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
-
Permalink Reply by P Nicolas Velecico on
-
I read all the replies and I am amazed at the few agents that put their personal opinions over the facts or assume that we are " trolling " for an answer ( BTW , look up what trolling means , I am not using a fake name dear , I am here with a legitimate concerns that is not black and white as you see it )
! - I listed a property for what I thought it was worth , WHAT I THINK IS WORTH IS REALLY NOT RELEVANT since it was on the market for 35 days and did not get one offer , so when a buyer comes along and offers half , well why not ? maybe I did overprice it and who am I to tell the buyer the bank is not going to take it ( especially with state and local code violations and to boot the property is tenants occupied !!! ) , of course I have made the bank aware of all this.
2- Back to the buyer , I AM A DUAL AGENT , you are allowed to be a dual agent in NJ , so he offers the 60K we present it to the bank fully executed with proof of funds ( cash deal ) along with all the sellers financials and begin the waiting period . END OF MY PARTICIPATION.
3 A week later agent B from another office calls to inquire about the property , said a client of hers saw my sign and wanted info , I tell her I have an offer and it has an offer pending. She calls back a day later and says her client is willing to pay 25K over our offer ( NOT KNOWING WHAT OUR OFFER IS , NOR DO THEY KNOW THE EXTENT OF THE VIOLATIONS ). I have now faxed her all the violations report and if they still want to submit an offer I will take a back up CASH OFFER ONLY , I dont even want to consider a 203K a viable offer on a 3 unit property.
I think at this point a valid offer has been submitted and we have a POSSIBILITY of a higher offer , Is a back up offer even legal ? . I think the first offer has to run its course and only if it gets turned down do I put the property back on the market and let other offers come in , or what if it gets countered by the bank and now I know how much they will take ? lets assume its 80K , do I get buyer one to agree to the 80K , or call the agent of buyer 2 and have them battle it out ?
What if a 3rd buyer comes along , and all this for 3% of 60K .......LOL
-
Permalink Reply by Smitty on
-
@ Carol – carol dual agency is perfectly acceptable in many states. He’s not breaking his fiduciary responsibility if he accepts an offer and submits it to the bank. He waited and took the offer and submitted it to the lender. In my state when you have a signed contract by the seller, you MUST mark it as contingent UNLESS the seller has directed you otherwise in which you put a disclosure in the MLS that an offer was accepted but you will entertain back up offers. When you are dealing with negative equity the seller’s best interest is a FULL release and deficiency waiver. He didn’t do anything wrong. As far as I know there are NO HAFA guidelines on short sale flips. Please post them if there are. There ARE DEED RESTRICTIONS that properties can’t be resold for 90 days, but as far as I know there isn’t a section on short sale flipping specifically for HAFA.
@ John and Jill – Just so we are clear, the BEST offer goes to the lender, not the highest and in his case he already has it under contract. He cannot submit the second offer to the lender unless he feels like being sued potentially, until the first offer is dead. He’s indicated his current buyer will go up to $85,000 and the second offer was for $25,000 more than the first, so why wouldn’t he just keep working on the first offer??? ESPECIALLY if the first is CASH and the second is financed…
@ Tara – what you have described is perfectly legal. A property can change hands within HOURS. It doesn’t need work done to it. As long as the flipping buyer had certain disclosures in his contract with the seller and disclosed in that contract he was reselling immediately for profit, it’s perfectly LEGAL. Now if the buyer never disclosed that they were reselling immediately for profit, then you have a big old fraud on your hands. Agents NEED TO KNOW flipping ON THE SAME DAY is perfectly legal and as much as people have said otherwise because they don’t like it, it’s not true. There is NO LAW that states you can’t buy and sell property on the same day. As much as the car analogy didn’t work, think about stocks. You can buy low in the a.m. and sell high in the p.m and it’s a heavily regulated industry.
@ p nick – you’re fine. I’m sorry I jumped on you earlier. Your post was clearer once you clarified. You cannot submit a higher offer unless the first offer is dead, otherwise you risked being sued for interference. Either your seller or buyer can sue you. You CAN FLIP it if you disclose to the lender you’re doing it, however, that doesn’t seem like what your original buyers intentions are.
-
Permalink Reply by Tara Nagelhout on
-
Smitty, in the case of a short sale if the original lender is not told there is a buyer waiting in the wings ready to close within hours it is fraud. You can try to justify it all you want, but there is no two ways about it. That is why they came up with a new word. It isn't flipping unless there have been improvements. It is flopping. And it hurts EVERYONE!!!
-
-
Tara, if you read what I wrote, the buyer DID disclose they were selling IMMEDIATELY for profit. Flipping is any time you sell a property for profit...no improvements need to be made. FLOPPING is when a higher offer is presented and signed first and then a lower offer is then generated and submitted to the bank without disclosure of the higher offer. Now, considering there is NO LEGAL definition of flopping and flipping, I can ONLY take case studies and the only case of convicted flopping I'm aware of is the famous Connecticut case. Disclosure is the key.
-
Permalink Reply by Jeff Payne on
-
Tara, Smitty was pretty clear about reselling with full disclosure. Actually I don't necessarily believe that there is a law anywhere that says it has to be disclosed and most likely if the approval letter for the lender does not prohibit it, what would make it fraud?
-
-
Intentionally withholding information which would be relevant to the bank's decision. That is fraud, the intent to deceive. Call any lawyer.
-
Permalink Reply by The Negotiator on
-
You are right! 100% right ...
-
Permalink Reply by Jill P on
-
Even though lots of stuff has been thrown around, I want to say that I am really glad to here the comments from all corners, it's helping me clarify what I would do if I were walking a mile in Nicolas' shoes...
I think Nicolas is doing the correct, legal thing... he's working with the offer that the seller has accepted (offer 1), which also happened to be the first offer by over a week, and lining up any and all back up offers. He currently has one fully exectuted and submitted offer and one verbal back up offer.
Now, if offer 2 gets written up (now it's just a verbal, so not binding or even legitimate according to the laws of the land) and when the bank comes back with a BPO and a price, perhaps your best course of action would be to counter any and all offers with "highest and best", and submit accordingly.
What do you think of that route, Tara?
-
-
I think that sounds brilliant. Will probably confuse the bank, but I think it is quite clever. In our state they are telling us that we have to now send ALL offers to the bank. While, of course, the seller can only accept one offer at a time, they are wanting us to send the additional offers to the bank, without seller acceptance. I just think I might stop doing short sales. My first one was about nine years ago, it was so easy compared to what we go through now.
-
-
Jill, he cannot take a higher offer when the first offer is still being worked on. He could only do that if ALL the offers were verbal. He is legally obligated to get that first contract through until he's exhausted his efforts and the bank and first buyer don't agree. If he has a SIGNED first offer and allows the second HIGHER offer to be presented to the bank without negotiating on that first offer, he has just committed tortious interference of contracts and can be sued by the first buyer and even the seller.
You can't just submit all offers. That first offer has to be formally rejected and the buyer then out of contract for him to start working on that second contract.
-
-
hmmm, Smitty... you're right. So then is his only choice -- in honoring his fudiciary duty to both the seller and buyer 1, since he represents both of them and they have signed a contract-- to let it run it's course? See what the bank does with the BPO and see if buyer 1 sticks it out to the end?
Tara? What do you think about that? If the buyer and seller are in contract with each other, does the agent have any business sending in another (written) offer? Or should backup offers 2,3,4....etc just be put in backup position like they would in a traditional sale? Or do you have other ideas that might work?
-
-
Oh nooooo, my brain is actually being forced to work. Say it isn't true! In a regular situation this would not work. And in a short sale it would be an issue IF it was not pre-negotiated. For example, in a seller's counter offer, stating that this would occur. In my short sales I write a counter offer requiring earnest money up front and I also require the buyer allows me 45 days to do my thing and try to get it worked out before they hop off to the next property. If they walk before that 45 days is up, the seller gets their earnest money. So in the same way, this could be figured into the original counter offer.
© 2024 Created by Short Sale Superstars LLC.
Powered by
**********************************
like buttons