All Forum Posts by: Tom Medwin

I think the worst case scenario in all of this is that I have to buy my short sale, close on it, and then remarket the property for sale. If I know that I know I'm buying it right, then I'll still resell for a worthwhile profit very quickly. Yeah the financing will cost more, but if the numbers make sense then so what. At least I can sleep at night knowing I'm not violating any laws or guidelines AND I'm still making good money. Of course that's a big IF they start cracking down. JMO

Originally posted by Jon Holdman:

You might point out the homeowner that if the thing goes to foreclosure, they will still end up with the 1099. Likely it will sell for even less at the foreclosure.

Again, if its their residence and the debt is for acquisition or improvement, they will get the 1099, but can avoid the taxes.

Thanks Jon,

This one is tough because the homeowner connected me with the end-buyer and knows how much they are willing to pay, which is about $40k more than I'm paying. So the homeowner will be very upset with a 1099 because their 1099 with me will be a lot more than if they sold to this end -buyer. Also, the house is not their primary residence but an investment property which makes it tough. So I told the homeowner if the bank won't waive the 1099 then I'll step out of the deal and let them sell for a higher amount to someone else for less tax liability. I really hate to do that, though, knowing I got such a good discount on this one.

What are the chances of negotiating with the bank to not issue a 1099? I have a verbal approval on one right now and the 1099 would be like $90k. The seller doesn't want to do it for that large of a 1099. What am I supposed to do, give the bank more money so the 1099 is less? No chance, but I told the homeowner I won't do the deal if the bank won't waive a 1099. I'm just wondering if anyone has had success doing that?

Great advice everyone. Thank you very much. It's great to have the support to help get me through some of these roadblocks.

Originally posted by Dustin Phillips:

Throw it back on her. Ask her to show you where it states that you must provide such a letter. If your purchase agreement states clearly that you will be reselling the property for a profit then that should be the end of the discussion. Call your end buyer and tell them that their sister is jepordizing the deal and that if it does not close it is on her, then explain how the lender would know that the deal is legit, based on the documentaion you provided them...

Sounds like she just wants her brother to think she knows what she is doing, when in fact she is making it worse...

Good call Dustin. I don't mind showing her my contract which should be the end of the discussion. I'm sure she heard something at this seminar about lenders being defrauded or wrongly led to believe that a property is worth less than it actually is. The reality is that OCWEN was super easy to deal with. I submitted the offer, waited for the BPO, and they told me what they would accept for a short sale. Period. This is the whole reason there's a BPO to begin with. The lenders are grown up enough to decide for themselves what price they are willing to accept. Once I own the property I can do what I want with it. I don't know if First American Title Co has an issue with me flipping the property, but it doesn't sound like this lady really knows either.

A written statement from the lender that they know I am reselling the property for profit. I always try to use my title co for double closings. However in this case the end buyer's sister owns a title company. On top of it, the day before his agent brought me a contract she attended a seminar held by First American talking about how flipping short sales is illegal. I doubt that's what they said at the seminar but that's what she took away none the less. So I had to diffuse the situation and educate her about the details of the transaction. She is OK, but still concerned that the lender, OCWEN, is being defrauded because I'm buying from them for one price and reselling for a higher price. She is demanding to do the closing for her brother the buyer and is saying she wants a written statement from OCWEN acknowledging that they are OK with me flipping the property. My purchase contract says plainly on the front page that I have the right to re-market the property on the MLS for profit, but I don't know that that will satisfy her. Anyone know if I'll have any luck asking my negotiator to sign something I send them that says I am reselling the property for profit? If their approval letter doesn't mention the fact that I can't flip the property then I'm clear, but I don't think that will be enough for this title co. My usual title co uses Stewart Title, so I don't know how First American will be with all this. At the end of the day they may still do the deal without such documentation from OCWEN, but she's saying she wants to have it to provide to the underwriter. Ugh, what are the odds that this buyer's sister owns a title company?!

I genuinely appreciate all of the responses. Thanks for taking the time to share, I really mean that.

Just a good follow up... in both of the cases I mentioned there was serious mis-information on the part of these other buyer's agents. Miscommunication and lack of understanding seems to be the fatal flaw in so many cases, both business and personal life. As of today I've had a chance to sit down and thoroughly explain the whole situation to both of these agents, along with supporting information straight from HUD.

The one who was calling this fraud admitted "someone told him you can't do that," but after looking at the facts and understanding the whole process is OK with it. He's just concerned because he has an interested buyer who is getting financing through FHA and his lender can't do it. And the agent is not willing to recommend a lender he doesn't know just because they can do it. The second case was a more serious one. That agent said myself and my entire office was violating "ethical issues," and that could have gotten out of hand and taken to the MLS board at least. I sat in person with him and his broker to explain AGAIN for the third time all of the moving parts involved and how it is documented and fully disclosed. This time, however, the broker is there with me in person. The broker completely understands and is OK. So guess what.... the agent is also OK with it. I actually found out that the whole issue arose because the buyer's agent heard wrong information from the listing agent. I told the listing agent to have all buyer's agents call me before writing an offer so I can talk to them and make sure everything is clearly explained... which the listing agent did. This buyer's agent kept pressing the listing agent for info however before calling me. The listing agent swears he didn't tell him this... but the buyer's agent HEARD that if my offer to the bank is counter-offered, then his offer would be submitted along with mine. So his issue was that he thought his and my offers could be competing with each other, and since the listing agent showed me his offer there was an ethical issue. Obviously this isn't the case and we had a great 1 hr. meeting to address a whole bunch of points on the short sale topic and everyone felt great about it. And for the cherry on top.... the broker wants to talk about me coming to do a presentation at their next sales meeting on how I am doing short sales with the A-B,B-C transaction and how it benefits all parties involved. And this is one of the bigger brokers with a good amount of agents. I'm from a smaller family owned type of brokerage so it's interesting to make some potential partnerships with the big boys.

So I'm very relieved that everyone is on the same page. I appreciate everyone's comments. I really needed to double and triple check that I'm OK doing these things the right way and it appears I'm on the right track. So thanks again and I hope this helps someone else out there.

Originally posted by Ralph S.:

Hi Tom
Here's opinion #3. Get a thicker skin.

Your OP leaves me wondering what your role is in these two transactions. You state "I just received offers on two of my properties..." and then states "the listing agent is also in my office." So, are you the seller and not the listing agent? Are you buying SS and flipping them retail? It's not clear to me. And, you don't disclose what exactly these two are objecting to, or what they think you've done that is unethical or fraudulent. So, I'll take it for granted you've made all the disclosures, know the line you're walking as investor/agent and are in the right.

In these transactions I am acting as the "B" in the A-B and B-C transaction. The seller has a listing agent, although on two of these they are other agents in my office. I have them fill out a short sale package including a sales contract which gives me the right to re-market the property on the MLS and resell the property for profit. I also have a disclosure that says I am not acting in an agency relationship with anyone. So once I submit the ss package I start looking for a retail buyer. These two I am referring to have a buyer's agent. I am explaining to them that I am the seller since I have equitable interest, and that if their buyer is going with an FHA loan then their lender can't have any seasoning requirements.

Before doing any of this I met with a very good real estate attorney in my county who knows his stuff. He said everything is fine, and I stressed the fact that having an RE license I want to make sure I'm not violating anything. He said as long as I disclose everything and the fact that I do have a license then I'm fine. So I feel good knowing I'll have his backing if I need it but it still doesn't keep me from having to deal with these agents. You're right though Ralph, if this is par for the course then I'll develop a thicker skin and deal with it. As long as I know I'm doing things the right way then I'll have to confidence to deal with these guys and even the board of realtors if I had to. It's what you other guys are saying that bothers me, with they try to make an example of me since I am licensed? We'll see. Thanks for all the comments and keep them coming from others....

I've been a realtor for 5 years this May and I've really been dissatisfied with the job for 2 1/2 years. I've been trying to work myself out of that side of the job and into investing. I'm trying to focus on short sales for the time being. I have 7 deals in the works and have the potential to get many more in a short amount of time.

I just received offers on two of my properties... one of the buyer's agents is accusing me of unethical practices, and the other is calling it fraud. I diligently and clearly explained how these deals are put together in an attempt to educate them and create a smooth transaction. Instead they are all fired up, and one of them is also accusing my entire office of being unethical because the listing agent is also in my office. I've made it a point to build my business based on good practice and always being ethical, even to the point of losing deals because of it. So when someone attacks my character I don't take too kindly to it. I've offered to meet with this agent, his client, his broker and whomsoever to help them better understand what is happening. They aren't open to that.

So I'll deal with all that but I'm wondering if I'm being hammered because I'm an agent and the investor. Do you guys think I should just put my license in escrow and go full-time into investing? I wonder if that would help or if I'll still get scrutinized by agents because so many are so narrow-minded and can't see beyond a conventional, typical real estate transaction. At least without a license I wouldn't have to stress about being brought before the board of realtors or the real estate commission. I've already lost one night of sleep over this and I don't want any more. Any thoughts? Thanks...

Wow, thanks everyone. That is all exceedingly helpful. I've heard so much talk about getting the BPO to come in low I'm probably over thinking it. I'm just going to keep doing the best I can with them and not get all paranoid about 2nd and 3rd BPOs that may come. I think I'll continue to list them at my original offer price for the 1st BPO, and then relist at a higher price to get my end buyer. If a 2nd BPO comes out and sees the higher price then I'll just have to deal with it and take it as it comes. Again, I really appreciate everyone's insight and contributions.