calls. The Voice mails left ranged from “Telling me to back the f$&k up and stop sending them mail” lol one guy told me to “kill myself” lol.
Anyway, math came out to 350 within the span of 1.5 weeks (Granted Cody probably had nothing to do with it, but the automations he provided us wouldn’t of been able to auto screen 350 calls.
5 of this calls were solid leads
2 of those calls were a assignment fee or $10k each = $20k Then it seemed like we were getting deals left and right as though he provided them Once we joined his mentor ship - Our ROI greatly exceeded our expense of clever software and I recommend to everyone.
My wife was thinking it was propbably staged and pre I planned - but no we had people and to this day calling and cash buyers seeing what we have for inventory. We hired a realtor for our acquisitions and resell of fix and flips as well as interview potential tenants for our rental properties.
Cody is actually making deals himself believe it or not in AZ - Yes i thought Cody was a weasel marketing scammer in the beginning but fact is, he is part of numerous REI associations, and has a office in AZ that pumps out everything from assignment contracts done by a few office admins, or if a deal is good enough, he has a few partners to assist him. So yeah, he made a lot of money from the internet but most of it, and I am not defending him AT All- But has made more money in REI then with his online presence. Since we are in his mentoring program, he actually GAVE (Straight up told us he had 7 leads his team cannot cover and need to keep his clients happy- In turn we work these deals (and were allowed 100% or spread) And these weren't even leads like Cody presented to us (that rascal lol) BUT BETTER. ALL 7 were actually all had been previously negotiated and accepted, all we had to do is throw to our cash buyer list and Boom!
The trick is- although Cody is def not a scammer, but the whole trick to be successful is to automate automate and automate. WORK HARDER IN THE BEGINNING, Now smarter!
Anyway, my wife and I have exceeded both our career salaries but both find joy in what we do. The money is rolling in and I’m just wheeling and dealing. As of Jan of 2019 I could easily quit my job and my wife as well. We decided to work for another 5 years (regardless if we hit 5 million in 3 years (we will still work unti the 5th year) we plan on hitting $290k plus the 6 rental properties at 1.9% cash flow percentage (1% Rule) that we just rectified so I’m Interested in how this goes. Although my wife brutally vetted all the tenants. We are acting as if we don’t have half a million between the each of us and are constantly recycling our the money. Now getting into national wholesaling, BrickOps and Rooftop Aps
Anyway, Cory knows his stuff and it’s NOT A SCAM
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