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 Eric Mieles on
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P, so just a couple things. And please remember I commend anyone reaching out for answers and trying to get better. That's what were all on here to do. I know a lot of us jumped on this one pretty hard. So let's review a couple of things you said.
1st you said "Aurora the servicer would not do an appraisal or give an indication if the PSA would even allow the short sale, so” getting the ball rolling " has nothing to do with in experience but more with dealing with the banks incompetency. Aurora insist on a sales contract to get the SS process moving"
It does have a little to do with inexperience...and that's okay just here is the truth. Were you assuming Aurora would have done an appraisal prior to you listing the home to allow you to know where the values were for the short sale? Please remember when doing a short sale the seller is still the legal owner of the home and the transaction pretty much is the same up to that point as a normal sale. However it starts to change because it's "Contingent upon third party approval" which in this case is Aurora.
So you would have run your CMA, comps and determined the right price for your listing. Just FYI for future reference. There are programs out there, (HAFA, Coop) that are pre approval short sales and allow you to know what the lender wants to net and/or price the home in order to sell. However this deal is not one of them.
Also they are not going to just "give you an indication" whether or not they will allow your short sale to happen. The whole reason we do what we do is to work hard in interviewing our seller, understanding the hardship, putting together the most professional package we can and submitting it with thorough follow up to seek out an approval in a timely manner. Sometimes we hit, sometimes we don't however it's what we all do.
You also mention "Aurora insists on getting a contract to get the deal going" Well yes, they would like to have a ready, willing and able buyer so they can review your short sale offer, go over the borrowers information and situation and crunch numbers to see how they can best mitigate there investors loss.
As for working with a seller who could does not care at all. Well that's a personal decision if you want to invest the time it takes to complete this type of transaction and SAVE someone from foreclosure if they don't even care at the end of the day. As a professional you need to be selective of your time investment and decide if you’re willing to work hard for someone that may not get you the docs you need or cooperate at all.
To address the other offer. Since you have submitted the contract already for $60k this is the contract Aurora will be reviewing. Since you did not disclose anything on that contract that the new buyer will be reselling it right away or whatever there are no disclosures at all and that may put everyone in a bad position and liable position. I know some of the other guys can speak more in depth about this one. If the bank agrees to the $60k and they give you an approval for the short sale then you move on to closing and your buyer funds the deal. Your seller gets saved from foreclosure and you get paid a commission for the services you provided.
Good luck P.
P Nicolas Velecico said:Let me clarify :
I listed the property at $129,900 , the property is NOO , it will need 20-30k to bring it up to code , the market value once brought up to code would be less than 150K
After 35 days I got an offer for 60K ( Aurora the servicer would not do an apparisal or give an indication if the PSA would even allow the short sale , so " getting the ball rolling " has nothing to do with in experience but more with dealing with the banks incompetency. Aurora insist on a sales contract to get the SS process moving
The seller included the home in a chapter 7 and the debt has been discharged , the seller to say the least is not very motivated and could care less what it sells for , the note already has been discharged in the BK
After I present the 60K offer ( I have the buyer ) the property is taken off the market during which time I get a call from another broker that they have a buyer that will offer 25K OVER MY BUYERS OFFER .
My buyer is a low baller and will not go over 85K on this property anyway and I doubt it will go for 60 , but the contract is already in and waiting for a bank response , so if the bank agrees to the 60 , then what happens ?
What if the buyer offrering 25K over my buyers offer is BS and does not even qualify ? at least I know my 60K buyer is cash and can close whenever the bank is ready
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Permalink Reply by Jill P on
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I see this as more muddling due to the system, not the agent. According to your second post, I don't see what else you could have done. You waited 35 days and when you got an offer-- your one and only offer--, you got it signed, submitted it to the bank, even though you knew it was on the low side, it was the only one that you had, so you sent it in, presumably fully exectuted (signed and agreed upon by both the buyer and seller, just waiting for lender approval).
At this point, you have probably told the buyer that you will submit their offer and work with one offer at a time. Yet, did you leave the property in "contingent" or "accepting back up offers?" At a later point in time, and AFTER the first and only offer was sent to the bank, you got another, higher offer. So, the question is, what do you do with the higher offer? Are you obligated to work with the first offer, since it came in first and, by implication, should be considered ahead of any others? Or, because you have a signed and accepted offer, are you obligated to go with the first offer no matter what?
So, should you counter the first offer with "highest and best", or should you put the second offer in second place? Or should you wait and see what the bank will agree to take for the property, which might be much more than the first offer? You don't have a final price from the bank or you'd be further along in the process (with a 'bank approved price")
People around here stopped offering on short sales when the listing agents would take higher offers during the wait periods, because then if somebody came in and offered 1,000 more and got put in ahead of you, and you'd been waiting for months, it just didn't give anybody faith in the process. Most short sales in our area now work with the first offer that comes in, OR, has a submission period and then submits the highest and best from the group to the bank, with all others in back up position. If you are a listing agent and let some new player hop scotch ahead of the long term, patient buyer that has a signed purchase agreement, you will sully your reputation in the Real Estate community.
Since you may or may not be "in escrow", I think the fudiciary duty to buyer 1 and the bank are both kind of muddled-- since, in a case like this, it's pretty clear that either the bank wins and buyer 1 loses, or buyer 1 wins and the bank loses. You're squarely in the middle. The seller doesn't care because he already filed his BK. That's a tough spot for you to be in, and I'm not sure what's legal.
I think, at the least, you need to inform the seller of the second offer. Your seller and you are both under contract with buyer one. Then, I'd ask my broker what to do with it. I think I'd also, just to CYA, assign the first buyer to another agent in the office, so nobody can say that you played favorites. This would not be playing out in such a way if the banks would move a little quicker on short sales-- fair market value is the highest price somebody will pay for a property at a give moment in time... when you drag that timeline for 6- 12 months, you add a ton of unknowns into the equation.
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Permalink Reply by John A. Zentmyer on
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Nicolas, 9/4/11
You have just opened yourself up to a whole lot of items you may not want. This is why blogs like this are here.
I'm in Illinois where most banks won't pay both sides to one agent without reducing the total comm. on any short. And watch some
agent is going to tell me I'm wrong, but the fraud in illinois is huge. Investors are calling agents a lot to assist in short sales etc. I
do a lot of these myself and our MLS even has guidelines for short sales. The best offer needs to go in to the lender as stated we
all pay in the end. And if your buyer won't go over 85k when you know the bank may want a higher offer isn't it a dead deal
and you have just wasted your time?
Training, training training !!!! Ethics, ethics, ethics !!!
Johnny ZZ
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Jill,
Please let's not forget that just because you get an offer doesn't mean you HAVE to submit it to the bank. Our job is to act in the best interest of our SELLER. If you listed a regualr home for sale and the seller and you listed the home for $150,000 when a buyer came in and sent you an offer for $60,000 would you tell the seller to take it?
Also just because you submit a low offer, "Get the ball rolling" and they come back and deny it does not mean you now have a "bank approved price". This is a fallacy!!
I have to fully disagree with you that "This is a topuch spot to be in" it's very simple actually. He has an accepted offer, fully executed and now with the bank for review. That's it. he can inform the 2nd offer of this and they can determine if they would like to be held in 2nd position. he did not disclose to the bank, in the event they approve the 1st, that the buyer is an investor and his intent is to sell the property right away, so as for lining up a flip with the 2nd offer there may be some liability issues.
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Permalink Reply by The Negotiator on
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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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And that is why realtors have the reputation of being like "CAR SALESMEN" for so long we have tried to bring our profession up a few notches, then the 2005 stuff hit with realtors not knowing anything except where to tell the buyers to sign, then the newbees coming on board again as professionals in short sale and investment properties...since when were we allowed to give advise about investing and flipping??? So negotiator asks whats the difference??? I'll tell you what, we as tax payers are paying for all of this, are we angry, well heck, I am...The crash has caused all of our values to go down and taxes up to help with the bail out...and many of the same weasels who have bailed on their own properties are back in action with cash that they stole and called it a SECOND MORTGAGE. I would have loved nothing more than the government and perhaps the national mortage assoc set up a task force to go after all the fraudulent activity that continues to go on...I would have been their number 1 employee!
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Permalink Reply by Tara Nagelhout on
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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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"25K Over My Buyers Offer" Sounds like fishing to me. Have you disclosed your current offer? Did the Broker deliver an offer $25K over? Verbal offers mean nothing in real estate.
Don't go sideways over a phone call. In the end the property was out there for anyone to make an offer. Stepping on offers is a part of the business. Too many times Realtors open issues by just not saying "we have an offer submitted to the bank and are awaiting a response, the Seller is not accepting any more offers. If the status of the current Buyer changes it will be updated on the MLS."
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Eric, you think that it's just as cut and dry as... he has an offer that's fully executed and sent to the bank... so that's it! Bravo for getting to the heart of the matter!
I don't think it's fraud... where's the fraud?
There was no way to tell what the future would hold... they didn't know a (possibly) better offer would come down the pike later, so they proceeded with what they had.
Also, it's hinted that offer two needs loan approval, whereas offer one is cash, and the property has permit issues that will likely make it un-lendable.
Seperate issues are 1) Should he relist when offer one closes and sell to offer 2? (ethics)
2) Can he get paid dual commission on offer 1? (bank policies... expanded upon in many places in these blogs)
3) Will the bank accept an offer of 60K?
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Disclose your position in the transaction clearly, allow transparency of all agrements and arrangements in writing to the shortsale lender, and to all parties you represent as you are required.
Take the 2nd offer in writing as a backup and require proof of funds, due your diligence as if it were your primary offer, document your steps. Present the backup offer to the shortsale lender and let them make the decision with the seller's consent to do this. If you do anything to the contrary , you are setting yourself up for an investigation for fraud, and you should counsel the seller (and whomever your client and brokers are) to seek legal advice before you proceed as you were originally.
Hope you follow the clear messages of a Professional and honest dealings...may god enlighten your path.
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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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Hi Carol. Please remember this is a national forum. Not all states have the same laws when it comes to real estate and agency. In Florida we have NO fiduciary with our sellers and buyers unless we choose to. And in many states you can work both sides of the transaction without being a dual agent.
Nicolas's post and question are valid. He is not "trolling here for answers". This is a forum and we welcome questions. Especially ones that help other learn. Thanks
Carol Pease said:Why would you open yourself up to all kinds of liability by attempting a dual agency short sale? You get an offer so you take the property off the market? It's your offer, so why not? Gee, how can this possibly be in your seller's best interest? Have you even read the HAFA guidelines on flips? Do you understand the term "fiduciary responsibilty." If I were you, I would sign up for short sale class instead of trolling here for answers, This is the kind of behavior that gives the rest of us a bad name. It is just all kinds of wrong!!!
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