Posted by Zach Acox on April 26, 2004 at 14:20:00:
Well, its academic at this point. The lender has come back with a 90% requirement of the BPO, in this case they are looking to recover at least 160 net from a 180 owed.
I realise there is still opportunity here, but given the numbers and my borrowing capability, there is no sale to happen here.
Sub2 can happen, but i really dont relish the thought of taking a property and having it sit for 6 months waiting for a tenant/buyer or buyer.
My $5,000 mistake - Posted by rm
Posted by rm on April 24, 2004 at 06:57:20:
Rather than brag about a couple recent sweet deals, I thought I’d share a first-class screw up from earlier this week.
Met with a seller who called me only AFTER his property went to sheriff’s sale. He didn’t have a good reason for having waited so long to call.
He owed ~29 on the first, and 14 on the second. He told me that he had been in communication with them, and both were willing to short.
I wrote the offer for 20k, with 500 to the second. He wanted 5k, so I wrote a back-end addendum for that.
Found my contacts at both lenders, put the package together, faxed them out to each.
Got a call back the next day from the second… She says, “I have a few problems with this… not the least of which is that THE SELLER IS GETTING $5,000!”
I had three shorts I was working and mistakenly included my back-end addendum, showing that the seller would get $5k upon successful completion.
Oops!
Oh well, I had a good laugh.
I guess the lesson here is to PAY ATTENTION to what you’re doing… or maybe it’s time I delegated the short sale processing.
Re: My $5,000 mistake - Posted by Chuck Rosenberg
Posted by Chuck Rosenberg on September 05, 2005 at 14:26:40:
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This Brings Up A Good Point - Posted by Joe
Posted by Joe on April 25, 2004 at 12:38:28:
For short sales such as these, it’s good to remember that giving the seller/owner any money could put you at risk of committing fraud. The lender is going to want ALL they are owed from the seller. Of course, they don’t want him to profit when they are taking a loss.
Therefore, when you send them the contract, minus the addendum showing the seller’s profit, you are treading on thin legal ice. But here’s the rub. Most, if not all short sale contracts with the lender WILL have a clause stating that the seller must get ZERO dollars from the sale. By signing and agreeing to these terms, you will be committing fraud if the seller gets money from this deal.
I know you are probably aware of this risk, RM, but I wanted to make sure any newbies understand the legal risk, and the moral one, of lying to the lender. “No one will find out” is a precarious position, legally and morally.
Re: My $5,000 mistake - Posted by Lydia
Posted by Lydia on April 24, 2004 at 16:21:25:
How do they short AFTER the sheriff’s sale??? I thought after that, it went to a realtor as REO.
Lydia
Re: My $5,000 mistake - Posted by Bill H
Posted by Bill H on April 24, 2004 at 11:55:05:
Hey RM:
Thats just a paper loss. I was involved in a deal with my partner in which we purchased a properety for $575,500 and had an opportunity to flip it for $825,000 and my partner said “NO WAY we can get $1,025,000 at least after we rezone it.”
Yep, we rezoned it and wound up losing the entire deal and $51,000 out of pocket expenses, etc.
It really pays to PAY ATTENTION and NOT GET GREEDY.
Good Luck,
Bill H
Re: This Brings Up A Good Point - Posted by rm
Posted by rm on April 26, 2004 at 16:02:47:
Actually, this has proven to be a good way to get the seller to take less than asked.
Re: This Brings Up A Good Point - Posted by Zach Acox
Posted by Zach Acox on April 26, 2004 at 10:55:09:
But what about an off-the-books “finder’s fee” or something similar?
I’m doing a short right now with the sellers owing about 176 on a 187 house. The lender is doing the analysis and i will hear from them this week. In this case, the seller is losing out on about $10k if they were to sell it FSBO, almost nothing if realtor.
I know, of course, that for a short to work, the seller must receive ZERO dollars.
My feeling on this is, that i am robbing the seller blind. I know the alternative to my helping out the seller is foreclosure, sheriff’s sale, deficiency judgment, etc. I still have conscience.
What if… I don’t include ANY money to the seller as part of the contract, back end, front end, bottom end, any end. Instead i just simply write a check to seller 30 days (or 60 or 90) after the closing for maybe 2 or 3k, and call it a “finders’ fee” or the like? They get some money out of the bad situation, and i get a little sleep at night. I can even write it off (i think) if i 1099 them.
Ostensibly, it would be to cover a 1099 from their lender, though i know they wont be paying tax on that 1099 because their cost basis in the home is 194 and they are selling it for way under market value.
Any thoughts or experiences would be appreciated.
Re: My $5,000 mistake - Posted by rm
Posted by rm on April 26, 2004 at 15:56:58:
6-12 month redemption in our state.
Yours may be different.
Right of Redemption by Owner - n/t - Posted by JT-IN
Posted by JT-IN on April 24, 2004 at 19:31:05:
$
Re: My $5,000 mistake - Posted by E.Eka
Posted by E.Eka on April 24, 2004 at 17:08:11:
I’m assuming that the property went to the sherrif’s sale and the Bank/lender out bid everyone. So it went to them on their books. Then you can approach with a short. Although, the rest of the original poster’s story didn’t sound like that’s what happened…so I don’t entirely know.
Re: My $5,000 mistake - Posted by Hank FL
Posted by Hank FL on April 24, 2004 at 16:36:38:
Why’d you loose the deal?
The rezoning delay?
Something else?
Re: This Brings Up A Good Point - Posted by Brent_IL
Posted by Brent_IL on April 26, 2004 at 13:57:56:
I really can?t see the robbing-the-seller-blind part. There?s nothing to rob.
They?re at 94% LTV. Costs of selling FSBO would eliminate their ?equity? if they received a full-price offer and most offers aren?t full-price. You are taking nothing from the sellers. They?ve maxed-out the benefits of owning the property.
Consider the poor bank that lent money in good faith and now has to take a loss if they sell to you. The thought is almost enough to make you want to send them an extra $3,000.
Re: My $5,000 mistake - Posted by Bill H
Posted by Bill H on April 24, 2004 at 18:20:26:
Hi Hank:
In one simple word GREED. We could have flipped the property and let the new owner compete the rezoning, etc. Instead we held out, the rezoning did not turn out as we wanted…etc.
We had just done three other deals in the area and made a small fortune. And; as I said we got GREEDY and lost.
Good Luck,
Bill H