Comment

Comment by Sharon Senger on October 4, 2009 at 8:26am

Karen,
Good points. I do know that the bank gets a BPO for the property and they then negotiate the price depending on what the bank will accept. if I see him again will ask some more questions regarding the price and what happens if they cannot come to an agreement with the bank.
Sharon

Comment by Karen Mathers on October 4, 2009 at 7:57am

I am not seeing them hold it for 90 days. They flip it at the same title company on the same day. They can't do FHA loans because of this, so you will see these investor deals say "no FHA” in the MLS listings.
The situation you describe would probably be fine. However, I have been told the banks want to see the property listed in the MLS so they can hopefully get fair market value. Also, what happens to the seller who gives up 3-5 months to this investor who is looking to get a screaming deal that he can flip 90 days? What if the investor only gets fair market value? Then he walks, and the seller is left with a home on the brink of foreclosure. It may be legal, but is it a good for the seller or the lender? Feels less sleazy but it still smells bad.

Comment by Sharon Senger on October 4, 2009 at 7:19am

Hi Karen,

Just to let you know that an Investor who I was talking with told me that they have the Sellers sign a Power of Attorney. They then deal with the Lender on their behalf to purchase the property. They pay cash so do not have to deal with financing and after the purchase they put it in the hands of a property management company. Or if they cannot rent it they will hold the property for 90 days (or whatever the statutory time is in a particular state) before selling. I asked if this was legal and according to him it is.

Sharon

Comment by Karen Mathers on October 4, 2009 at 6:15am

Well I found out they are doing option contracts. They record the option contract in the County records but they do not change title till closing day. On closing day, they close twice. I am told the lender knows what they are doing . . . but who knows what they tell the lender? I also was told one of the benefits of working with them is they start negotiating with the lender from the day the property is listed as they are the buyer with a contract, but I doubt that as well.
In the end, the biggest problem is the option contract. Most MLS systems do not allow option contracts. We have a couple of agents with 10-15 listings with these option contracts and it looks like they are going to have to remove them from the MLS. They don't know how to process a short sale, so it will be interesting to see what happens. If anyone is thinking of working with one of these guys, think again. I am told they sometimes make $10-$20,000 when they flip a home. Hard to believe the lender would go along with it if they knew; but you also have a seller that may have tax ramifications or a promissory note and a buyer that is wondering why they paid too much? If you have to make your short sale contract say "owner of record" then you are probably dealing with one of them.

Comment by Stephanie Lim on September 25, 2009 at 2:02am

We're seeing those too....from my understanding if they are done a certain way they are legal. That being said, they are too gray area for me personally. It seems like one of those things that could be legal today...illegal at the point someone decides to crack down on it. The only one I had a buyer interested in we were not able to obtain bank financing on when I explained the situation to the banks. It will be interesting to see what direction these go in.

Comment by Wendy Rulnick on September 21, 2009 at 3:21am

Karen - I want to hear it, too. I have never dealt with one of these and personally would not! I hope we get some more comments!

Comment by Karen Mathers on September 21, 2009 at 3:09am

Wow, Wendy, we have several of these investor/mitigators over here. I even met on at the FAR convention . . . he had a booth! From what I understand, since they have a contract for the deed - they are the buyer bringing an offer to the bank? I bet 10-15% of the short sales in our MLS are being done through one of these investors. Agents like them as they do not have to do any work and they are guaranteed their full commission and some of them are topping it off with a transaction fee as well! It sure feels like a scam, but they say it is all out in the open and the banks actually like working with them? If there is anyone else out there that has some insight, I would love to hear it.

Comment by Wendy Rulnick on September 21, 2009 at 2:44am

Karen - The major banks do not negotiate for a short sale BEFORE an offer is received. Otherwise, instead of 200,000 files, they would be working 800,000 files. That makes no sense. I do not know about the other aspects of what sounds like a scam to me!

Comment by Karen Mathers on September 20, 2009 at 3:09pm

I have a question. What is the real story behind these investors who get the sellers to sign over their deeds so they can take over negotiating with the bank and if successful . . . they have simultaneous closings on the same day? They are showing up more and more; at real estate office meetings and in the local library doing presentations for the public.
I have worked a short sale with one of these guys and here is what they have told me . . . I would love to know if any of this is true?
First of all they have the seller sign over the deed to them. The investor will record the agreement with the clerk of the court. This makes them “Owner by contract”. I am told it is all legal and out in the open? The investor does not actually take title to the property unless they get a real buyer for the property. On closing day, they close twice. Once between the seller and the Investor and then again between the investor and the new buyer. They say they can get a short sale done faster as they can start negotiating with the bank before an offer is received? I was told that when they call the lender to negotiate he knows they are investors who are going to flip the property for a profit. What is the real truth about these guys? Are they legal? Does the lender know what they are really up to?

Comment by Wendy Rulnick on August 24, 2009 at 4:27am

Freddie Mac issues short sale commission policy

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