Anyone care to chime in?
Specialist · MA · Member since 2009 · 858 posts · 306 votes
Anyone care to chime in?
Most Popular Reply
Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votesShort sale investors would not exist if there was no demand for their services, i.e. enough retail buyers were in the market. It's a free market, everyone operates in their own best interest. If there was a higher offer on the table the seller would take it instead of the investor offer.
Bill's argument against short sale investors is the old one that the consumer is too dumb to make his own decisions. Therefore, a third party must protect him i.e. goverment, specially licensed government group (real estate brokers), etc. In some individual cases this might be true. However, overall, the free market sorts it all out.
Short sale investors bring much needed liquidity to the market of owners "upside down" in their homes. They exist exactly because of the service they provide - the ability to work thru 9 months of frustrating and often fruitless negotiation with corporate buracracies that are saddled with ineptness, inverse motivations, and governmental rules and regulations that negate the usual motivation of quick dealmaking. After providing the service of working thru these frustrations, investors who successfully complete the transaction can then try to sell the property to a retail buyer who only steps into the transaction when it can be closed in a reasonable time frame. Of course, the investors capital is at risk and he is not guaranteed any profit, the investment may well end in loss.
The economy works best when everyone works in their own best interest. This is known in a capitalist society as the invisible hand. Many people can't accept this because they can't accept the premise that people working "selfishly" in their own best interest result in a greater benefit for all. However, the result of so called unselfish interest is a government owned economy, and we have all experienced how well communism has worked!
One final note. The premise of Bill's argument is that whatever an investor offers on a property is too low because the investor hopes to sell it for a profit, so the seller should hold out for the higher hoped for price. This theory assumes that the desires, motivations, financial situation of both the investor and seller are exactly the same. Obviously this is not the case. A transaction can be good for both parties at a certain price. One party does not have to lose for the other party to win. Financial condition, ability to accept risk, time alloted, expertise all play a role. The people who are outraged by profit are the ones who believe that the economy is a zero sum game, i.e. if I win you have to lose. This is obviously not the case, almost all deals only get done when both parties get what they want.
60 Replies
- Involved In Real Estate · Hopkinton, MA · Member since 2008 · 9 posts · 0 votes16y
Richard I agree with everything you wrote accept for the fact that many deals will never get that far because the lender more times than not will not accept an offer for $200,000 if the market value is $250,000. I can't have a seller client sign an offer that I expect the lender to reject. That would not be doing a good job for my client.
- Real Estate Investor · Outer Banks, NC · Member since 2009 · 121 posts · 44 votes16y
Bill if you have 2 identical homes sitting side by side both priced at $250 but one is listed as a short sale which one do you think your RETAIL buyer who wants to close in 30-45 days is going to pick. They are not going to want to wait for 6-9 freakin months to get an answer. They are going to pick the one that is not a short sale ie the short sale listing is worth less.. I as an investor eat up that 6-9 months of wait time which puts the value back into the home for the $250 price. Yes the bank took $200 because if they foreclose it is going to cost them $50-$75K to take it in foreclosure and then the dogs are going to list it for $200K anyway to get it off the books. Who pays the price I do, you do, we all do! The freakin note is insured the bank gets their money and then some.
- Real Estate Investor · Outer Banks, NC · Member since 2009 · 121 posts · 44 votes16y
"I can't have a seller client sign an offer that I expect the lender to reject. That would not be doing a good job for my client."
Sure it would because the bank is going to counter. Now you know for fact what they will take. and you found it out quickly not "pushing your client closer to foreclosure" - Real Estate Investor · Craigmont, ID · Member since 2009 · 564 posts · 239 votes16y
Bill,
Now that you are on "our turf" we can pummel you...JK
Great to see you here. It is a great resource.Maryanne, It looks as though you got owned when you posted that Bill was the "dumbest realtor". Bet you didn't expect to see him here. While I agree that Mr. Gassett has made some proposterous remarks especially for one who has never worked with an investor there is a big difference between a real estate sales person and a real estate investor. The same thing would be true of a good car salesman. They do not have to be a good mechanic or even know the truth about the car they are trying to sell you. They just have to get you to buy the car. That is what makes a good sales person.
Originally posted by Bill Gassett:
Richard I agree with everything you wrote accept for the fact that many deals will never get that far because the lender more times than not will not accept an offer for $200,000 if the market value is $250,000. I can't have a seller client sign an offer that I expect the lender to reject. That would not be doing a good job for my client.To steal your line: Are you serious? The lenders must love you if you believe they will not accept 80% of value. It is VERY hard to find buyers in my market who will offer more than 80% of value especially on a SS. Some "fall in love" with a property and just have to have it even if they could get a better deal elsewhere but those buyers are few these days. Most are looking for a screaming deal ESPECIALLY on a SS.
The reason you believe a lender would not allow the seller to sell at a 20% discount is because you have been convinced in your "short sale 101 classes" that the lender will not move from their "counter" and do not understand the lenders actual tools and methods of calculating acceptable net proceeds from a sale.
When buying anything where you make an offer do you always make an offer you know the seller will accept? NO! Not unless you stink at negotiation (sad to say most of us do) you expect them to counter. If you want a good deal then you have to be embarrassed when you hand in your first offer. If you offer your top dollar your offer is too high because it leaves no room for negotiation.Most realtors walk on eggshells when it comes to making a short sale offer. "Make sure it is close to market value" "the lender will never accept that" etc. This is only because this is what they are taught in the SS 101 class and do not know how to negotiate with the bank.
I have seen more retail buyers doing what you say investors do that is so harmful to sellers. That is making a lot of offers hoping that one will stick. The truth is that investors intend to buy every property they put an offer on (even if they don't personally hold the capital) whereas the retail buyer is actually only planning to buy 1 even if they put offers in on 4 or 5.
- Real Estate Investor · Craigmont, ID · Member since 2009 · 564 posts · 239 votes16y
Originally posted by smitnlit:
Realistically guys? He could have just written,{if you encounter an investor that wants to negotiate your short sale, make sure they disclose they intend to make a profit. That's the way to tell if you are encountering fraud.}
It would have been a much shorter and less of a plug for Bill, but certainly truthful and a lot less controversial.
A very accurate (and concise) statement. - 16yDon KonipolBusiness MemberInvestor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
Short sale investors would not exist if there was no demand for their services, i.e. enough retail buyers were in the market. It's a free market, everyone operates in their own best interest. If there was a higher offer on the table the seller would take it instead of the investor offer.
Bill's argument against short sale investors is the old one that the consumer is too dumb to make his own decisions. Therefore, a third party must protect him i.e. goverment, specially licensed government group (real estate brokers), etc. In some individual cases this might be true. However, overall, the free market sorts it all out.
Short sale investors bring much needed liquidity to the market of owners "upside down" in their homes. They exist exactly because of the service they provide - the ability to work thru 9 months of frustrating and often fruitless negotiation with corporate buracracies that are saddled with ineptness, inverse motivations, and governmental rules and regulations that negate the usual motivation of quick dealmaking. After providing the service of working thru these frustrations, investors who successfully complete the transaction can then try to sell the property to a retail buyer who only steps into the transaction when it can be closed in a reasonable time frame. Of course, the investors capital is at risk and he is not guaranteed any profit, the investment may well end in loss.
The economy works best when everyone works in their own best interest. This is known in a capitalist society as the invisible hand. Many people can't accept this because they can't accept the premise that people working "selfishly" in their own best interest result in a greater benefit for all. However, the result of so called unselfish interest is a government owned economy, and we have all experienced how well communism has worked!
One final note. The premise of Bill's argument is that whatever an investor offers on a property is too low because the investor hopes to sell it for a profit, so the seller should hold out for the higher hoped for price. This theory assumes that the desires, motivations, financial situation of both the investor and seller are exactly the same. Obviously this is not the case. A transaction can be good for both parties at a certain price. One party does not have to lose for the other party to win. Financial condition, ability to accept risk, time alloted, expertise all play a role. The people who are outraged by profit are the ones who believe that the economy is a zero sum game, i.e. if I win you have to lose. This is obviously not the case, almost all deals only get done when both parties get what they want. - Specialist · MA · Member since 2009 · 858 posts · 306 votes16y
Sam, I commend Bill for coming here and taking a position on his blog. He came and tried to defend what he wrote, so I'm very glad to see he felt that passionately about it. ;)
I still feel 90% of what he wrote was tainted with misleading information, but he was strong enough to come here and respond.
- Flipper · Phoenix, AZ · Member since 2009 · 973 posts · 679 votes16y
I don't do shortsales, but isn't it legally and ethically required to submit every offer to your clients?
Do you really tell your clients not to accept an offer because it's from an investor? Or because the price is too low? Shouldn't that be their decision? I'd hate to be the one that falls into foreclosure because you promised you could get me the bank a better price. - Real Estate Investor · Portage, MI · Member since 2010 · 470 posts · 315 votes16y
Originally posted by Marc Freislinger:
I don't do shortsales, but isn't it legally and ethically required to submit every offer to your clients?
Do you really tell your clients not to accept an offer because it's from an investor? Or because the price is too low? Shouldn't that be their decision? I'd hate to be the one that falls into foreclosure because you promised you could get me the bank a better price.All offers should be presented until one is accepted. Others can be held as backup, but the accepted offer is the one that is binding. This is where many agents get in trouble. They mistakenly think they are working for the lender and submit another offer after the first buyer has invested a lot of money, time and effort into the transaction. We are currently submitting an ethics complaint on a Realtor that did this.
Bill
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes16y
Very good points above. Bill G., my concern was that you made a stong implication that new agents were not qualified to do a short sale. Saying that any agent is not qualified, of implying so, is a violation of the Realtor Code of Ethics, IMO,
Using scare tactics and then basically saying I'm the one "qualified" to do this, obviously suits your campaign, but the implications made, as others have pointed out, are without merit.
So, then you were basically implying that since I have never represented an owner in a short sale that that I could not do so? Really? Fact is, you don't know who is qualified and who is not, a brand new agent could have a brother who is a real estate attorney that assists them!
Trying to drum up business saying that your competiton is not qualified, might not be ethical and can get you in trouble sounds like a political ad. Not professional IMO. Advertise your expertise and abilities in a positive light without the implications of the possible short commings of others.
On the other side, you made a good presentation of things to watch for and some good points, it's just the flavor and spin that, to a more sophisticated seller, (and your peers) may put you in a bad light.
- Real Estate Investor · Gainesville, GA · Member since 2009 · 241 posts · 34 votes16y
We all investors get a bad reputation because people don't understand or don't like to take the time to educate themselves about what's going on. I guess it is easy to go ahead and point your finger on the "WE Buy Houses" guys.
Slowly I am leaving the SS field not only because the lenders, time and buracracy but also because I had my share of incompetent narrow minded people that had no clue of what to do or what to say but when something goes wrong they are the first ones to point out their fingers and jump on the Van Wagon of negative rumors and talk about fraud, etc.
I am concentrating more in wholesales, light rehabs and quick turnaround/ flips but I am also open to SSs where I know the lender won't bark about the listing agreement.
Again, most of the "We Buy Houses" people are good people trying to do an honest living and as you see this forum is the perfect exemple of these people. Now for someone to go ahead and throw all of us under the bus is just wrong!! Shame on you!! - Rehabber · Tucson, AZ · Member since 2008 · 1k+ posts · 802 votes16y
Originally posted by Bill Gassett:
Richard I agree with everything you wrote accept for the fact that many deals will never get that far because the lender more times than not will not accept an offer for $200,000 if the market value is $250,000. I can't have a seller client sign an offer that I expect the lender to reject. That would not be doing a good job for my client.
There are several reasons why a listing agent would accept a lower offer even though he or she may not believe this will be accepted.1. Stave of foreclosure. You need an offer in order for the lender to consider a short sale and if the sale date happended to be right around the corner, then you could use the "low ball' offer to help get a poatponement and give you additional time for a higher offer.
2. Catching a Falling Knife. Where sub-markets are in a decline, pricing properties can be tricky. With the long short sale review periods the original contracted offer may now be higher than market value by the time an approval is reached. So, a listing agent can help their client by accepting a "low ball" offer to establish a pricing floor and when the lender counters the investors offer, you will have established a ceiling as well. On pre-foreclosure sales, buyers do not establish pricing, lenders do.
Originally posted by Bill Gassett:
If you can buy a short sale of mine for $200,000 and turn around and sell it for $250,000 as is then I really did not do my job all that well did I? I am fairly confident in saying both the seller and lender would be scratching their head. Frankly, I don't care so much about the lender but the seller I certainly do.You have no fiduciary responsibility to the lender so your loyalty should remain with the seller. In using your example, if no other offer cam across your desk except a $200K investor offer and you advised your client not to except this offer becuase it was too low. Then, without any subsequent offers the house goes into foreclosure, would you still argue you did you fiduciary duty? Or could the seller argue you listed the home for too high an offer?
Currently, there are many complaints being heard by the DRE's addressing this very conundrum. Of course agents and brokers are lawyering up and saying they did not cause the default that eventually led the the loss which is true, but some of the conclusions coming out is that agents are not the gatekeepers the lenders/servicers are. The Listing Agents job is to sale the property and to do it ethically. Submit your offers and keep the foreclosure at bay for as long as you can. Prolonged pre-foreclosue periods means more marketing time which will give you the best chance for success!
Short sales are unlike any other type of listing. There are no real black and white patented strategies when dealing with lenders. The most successful agents are thinking outside the box and are actually teaming up with investors on their listings in order to help expedite their own listings.
Look no further the NAR own statistics of successful short sale closings to prove my point (23% which was a months back), the traditional vanilla strategies are not working. Contrary to your own publication, agents can help their clients by working with investors. I have many agents as clients that do just that and their success rate are many times greater than 23% and have many more satisifed clients as well. This does not mean the investors get the property everytime, it just means the agents are smart enough to use the tools they have at their disposal and are able to leverage these "low ball" offers into a pricing and marketing strategy that is in the best interest of their clients. That is called being a fiduciary.
- Real Estate Investor · Craigmont, ID · Member since 2009 · 564 posts · 239 votes16y
Bill Gassett commented on another blog:
"What I have a problem with is every investor commenting who wants to throw a blind eye to the fact that there ARE investors that commit fraudulent activity. Some of the comments suggesting that they are looking out for the best interests of the seller are ludicrous."
The blog is found here http://homesforsaleloganut.com/short-sale-agents-and-investors-committing-fraud/comment-page-1/#comment-404
This agent while doing a great job describing an actual fraudulent scenario butchered it badly and showed that she really has no clue how these things work or what the real issues are.
- Real Estate Investor · Portage, MI · Member since 2010 · 470 posts · 315 votes16y
Thanks for the link, Sam. I posted a response, too and hope it passes the "moderation" as all of my last posts on the original article did not. What Bill needs is a white horse and a white hat if he thinks that he is the only one that has the seller's best interest in mind. "Ludicrous"...his choice of words need a little help from Dale Carnegie! He is not making many friends or influencing many people that I am aware of!
Bill - Real Estate Consultant · Logan, UT · Member since 2010 · 2 posts · 0 votes16y
Hi Investors -
Sam wrote
"This agent while doing a great job describing an actual fraudulent scenario butchered it badly and showed that she really has no clue how these things work or what the real issues are."
Thanks for letting me know I have no clue, yet at the same time saying I did a great job explaining the situation. If you know so much about it, are you involved in these issues?
Thanks!
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes16y
Good point Lisa, it's kinda hard for a guy to describe how to wash drug money, unless he has been exposed to the process in some way.
Actually, thinking about it, seems to be the listing agent is the one to be in the best position in a SS to cloud the dealings. Besides an investor making an offer and not disclosing the intent to sell the property, I don't see him manapulating the deal, with other offers or hiding infromation, seems if there is much trickery involved, the listing agent is in the best position to pull something...
And the good friend of Bill G.'s (the author), don't they run in packs? Guess I could/should make the rounds to other sites more often!
- Real Estate Investor · Craigmont, ID · Member since 2009 · 564 posts · 239 votes16y
Originally posted by Lisa Udy:
Hi Investors -
Sam wrote
"This agent while doing a great job describing an actual fraudulent scenario butchered it badly and showed that she really has no clue how these things work or what the real issues are."
Thanks for letting me know I have no clue, yet at the same time saying I did a great job explaining the situation. If you know so much about it, are you involved in these issues?
Thanks!
Lisa,
Wecome to BP!
You did a great job at the beginning of your blog spelling out how someone would get a higher offer then get an investor involved to make a lower offer.
You later went on to rambling about how investors blame the agents and take no responsibility. As I pointed out in a response EVERYONE involved in a deal like you first describe is involved in fraud not just the agent. Here is a direct quote from your blog: The fraud Bill describes makes it hard to determine the culprit. Many of the comments he received claimed that investors are not committing fraud, but the agents are.
They claim that the investors are just looking for a great deal. The fraud has nothing to do with investors purchasing a home for a great price and turning a profit by reselling the home in a flip. They say it’s the agents fault and the investors have nothing to do with it."
This is so not true. I do think that Charlotte went overboard saying the case in CT was just about agents because the one agent was also the investor (just in a seperate LLC) So this really was about investors but Lisa described this scenario perfectly. They got a higher offer then told the bank that the "investor/agents" offer was the highest offer on the property.
Here is where you describe it perfectly:
Bill describes real estate agents taking short sale listings, finding buyers to pay the market value for the home, and than having an investor on the side offer less than market value.
This is actually better than what Bill wrote because Bill put pretty much all short sale investors in the bin of "not in the best interest of the seller" not necessarily because of fraud but other reasons even though the title pretty much said what he was writing about was fraud.
Gota run!
- Real Estate Investor · Portage, MI · Member since 2010 · 470 posts · 315 votes16y
Lisa,
Welcome to BP! As a Realtor and investor, I try to stick up for Realtors if things get hot for them on BP, but could not do so for Bill. He has caused his own grief and will need to fight it out on his own.I quote form your post on your blog comments:
[Maybe the title could have been different, but I think he used his title to draw in the eyeballs, and for Google to show his blog when people search terms related to short sale fraud. One thing you may not know about Bill is the fact he is an SEO expert. Because of that blog post he has gotten a lot of marketing to his blog, generated talk about him and his company, and it shows up very high for the term short sale fraud in search engines. The title is everything when it comes to marketing a blog post.]
Again, this is the problem....the misleading and on several points, false information is showing up in searches and being taken as truth! There is no real point in debating this with Bill any further. We work with Realtors Nation wide that appreciate the service that we provide and the benefits of our involvement in the short sale process. There are also Realtors like Bill that refuse to consider another point of view. We can't win them all! As I pointed out on an earlier post, there was a webinar on short sale fraud that I invited Bill to attend. I don't know if he did, but if he did, I would hope that he would not be as careless in throwing out the term "Fraud".
Bill - Real Estate Investor · Craigmont, ID · Member since 2009 · 564 posts · 239 votes16y
The reason us investors get all worked up about articles like yours is that we run into agent after agent who will not work with us because of "all the fraud" rather than looking at each situation and judging an investor accordingly. I have talked to 40-50 agents in my area who talk about all the agents getting in trouble for short sale fraud but when asked for cases they can only give you the case in CT which all of us agree is fraud. Hey we actually agree on something!
Just to give you an example of what the FBI is actually doing check out this site and read down through the indictments. It is scary to realize all the fraud going on with agents, mortgage brokers, appraisers, investors, homeowners and the like. http://www.mortgagefraud.org/tampa-mortgage-fraud-surge/Here is the page from the link where it gives the first few lines of each charge of the November 09 bust in Tampa, FL
The point is fraud is all around us. - Real Estate Investor · Portage, MI · Member since 2010 · 470 posts · 315 votes16y
Sam,
Your post just goes to show that all of the mortgage fraud that is talked about is not just about investor fraud. Unfortunately, when short sale fraud is talked about the statistics quoted include all mortgage fraud in most cases.
Thanks,
Bill - Involved In Real Estate · Hopkinton, MA · Member since 2008 · 9 posts · 0 votes16y
"The reason us investors get all worked up about articles like yours is that we run into agent after agent who will not work with us because of "all the fraud" rather than looking at each situation and judging an investor accordingly."
Thanks Sam at least you were willing to put pen to paper and say what the real truth of the matter is. You are probably right that public perception is not great for investors. A few fraud cases can do that and good people do get lumped together with the ones who aren't. Join the club my friend that happens in many businesses including my own.
Bill P - I just got of my white night you will have to excuse me I am a little tired from riding all day. I love reading your comments Bill. I am so disappointed I don't have you to back me up in the forum like you do for all the other Realtors who are dumb like me.
You love to talk about FALSE information Bill but you offer no examples of what is false in the article.
You also keep saying that I edited your comments which is completely false. I have let all comments go through unedited. Just look at what is on there Bill. If I was editing comments a lot of what is written would not be there.
- Real Estate Investor · Craigmont, ID · Member since 2009 · 564 posts · 239 votes16y
Mr. Gassett,
Do you really want to go there?
Here are a few untruths:
1 "The contract price that you have accepted from the short sale investor needs to be within a reasonable proximity to appraised market value or the short sale will be rejected. From an investors perspective they could care less because they have your home tied up and there is no risk to them if the transaction does not happen. They get their deposit monies back if the lender does not accept their offer. A short sale investor knows this and will put offers on many short sales hoping something eventually sticks.
The truth is that while value is a PART of what a bank uses to determine an acceptable payoff it is only a part. The other parts have to do with assessing the risk to the lender and using average losses/ expenses to come up with an acceptable number.
The truth is investors are prepared to close on EVERY deal they put under contract. The truth is it only happens 70% of the time. The truth is this is what RETAIL buyers are doing because the short sale is so unpredictable. Even though they put in 3-4 offers they really only want one property.
2 Your home will be off the market tied up for months with this investor while you wait for the banks reply. When it finally does come and the answer is no way Jose you will be starting from scratch and the foreclosure will more than likely be right around the corner. This scenario happens all across the country on a regular basis with short sales.
The truth is that an investor begins negotiations figuring the bank will not accept the first offer (believe it or not) but this is just the beginning of NEGOTIATIONS and gets the proverbial ball rolling. The truth is that if the investor has a buyer but cannot negotiate a spread the investor will back out of the deal and allow his buyer to buy directly from the seller even though he has no DUTY to do so.
3 It is much more routine for a lender to require a seller to pay back a portion of their short fall in order to close the property. An agreement to pay back a portion of the debt will become part of the approval letter. Typically the owner will be asked to sign a note where they agree to pay back a certain amount over “X†amount of time.
The reason why this becomes important when dealing with a short sale investor is because if they do manage to get the lender to approve the short sale you will more than likely be on the hook for a larger portion of debt than if you held out for something closer to market value.
The truth is an investor will do his best negotiate the deficiency away or down to a reasonable amount. After all what kind of idiot seller would pay for the investor to make a profit?
Are you seeing these promissory notes on your deals? If so it is no wonder you can close so many!!!! The lenders must LOVE you! If you are doing retail sales and cannot get the lender to release deficiency then you are not doing the best job you can for the seller.
4 Other measures have been put in place by the Treasury Department to prevent short sale fraud by requiring that the buyer and seller have no hidden relationship and banning a re-sale to take place in under 90 days.
You talking about HAFA? What a joke and a near total flop of a program just like any other time the federal government steps in to help.
5 Realtors that get involved with these kinds of transactions walk a fine line with getting themselves into a situation where they are clearly not working in the best interest of their client.
It depends on the track record of the person negotiating the transaction.
There are the ones I picked out in just a few minutes of reading it again.
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