Transfering A Short Sell Note
Hello everyone!
I was wondering if anyone could shed some light on this situation.
If you find a note to to short sell. You negotiate with the bank on the sellers behalf and you arrive at a shorted payoff amount. At this point how can I assign the deal to an investor and have him take over my position to pay the bank and aquire the property???
I would like to charge him a 1.5% commission on the payoff amount.
Has anyone done?
Thanks
The named Purchaser would have to demonstrate an ability to close. Mortgagees take a dim view of an assignment to another party...
Either you name the other party as Purchaser (Me, and/or The Other Party);
or the named Purchaser would be an entity, such as an LLC. The 'Other Party' could be named as a member of the LLC to complete the acquisition.
I believe what you want to do initally is also have contract to buy the property for a price below market value but high enough to cover your targeted short sale balance. The difference between the purchase price and market value being your projected equity.
You also want to give yourself the right to assign that contract. While you are negotiating the short sale, you make arrangements to transfer your contract to a new investor.
This investor pays you a fee which should vary depending on how much instant equity they get when they close.
You could either do that or refer the deal to an investor (for an upfront fee), and he writes the contract.
For a number of reasons, the majority of mortgagee short sale approvals do not recognise an assignment... the approval is implicit that the named Purchaser close. You must cloak your effort. Simply including the right to assign means nothing since your agreement is between You, and the Seller. The mortgagee isn't bound by anything in your agreement.
For a number of reasons, the majority of mortgagee short sale approvals do not recognise an assignment... the approval is implicit that the named Purchaser close. You must cloak your effort. Simply including the right to assign means nothing since your agreement is between You, and the Seller. The mortgagee isn't bound by anything in your agreement
What stradegy would work best in that situation to flip the contract? Why would the bank care where the money is coming from?
You're dreaming and rippinging yourself off by doing that. Firstly once that banks attorney sees that the contract is being assingned for monetary consideration your deal is out the window and the bank will want more money because you are showing them that more is being paid. Secondly 1.5%???!! of the payoff man you are ripping yourself off royally! The numbers need to work so that you are getting a minmum of 30% of the equity spread. That's why the whole point off a shortsale is to create equity.
""Why would the bank care where the money is coming from?""
Short sale approval is subject to the terms dictated to the mortgage servicer by the investor who actually owns, or insures the mortgage loan. They can't willy nilly approve a short sale without that specific criteria being met. It's their job to maximize their net recovery... so they won't/can't permit anyone else to overtly profit... If you can't actually purchase the property via a mortgagee aproved short sale, then you've got to have a mechanism in place that allows you to transfer your interest in the Contract... disguised in such a way as not to alert the mortgagee. It can be done, but takes some forward thinking, a well conceived business plan, and the ability to follow the business plan.
hi ssp, i completely see how the "cloaking" of the purchase is the way to do it, however, how do i add another investor under my umbrella LLC? or i guess just LLC..i think ,creatively ,this is ingenious..is this maybe a question for my attny?? thanks.. take care..
regards-pat
The LLC (limited liability company) can be set up to embrace whatever activities you so desire... with managing partners, senior members, lower class members, etc. You don't really need to run to an attorney to set up a simple LLC, but you should really be forward thinking about this entire setup. Tape a big chart on the largest wall in your home. Really think about how to make it work for you. Work on the structure for a week or two. Then, bring your draft to an attorney.
You can have a master Company, with a subordinate entity for each project (each a mini profit center) all paying tribute (% of profits) to the master company.
Once you have the basic concept, then run it past a CPA, and an attorney.
The real estate contract becomes an asset of the LLC. Members' interest in the LLC is what's assigned, bought, sold, etc.
Finding the property is but one piece to the puzzle. Other important elements are the mechanics of acquisition, finance, and liquidation (exit strategy).[ Edited by TheShortSalePro on Date 09/28/2003 ]