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 Smitty on
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Jill, you cannot have more than ONE fully executed contract at a time. If the sellers signed more than one contract you have problems. Now if NONE of the contracts were signed, and you submitted them all, then you haven't breached any contracts. Unless your contracts specifically state the seller may enter into OTHER contracts at the same time, you face HUGE liability. Both parties agreed to a binding contract, and the seller may not enter into another contract UNLESS it has been written in and agreed to by both parties.
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Permalink Reply by Tara Nagelhout on
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I remember a few years ago when short sales became the norm. Agents were having sellers sign all contracts and while I was taking the CDPE class (so much of which is now so outdated) there was a heated argument about this. My way of making sense of it to myself was this: Imagine the seller signs three offers, accepts them all and submits to the bank. He has disclosed to the buyers that 3rd party approval would needed for this transaction. Two weeks later he wins the lottery. $10 million dollars. Uh-oh! Third party approval was just granted, because the servicer is no longer taking that haircut. So what do we have? 3 nasty lawsuits.
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Permalink Reply by Jeff Payne on
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OK, so reading all of these posts, what can we learn from this......
If we have a buyer making an offer on a short sale and want to make sure that our offer is the only offer, put verbage in the contract that states "Seller may only accept and submit one offer to the sellers lender/lienholder, all other offers will be held in back up position" and if I was in Tara's state, I would probably advise the seller to NOT accept ANY other offers once we find a buyer and submit the accepted offer for short sale approval.
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The truth of the matter is that in Tara's state, it is almost better to just let it go. Non recourse, non deficiency state. The credit score is trashed by time the short sale is approved and the chance of a deficiency exists in a short sale....so it is a hard call around here.
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Permalink Reply by The Negotiator on
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Good word Jeff. Also, as a short sale Realtor, your job is to get the house sold... that's it! The traditional rules of real estate get thrown out the window because of the lender negotiation. Start low and come up is the key to short sale success. "Highest and best" get tossed out the window. Why? Because when you were taught that, did the words "short sale" ever make it out of your instructors mouth? To this day, I don't think new agents who go to the 3 week class ever hear the words "short sale" (at least here in SW Florida.)
People are also talking about how flipping will increase deficiencies and tax consequences? Well, we all know that 99% of the people doing short sales (at least for me because I only deal with "real" short sales and not strategic defaults) will not have to pay any tax, so, that's not a "real" issue. This is because of the "Mortgage debt relief act of 2008" which ends the end of 2012, which, says that a homestead short sale doesn't pay taxes, with some exceptions. And, if its an investment property then they may qualify under the insolvency code using form-982. As for the deficiency, well, again, you should be dealing with people who are broke and have no money and who's houses are so upside down that it's nuts. That being said , because of the properties being so "upside down" down here in FL, the lenders are usually still owed almost double what the house was sold for. So, on a 100k sale the deficiency would have been 100k. MY point is that if an investor came in and bought the property for 80k, then there would be a 120k deficiency. Logically thinking about that, what is the difference to the homeowner? Can they afford 100k but not 120k? No, they can't afford anything and if the lender actually sought the deficiency in court years later, they would have to file BK on the 100k or the 120k.
Start low and come up is the key. If you have a cash buyer who calls you and says they are making an offer, ask them what the most they would pay is. Then depending on the amount, write the contract out for 10% less to give you room to negotiate. For example, of the buyer says max of 150k then write contract for 135k and you have 15k to play with. Imagine the 1st lender approves the 135k while paying the 2nd lien 3k and your 2nd lien saying they want 10k ... sound familiar to anyone? Well in this case, NO PROBLEM! Your buyer already said they would go up to 150k.. so, 135k contract with 3k going to the 2nd and your buyer puts in 7k to the 2nd. The buyer nets the property for 142k. A WIN-WIN-WIN-WIN because everyone got what they want!
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You know, something else that has to be said is that it is the lenders responsibility to verify that the offer they have is high enough, isn't it? If the lenders actually knew the real estate market or at least relied on the proper professionals and did their due diligence by ordering appraisals from licensed appraisers who have NO relationship with the lender, wouldn't that give the numbers that they need to make a decision? It would probably make flipping, flopping or whatever you want to call it, impossible to do immediately. They would approve the sale at market value and make it hard for someone to resell for immediate gains. Problem is that the banks don't do their due diligence, they order a drive by BPO from someone who is probably doing them for the $30.00 and from agents who don't know the market and they don't get a true picture of the value of the property.
This is not rocket science for sure.
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Honestly, Jeff, I don't think banks actually give two shi** about flipping because they do it themselves. I think they try to minimize damages by flooding the industry with bogus articles meant for only one thing .. scaring Realtors into thinking that buying and selling for profit is wrong. And, by putting "illegal" no-flip clauses in their approval letters.
You know Jeff, if buy a stock today and sell it tomorrow and become an instant millionaire, I would be praised and all over the news being labeled a genius. Yet, in real estate, if I buy a house today and sell it next week for big bucks, I would be frowned upon and probably labeled a crook!
To all,
Does anyone understand that? And please, don't make this out to being about the "banks loss" or our "tax payers loss." Business is business... anyone hear of "for profit?"
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If they did actually care they would take the bull by the horns and work with us to fix the situation.
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Permalink Reply by Becky Martin on
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Amen
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Permalink Reply by Nathan Giguere on
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There are two issues that need to be addressed in this article.
First is the fact that the seller can only be under contract with one buyer. The other offer is only a back up offer and should not be sent to the lender. The lender will only work with one contract. If the 1st buyer walks away then the 2nd offer could be executed and submitted to the lender.
Secondly, if you re-list it after getting the 1st buyer approved and closed then the lender may see that as fraud. I wouldn't even think to do that. The government as well as the lenders are starting to crack down on those kind of things.
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