Show Us Your Favorite Way To Get Paid In Short Sale, Please!!
Hi,
I thought this might be a helpful post for many... (inlcluding yours truly 
).
I am not real clear on the smoothest way how to exit from a short sale.
Since I have the first four on my plate right now, the timing is perfect...
Options I heard so far (and your experience/success/disaster shared with us is greatly appreciated!);
- assign contract
- double closing (had seasoning problems?? Have you had luck hooking up retail buyers with financing that gets done in 30 days, so it doesn't srew up the bank's required 30-day time frame)
-get hard $, close yourself (rehab and flip then) [or: have your corporation flip/doubleclose it to you personally - now you have even money to rehab it!! And afterwards have a house with no $ down and still equity if you bought it right!!)
- put a second mortgage (or mechanic's lien) on the house - hence no seasoning issue with new buyer's lender
(ISN'T THERE A POTENTIAL PROBLEM IF THE BANK GETS WIND OF THAT ANOTHER MORTGAGE GETS PAID OFF IN FULL, WHILE THEY ARE TAKING A BIG HIT???)
If the bank wouldn't care/know about that 2nd mortage 100
% pay-off, I would really like this way! I'd never been on title................
- buy it in land trust, then assign beneficial interest, avoiding possible seasoning issues
- buy it in LLC, then sell the LLC, no seasoning issue either
I have never done this, but I know all of the above are real options.
Show us your favorite!!
Thanks,
Falk
For me, the most rewarding payoff occurs when handing keys to and getting a check from the new owner on a property that has been retrofitted, renovated, and rehabilitated into good quality, and affordable housing.
I don't believe that flipping a short sale contract, or effectuating a double close, or managing an LLC is maximizing profit potential. You are giving away the profit potential for a few bucks...
I don't see shorts as a volume business. Many of you do.
I like to carefully prequal the candidate and stay the course.
A successful short, to me, includes helping a family thru the foreclosure process; upgrading a home and improving a neighborhood; and getting paid well for the efforts...
Let's get the discussion started!
I value your point, SSP!
What about timevalue of $, though?
Rehab & sell takes 3-4 months - and babysitting the process, and coming up with the financing.
In those 3-4 months I could have flipped 3-4 houses. (Profit potential where I live: 50k and up - W/O touching the house...)
Anyway, I am aware of that there's no right or wrong...
Other 'doers' feel like goving their 2 cents??
I am completely on the same wavelength as ShortSalePro. I am just working on my first sale now, but so far I have completely enjoyed the process of working with the family in trouble (I know I am actually helping them), preparing the proposal (priding myself on a professional & well-organized package)and speaking with the Loss Mit Rep (a little adrenaline rush because I'm actually doing this!).
I really hope this deal works out because I am truly looking forward to the rehab stage - something I've always wanted to do.
I can't decide which part of the process I enjoy most - I like all of it, but I'm sure receiving a check when I've sold my 1st short sale will be pretty great!
I also have a small children, so not a lot of time to spend on this.
In short, I guess I prefer to savor each part of my job. It is very energizing to me.
I realize though, that many others would choose volume. That's OK too.
You will find out which method best suits your taste and financial goals. Best of luck!
That might not have been both of your point, or it was..., I don't know.
But, for clarity's sake: I don't think I am helping the homeowner any less by flipping the house and letting the next person do the rehab.
You disagree?
Another point - and my (and would believe many others' without larger $ resources) biggest attraction to (flipping) short sales:
No need to put any money up (especially gratifying when you don't have that much... ) or be on the hook, liabilty-wise.
Don't misunderstand me, I
DO care about the owners and have no desire to carelessly do anything that could worsen their situation.
A rehab, even if desired, is currently out of my reach anyway.
Hmmmmm, so nobody else besides the short sale pro is making any money on short sales???
Just saw you post, I have closed 3 in the last 3 months.
Hey, fellow NY'er giveyoucash,
so how did you cash out so far? One way, different ways?
Had seasoning issues with your buyer's lender or problems with 30-day time frame?
Seems like this is critical stuff, so it would serve all SS forum readers to check out any and all exit strategies available.
After all, don't wanna mess it up at the end, having spent a lot of time and energy, SS accepted, but then have problems getting out of the deal.... Correcto?
Still waiting for people besides SSP to share which exits they use, which they had problems with, etc.
Seems to me that, if I wanna double close it to an end user, it would be in my very best interest to insist on having him/her use MY mortgage broker, who makes sure this gets done in 30 days plus there is no seasoning requirements. Right?!
Sounds dangerous to do all this work and then put it all in the hands of your buyer's mortgage broker - to potenetially screw the whole thing up.
Or, just go with investors, who come with a bag of cash w/in a week - but want a lot lower price...
Thanks one more time,
Falk
I suppose this is as good of a time to post this as any....
I'm currently working on a short sale. My exit strategy is to execute a double closing so I don't have to close on a loan and take money out of my pocket to get this deal done. The property does not need any fix up work. It's a 2-flat in Chicago suburbs. Needs about 1k in fix up from what I'm told. The numbers read as follows
FMV: $255k
Short: $185k (awaiting approval from the bank - loss mit rep gave me verbal $185k but I need it in writing so it needs to go to a comittee)
Fix up: $1k
Now, this property is about an hour away from me, so I don't really want to be a landlord. I also don't want to take 10% down payment out of my other investments to close on this property. For this reason I'm going to attempt a double closing. Also if I closed on it myself I could possibly run into the dreaded seasoning issue. Any comments/suggestions on this?
Thanks,
Ryan J. Schnabel
Ryan, if you close yourself, and keep it, there is no seasoning issue, right?
If you do double closing with new buyer at the end, his new loan/lender must be ok with 'no seasoning.'
Btw, w/o any intention to be a wise guy, maybe you could start a new thread with your deal?
I was hoping to keep this one general, and just have people share all the possible exit strategies that worked (or not) for them.
Thanks,
Falk
If you got the approval at less than 75% of LTV it is easy to keep it as a rental, if you want. Close with hard money then immediately refinance. You will have out of pocket money for the hard money close, but you can roll the money needed for the refi into the refi. Easy to find no seasoning refi at 75% LTV.
I just did my first short sell and I am keeping it to rehab then L/O. There was just too much money on the table to do a flip. I should get about 40k when it is purchased.
I have a friend who has no money and works counties that are more than 1 hour from his home. So he never wants to take title. He immediately markets it to retail buyers if it is in good shape or investors if it is in bad shape. He will only take title if he was unable to get the end buyer and there is a ton of equity. He tries for 0 out of his pocket. He does so many that he can afford to be picky. He has a realtor on his team that prices them very attracively so that the offer comes in within several days of being listed. The retail buyers must be pre-approved and they will take less for cash. I think the lawyer takes liberties by making it a simoltaneous close instead of a double close. Uses the incoming buyer to pay off the bank, records the land trust deed for the first close and then does the second close, and prepares an abbreviated HUD for the bank. I will let you know how it actually works when I close with the lawyer next week.
Brenda
There we go... Some 'meat.'
Thanks, Brenda!!
(Isn't double closing and simult. closing the same??)
We are not done yet, though...
Anybody doing the 'put on a 2nd mortgage thing?' (Hence never take title...)
Not only would I avoid transfer taxes (1.4% in NY) but also have no 'dealer' issues with the boys..
I am not expert, but a double close is obviously when there are two closings. Two sets of doc stamps, transfer taxes, etc. The title changes twice. In a simoltaneous close the end buyer closes with the original seller and you are in the middle just making an assignment fee. What my friend does is somewhere in the middle. He gets the warranty deed to trustee as part of his paper work. So for the first closing there is basically the recording of the warranty deed to trustee and the signing of the HUD. For the second close the end buyer purchases from the SMITH FAMILY TRUST.
Spoke today with the lawyer about how to get the HUD1 signed by the original owner even if he might be a flight risk. The lawyer had the lender threaten to return the money and cancel the deal because he did not give them a HUD signed by the original owner. Hate for the deal to go down the tubes because you can not find the original owner. I have decided to have a blank HUD in my paper work. If worse comes to worse, I will use a typewriter (remember those) to get the numbers on the page.
Brenda
Rather than have the original owner sign the HUD, I've never had a problem with using a third party or partner get limited power of attorney for the property and sign in place of the owner at closing.
This has worked out well for over 10 simultaneous closings now
Thanks, Bob.
Yeah, the power-of-attorney version sounds good (I also now people who do this successfully).
My title guy (and my attorney) wasn't too pleased with that, though.
(Time to change them? )
Would the owner still be called to check that John Doe really has the power?
This would also lend itself to putting a another mortgage against the house and realizing your profit that way (never on title, no dealer issues), wouldn't it?
On a different note: Does assigning the contract work??
Or is there a problem? Would the bank that gets paid off realize this???
And, would this be a problem with the new buyer's bank? Or it's none of their interest that the original contract I have with the homeowner is 290k but now I assign that, sell it for 359k and pocket 69k as assignment fee....?
(I am still waiting on Fairbanks, but that's what's hopefully gonna happen )
Thanks, all, for your input. I think this is very valuable stuff for all of us!!
Falk
Brenda
I was always under the impression that the double close and the simultaneous close is the 'same' thing .. ? Perhaps I was wrong?
I also think it's the same thing.
The other thing Brenda mentioned was assigning the contract.
Somebody has the answer to my above post re if I can assign my short sale contract?? Or do the two banks involved have a problem with it?
Thanks, and I'd love to see somebody answer this.
Falk
Bump....
Plus: If I do flip (double closing), I guess I put 'all cash' on the HUD since I am not getting any financing, right...?
Hi Falk,
For me, it's a balancing act between my objectives of cash flow, profit and retirement and using 1 of the following 3 exit strategies to accomplish these objectives.
1) Wholesale / Flip = quicker cash flow for monthly expenses.
2) Rehab to Retail = greater profit, increases cash flow
3) Rehab to Rent = longer term / retirement
It has been my experience that using an end buyer's money to fund my short sale with the foreclosing lender is a thing of the past. The foreclosing lenders have the position that if they are accepting less, then no one else will benefit from the sale. In fact, they will go back to the title company and trace the source of closing funds and if they find out that you profitted as the middleman, they will rescind the transaction.
So, I have been closing every short sale either in my personal name, LLC or Trust regardless of the exit strategy I use, even though I can buy and sell at the same closing table.
I am currently working 13 short sales and loving every minute of it.
God Bless You
Thanks for your answer.
Just to be clear: you mean you don't assign your contract, but you do do double closings, since you mention wholesaling as one of your exit strategies.
Am I getting it?