Shortsale then Flip , is this allowed ?
I just took a property off the market after receiving an offer , the offer is a low ball but what the heck , I felt at least it will get the ball rolling to submit package to bank since they did not want anything without an offer.
One week later I get a call from another agent that has a buyer that will pay 25K over what we get the home for and wants to get it in writting.
Can this be done ? , do I have an obligation to contact bank and let them know their is another interested party ?
neither offer would be enough to make the bank whole , so the seller could care less , the seller has filed BK and included the note , the BK has been discharged .
I would want to relist the home the same day of closing and re sell it to the new buyer
I feel the bank has had ample to time to do its due deligence and determine the price of this home and if they accept an offer it does not matter if someone comes the next day or the next year and offer more
What do you think ?
Replies to This Discussion
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Permalink Reply by Tara Nagelhout on
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But the intricate details are relevant to the moral of the story. You are comparing apples and rocks, not even oranges. The details MAKE the story. I am not talking about taxing, I am talking about the values of neighboring properties when appraisers pull up the record of the sale from tax records. My purpose is not to embarrass you. If you are searching for a place for true professional comments and want to contribute, I would suggest you not compare selling homes to selling used cars........
The Negotiator said:
It was the moral of the story, Tara, not the intricate details. However, I'm glad to see you are an advocate for proper taxing and paperwork. I am also glad that you responded because the world needs people like you who try to embarrass other people in open forums. Without people like you, great forums like this would be so boring. I mean, seriously, who really needs a forum that's a true place for professionals to make their point and get quality feedback and opinions.
It really goes back to my point about people being so angry about this topic.
Tara Nagelhout said:There are SO MANY flaws with your analogy. I just can't even decide where to start, but I will try.
- The $40,000 car sale didn't go down in tax records and thus compromise the neighbor's values.
- There was no lien holder for the $40,000 working on tax payer's borrowed funds to offset a loss.
- There was no short sale involved in the car transaction.
- The Negotiator said:
The mortgage fraud did not go down the way you are connecting the two. I would say go back and read the complaint, again.
Here's what happens everyday in car sales...A buyer calls the local car place and says they want a 1969 Charger with a 426 hemi (the best.) The dealer said he knows of one just like that (and orange, too.) The dealer then says to the buyer that he needs to make a few calls and will get back to the buyer. The dealer calls his contact who has the car and says what will you sell the the charger for and the seller replies 40 grand. The dealer says OK and will call the seller back. The dealer then calls the buyer and says I found the car and you can have it for 50 grand.... I think you know the rest..
This happens ALL the time ... it's perfectly legal and normal. So, whats the difference between cars and houses? Nothing, except an extra zero or 7. People have taken flipping to a whole new world. It's sad really .. are people jealous? Are people angry that they can't flip? Are people mad because the went bust in 07-08 and are taking legit flippers today and punishing them because of past personal failures? What is it? Seriously, why are people so angry?
Beverly Cibulsky said:I TRULY can believe this is still happening (although I guess it will always continue).
Get the ball rolling was a stategy in what maybe 2008/2009? The very first case for mortgage fraud happen to real estate agents in Connecticut under just this circumstance.What about the second buyer offering 25K more? Do you think they would not get a little upset if they knew this was happening as well?
Unfortunately the seller was exposed to "bad advise" taking the Low Ball offer! (Has the lender approved this low ball price yet?) Hopefully it may all work out, lenders figures will not be favorable to the low ball, they will walk, and hopefully the realistic buyer may have a shot at the property! Then again, is the first contract executed? Did the agent obligate the Seller by having him execute the low ball offer?
Gosh, I would be embarassed to even post such a thing!
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Permalink Reply by The Negotiator on
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Tara, as a Realtor your job has nothing to do with getting property values increased, or tax records, or anything of that nature. Your job is to sell property, period. Realtor's are not obligated to anything or try to control something outside of their fiduciary duties.
Here's another story,
A bank sells the note on a bad debt to a debt collector for pennies on the dollar without telling the homeowner (or offering the same deal to the homeowner .. pity there.) The debt collector tries to force the debtor to pay the original balance and make loads of money. Now, what is the difference between a short sale "flipper" and that debt collector? Each is buying something and turning around to make money on it. Why don't the debt collectors get a ration of crap from people for trying to make money off the the banks loss like "flippers" do? Wait I know ... . debt collectors have been doing it for centuries and short sale flippers have only been doing it a few years ... "common place" -vs- "the unknown"... Most people are scared of the "unknown..." I think it's pretty obvious...
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I take my job as a bit more comprehensive. My job is to do what is BEST for each and every client, and as a member of my community, my job is to what is best for the community. Flopping is never in anyone's best interest except the investor and the unethical Realtor who is getting a few paychecks out of the deal. Realtors (plural not possessive and thus no need for an apostrophe) who think their job is only to sell properties and not look at the bigger picture are narrow minded and focused on the short term only. My fiduciary duties include protecting the seller from prosecution and from committing fraud. Knowingly participating in a flopping transaction is fraud and in my opinion should be prosecuted. And before you claim I am some jealous person who is pouting because I can't participate in the game, let me tell you I have had ample opportunities. I have gently declined all of them. My focus is on a much bigger picture. Attitudes like your will assist in the continuing declines in property values as well as the moral compass of our industry. But good luck with that, glad you are not in my state.
In your above scenario the difference is that the bank sold the note which was their legal right to do so. There were no hidden secrets or back door deals kept undisclosed from anyone. The bank secured the right to take that action, legally and in writing at the very beginning of the arrangement with the borrower. They did not make a secret deal to cheat anyone out of money. And once again, the bank took a loss, your analogies really need some help.
The Negotiator said:Tara, as a Realtor your job has nothing to do with getting property values increased, or tax records, or anything of that nature. Your job is to sell property, period. Realtor's are not obligated to anything or try to control something outside of their fiduciary duties.
Here's another story,
A bank sells the note on a bad debt to a debt collector for pennies on the dollar without telling the homeowner (or offering the same deal to the homeowner .. pity there.) The debt collector tries to force the debtor to pay the original balance and make loads of money. Now, what is the difference between a short sale "flipper" and that debt collector? Each is buying something and turning around to make money on it. Why don't the debt collectors get a ration of crap from people for trying to make money off the the banks loss like "flippers" do? Wait I know ... . debt collectors have been doing it for centuries and short sale flippers have only been doing it a few years ... "common place" -vs- "the unknown"... Most people are scared of the "unknown..." I think it's pretty obvious...
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Permalink Reply by Cliff Stanwick on
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Story is a little more complicated.....
The "Banks" or lenders had an implied obligation to protect the asset (property) on which they lent the money on. Obviously through their past lending practices (both qualifying the Borrower and accepting the appraised value of the property) they IMO created constructive fraud.
What is the argument that it wasn't fraud? Oh the Borrower signed the note. If I lend you money and I don't care that you can pay for it, and I don't care what the item is worth that I'm lending you money on because I'm selling the note to another party who will take every note I make (because the Investor is given a secured and insured note).
Once a fraud is committed any legal right created by the instrument used to perpetuate the fraud is void.
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Permalink Reply by Jeffrey Burnham on
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In Nevada, you cannot submit another higher offer. Our assocaitions attorney has written a few articles about just this. Once an offer is accepted, you should not impede the banks decision. (You should advise your Seller, and you should see if the Buyer # 2would consider being a "back up" offer. If Buyer #2 says yes, you then have an obligation to advise Buyer #1 that there is another interested Buyer that has submitted an offer. I would check with your state regulations on Multiple offers at that point.
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Since you blame the wrong people for this mess, I don't see this debate getting any better. You would find fault with anything I said since you are prejudice about buying and reselling property. Maybe you should take pressure off yourself and sell cars .... j/k ... take a vacation?
By the way .. there is no difference between the debt collector making money from the banks loss or an investor. PERIOD! And please stop assuming the worst about everything ... why would you assume every single short sale flip isn't disclosed? That makes you look really prejudice in my opinion. Flipping houses will always be legal .. now and forever.
Tara Nagelhout said:In your above scenario the difference is that the bank sold the note which was their legal right to do so. There were no hidden secrets or back door deals kept undisclosed from anyone. The bank secured the right to take that action, legally and in writing at the very beginning of the arrangement with the borrower. They did not make a secret deal to cheat anyone out of money. And once again, the bank took a loss, your analogies really need some help.
The Negotiator said:Tara, as a Realtor your job has nothing to do with getting property values increased, or tax records, or anything of that nature. Your job is to sell property, period. Realtor's are not obligated to anything or try to control something outside of their fiduciary duties.
Here's another story,
A bank sells the note on a bad debt to a debt collector for pennies on the dollar without telling the homeowner (or offering the same deal to the homeowner .. pity there.) The debt collector tries to force the debtor to pay the original balance and make loads of money. Now, what is the difference between a short sale "flipper" and that debt collector? Each is buying something and turning around to make money on it. Why don't the debt collectors get a ration of crap from people for trying to make money off the the banks loss like "flippers" do? Wait I know ... . debt collectors have been doing it for centuries and short sale flippers have only been doing it a few years ... "common place" -vs- "the unknown"... Most people are scared of the "unknown..." I think it's pretty obvious...
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Jeff, your state is awesome. Being one of the top 2-3 states in the country for foreclosure filings, your short sale gurus know what they are doing and how to handle short sales ... 1 offer at a time.
Let me ask you .. if the lender agreed to a short sale price for buyer #1, in your opinion, would buyer #1 be a bad guy to sell to back-up buyer #2 and make some money if buyer #2 was really wanting the property? What are you thoughts on that?
Jeffrey Burnham said:In Nevada, you cannot submit another higher offer. Our assocaitions attorney has written a few articles about just this. Once an offer is accepted, you should not impede the banks decision. (You should advise your Seller, and you should see if the Buyer # 2would consider being a "back up" offer. If Buyer #2 says yes, you then have an obligation to advise Buyer #1 that there is another interested Buyer that has submitted an offer. I would check with your state regulations on Multiple offers at that point.
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Permalink Reply by Beverly Cibulsky on -
WOW this one turned out interesting! I really respect all the input (except selling cars!) Nicholas, you may not have made yourself too clear in your initial post, and I hope all of our input has given you a conclusion. Why do we treat short sale any different form "traditional sales". Yes we list a property for market value (CMA), and in traditonal sales a little higher of over priced, to ultimately get the price and seller where it needs to be.
Same with short sales, List at Market value, give or take, you try to get the best price for the seller! Keep in mind that they may be subject to tax and judgement concequenses, so we need to get the best price for the seller (not the lender)! Lenders are looking at MLS, Marketing and History now in short sales! So, if the listing is "seasoned" Listed, marketed, no offer, price reduced, then offer, You can justify to all, that you are acting in good faith to all!
I am seeing less of the old problem , where an agent list the property rediculously low, "to generate a fast good offer", and this gets into multiple offers, your buyer killing you, because they put in an over the price offer and now you need to tell them to they need to come in "highest and best" . Gets everyone.. really "ticked Off".
And yes, we can all instument these shady deals and make some good money! I Like others who have commented, DO NOT CHOOSE to do this! Yeh so what's the big deal, the banks etc, have caused this through there indescressions! Trust me we are all going to pay for this! But, I dont want to "Make Hay while the sun shines", It will just make the cloud cover to come, more dark!
Have I said lately how much I love this site? This is the most comprehensive, oppionated, helpful, and most of all welcoming site there is! We just share, and dont boast our designations, etc. Just share. I have learned alot from the people on this site! Thank you all! I only hope to contribute!!!!!!
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My PERSONAL opinion is that this is OK. I've heard many grumblings that this could be considered mortgage fraud by other agents IF the list agent knows that the bank could optain more.
To play it safe, I would spell out in the original offer that the Buyer has the right to sell the home in the future (some short sales PRECLUDE a flip within 90 days) and they MAY make a profit.
The Negotiator said:Jeff, your state is awesome. Being one of the top 2-3 states in the country for foreclosure filings, your short sale gurus know what they are doing and how to handle short sales ... 1 offer at a time.
Let me ask you .. if the lender agreed to a short sale price for buyer #1, in your opinion, would buyer #1 be a bad guy to sell to back-up buyer #2 and make some money if buyer #2 was really wanting the property? What are you thoughts on that?
Jeffrey Burnham said:In Nevada, you cannot submit another higher offer. Our assocaitions attorney has written a few articles about just this. Once an offer is accepted, you should not impede the banks decision. (You should advise your Seller, and you should see if the Buyer # 2would consider being a "back up" offer. If Buyer #2 says yes, you then have an obligation to advise Buyer #1 that there is another interested Buyer that has submitted an offer. I would check with your state regulations on Multiple offers at that point.
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Jeff,
In the case of reselling to buyer 2, the 90 day flip rule is an FHA & lender overlay. It can be circumvented on some occasions when proof of remodeling and improvements are provided to the lender and the appraisal.
In this case, if buyer 1 "flips" directly to buyer 2 one day after closing escrow 1, then buyer 2 may have trouble getting a loan, above and beyond the fact that the property in its current state (having permit issues/citations) would not qualify for most lenders guidelines.
If buyer 1 closes escrow 1, does repairs and improvements, and re-markets the property at it's new fair market value, the 90 day flip rule may or may not effect the new loan for buyer 2-- it seems to be a subjective matter in underwriting.
Overall, though, I think the industry as a whole benefits from the "one offer at a time policy". With the time lines so long, what other choice is there, really? Otherwise, the whole submission and wait process is a farce... the banks need an offer to establish value, so an offer must be submitted to get the wheels turning.
The banks are making the rules... they could, for instance, send an appraiser out when the listing paperwork is signed, work with the seller and junior lien holders to establish acceptable price guidelines, and then list the property like any other seller would. They could even, gosh forbid, tell you how long you have to pull it off before the foreclosure department will foreclose. Instead, we are stuck with everything done in arrears... first you list, then you get an offer, then you wait, then you beg, then you wait some more, then the BPO comes out, more waiting, then, months later, you figure out if the buyer is still in the picture at the price that's on the table. It's a bit bass ackward, don't you think?
As some one said early on in this blog, it's up to the bank to do their due dilligence... send an appraiser or BPO broker, digest the comps and the condition of the property, crunch the numbers, and come up with a fair market value for the offer they are working with. There's no promise what so ever that they will agree to a short pay of 60K or 85K or 150K... it all remains to be seen. When the negotiations with Buyer 1 have played out to the end (cancellation or close of escrow), then buyer 2 can step up and go through the whole process again.
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FHA waived their 90 day no flip rule because they know investors are the key to this housing mess. You can resell to an FHA buyer 2 days after purchase.
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I think the difference is what is done to the property. Flipping, not an issue. If it is a situation in which the property is purchased, repairs are made and then the property is resold for a profit. That is 100% okay. However, if it changes hands two days later and nothing was done and there was a profit made, that is wrong. The bank is owed that money. The listing agent and the investor are in the wrong. I don't think the average home owner would comprehend the complicity of the situation. The end buyer is also not really in the wrong. That is the difference...what happens in between buyer #1 and buyer #2. And as far as the bank doing their due diligence. They can't really do that if there is another secret offer sitting on the broker's desk. All the facts are NOT being disclosed to them.
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