Short Sale: This is an oxymoron. Rarely are short sales short. It’s even rarer if a sale occurs at all. An extremely subjective process, the short sale transaction has more moving parts than a Toyota Prius transmission. That’s because there are usually two Realtors involved, an unenthusiastic seller, multiple loss mitigation minions, BPO (broker price opinion) reports and gobs of paperwork.
In the event you’re lucky enough to get your short sale offer accepted by the bank then no doubt the seller, at the last minute, will decide they want to apply for the Home Affordable Foreclosure Alternatives (HAFA) program. This government bribe, I mean payment, puts $3,000 into the pocket of the short seller for “relocation”. When this happens the process starts all over again. I’m in the middle of a deal like this now and Bank of America has three BPO’s at $215,000, $250,000 and $261,000. You can bet they’ll want the highest of the three, which is ironic because if Bank of America were going to lend me money to buy this house they’d insist on using the lowest value.
Contractoritis: The symptoms of this disease start slowly. In the beginning the home remodeling contractor shows up on time and finishes on time, at a fair price. A few houses later they start showing up late, leaving early, and taking more time to get the job done. Worse yet, they want you to pay more. Before long you’re lucky to get them to finish the job. Your calls are returned days later, instead of hours, and eventually they don’t call you back at all. Your contractor has just come down with contractoritis and there is no known cure.
This has happened to me several times since I started investing. My last contractor disappeared after remodeling more than 50 homes. He was supposed to start work on a new property I bought at auction last Wednesday and never showed up. No phone call, no email, not even a text message. I found out from my landscaper that he went to Canada to build some guy a cabin. I’ve concluded that contractoritis is not a disease; it’s actually part of the contractor’s DNA.
Highest and Best: This is a very clever strategy the banks use to artificially inflate the value of their crappy, beat-up inventory of homes. They get unsuspecting retail buyers and real estate investors to bid against themselves by proclaiming they have multiple contracts and then ask you for a “highest and best” offer. Of course, as the buyer you have no idea how many offers the lender really has. Could be 2. Or 10. Or just yours.
A few weeks ago I wrote an offer on a lender owned property that had been on the market more than 60 days. The listing agent assured me, twice, there were no other contracts. After I sent the offer he informed me that, quite miraculously, 4 others showed up at the same time. Amazing.
Deed Restriction: Used mostly by housing giant Fannie Mae, this restriction forbids you, the real estate investor, from buying A Fannie Mae home, fixing it up, and flipping it for more than 20% of the original purchase price, for 90 days. Never mind that we live in the United States and it’s our constitutional right to sell real property we own for whatever price the market will bear. And never mind that it’s our tax dollars, $100 billion and counting that have bailed out this nearly bankrupt behemoth. What this deed restriction says is sorry Mr. Investor; you can’t make a few bucks at our expense. And since the restriction is written on the deed there is nothing you can do about it.
There you have it – a glossary for today’s real estate investor. Clearly, dealing with banks and contractors can be frustrating. Unfortunately, they’re part of the process. Kind of like politicians and attorneys – slow moving, stubborn and expensive. But a necessary evil.