Jack's Blog

Short Sale help for EVERYBODY...and it's totally FREE!!

Jack Burns (Estate Rescue, LLC) — Fri, 13 Mar 2009 12:43:40 -0500

What's the catch? There isn't one. Short Sale Nation is a new nonprofit to help agents and their clients facilitate their short sale. Its online tutorials and information is the stuff people pay thousands for to learn short sales. This is free! Check out www.ShortSaleNation.org. Remember the .ORG

This is a sponsorship funded organization. For sponsorship information, you can go to this link www.shortsalenation.org

Washington REALTORS on 2791, I call "Bologna!"

Jack Burns (Estate Rescue, LLC) — Tue, 06 May 2008 20:48:23 -0500

Now that the troublesome bill has passed, the blame game starts. Target: Washington REALTORS. Defense: They have posted notice that they were "closely monitoring the legislation" prior to the bill passing. Bologna! I'm Jack Burns of Estate Rescue and I was there, ALONE in front of the senate, arguing the absurdity of this bill. If anyone was monitoring this bill, I sure didn't see them. Watch the bill pass and the three minutes (cut short) I had to oppose it: VIEW VIDEO

Don't let anyone tell you the people who could have done something about it, didn't know what was happening. I'm not even a Realtor and I knew about the hearing and the content of the bill (thanks to REAPS). In the letter I sent the Governor as a last ditched effort to stop this bill, here's what it said about the fiduciary duty:

"A fiduciary duty is impossible in this context because it asks the person trying to buy the home from the seller, to act in the best interest of the seller. Could you imagine buying your next car with that in mind? Also, if a Realtor were to knock on the door of a distressed homeowner, they would be in conflict with themselves automatically."

The final public hearing was on Friday February 29th that I attended and spoke out. That following Monday, March 3rd at 9:33 AM, emails were already circulating and lambasting the revisions to the bill that added SB 6695 to HB 2791. That means that the fiduciary revisions to the bill took place the same day as the final public hearing that past Friday. How no one knew about this happening is impossible to believe and if they didn't know, what mysterious tyrant cruelly edited the bill at the last minute? How can our system of law making be so vulnerable to someone's ("one" 1?) whim?

Secondly Washington REALTORS, I take great offense to the accusation that anyone who did or does a leaseback is a "scam artist." I have participated in and facilitated leasebacks and the intention was very honorable. If given a choice as an investor, it would be much more lucrative for the homeowner to FULFILL the leaseback, rather than default. And it would be more lucrative to purchase the house outright and require the homeowner to vacate at closing, rather than buy, refi, carry a note for them, evict, fix and list. The media is having a hay day making investors out to be the bad guy, and especially leaseback investors. We don't do leasebacks anymore. Not because I think they're wrong, but because predatory, ambulance chasing attorneys are making a 'killing' from coaching the distressed homeowners how to be victims. It's those same attorneys who were behind 2791.

I found the Senate session especially chilling when the representative stated 'matter of fact' that she thought it better for the homeowner that they get foreclosed on!? If given a choice as a distressed homeowner, would you rather move out of your home and take what you can get, if anything...or stay in your house and get one more chance to keep it. On one leaseback we did, we created equity with a short sale and kept the homeowner in the house for another two years (same payments - equity on buyback) so their kids could stay in the same school and maintain the relationships with their close friends and neighbors. The Sawyers had the opportunity to buy the house back had they done their credit rebuilding homework. Click on the video TESTIMONIAL.

Don't let Washington REALTORS fool you into thinking they did all they could do. Here's how they responded to a self asked question about HB2791:

How was this law passed without the Washington REALTORS^® intervention?: The Washington REALTORS^® closely monitored the legislation as it was proposed by the Attorney General as the legislation progressed through the House and the Senate. Both the Washington REALTORS^® and the AG were satisfied that the Bill, as proposed and intended by the AG, did not include the adverse language now causing the problems. However, after the Bill was passed in one form by the House and in a slightly different form by the Senate, it moved into a process that occurs outside the arena where public comment or influence are allowed. It was at that stage that the adverse language was added and the Bill was immediately voted out of the Legislature without any opportunity for the AG or the Washington REALTORS^® to testify about the problem.

Read their full RESPONSE.

Short sales and Foreclosure help may change

Jack Burns (Estate Rescue, LLC) — Fri, 14 Mar 2008 02:35:39 -0500

Here's the problem...HB2791 has passed. It is no doubt that the number of homes lost at foreclosure auctions will increase. There's only one person left who can stop this madness. So here's a note to the Governor and where you can send it http://www.governor.wa.gov/contact/default.asp :

Dear Governor Gregoire,

There is a travesty in progress and you are the only person that can stop it. Somehow a bill has gotten enough approval to reach your desk. HB 2791 will, and may I repeat WILL cause MORE home foreclosures in the state of Washington. There were 122 signatures presented to the Senate and many other equally appalled real estate professionals in large investor groups who agree that this bill is a tragedy for distressed homeowners. Their voices were never heard or worse, ignored for political purposes.

Please consider these points in opposition to the bill:

1. HB 2791 eliminates the possibility of getting the bank to take a discount for the over mortgaged homes. In the case of a short sale, which most pre-foreclosure transactions are these days, it is illegal to give ANY funds to the foreclosed homeowner. This bill requires that 82% of the ‘fair market value’ go to the homeowner. That makes it a crime to comply with this bill if the transaction was a short sale. The Mortgage Forgiveness Act of 2007 was passed to give homeowners a break http://www.whitehouse.gov/news/releases/2007/12/20071220-3.html HB 2791 takes that break away.

2. There will be no way to come to an enforceable agreement on the “fair market value” of a distressed home because the urgency of the sale and the source of the appraisal order can alter the ‘value’ dramatically.

3. It is impossible to have a fiduciary duty to the homeowner if you are a real estate agent, attempting to buy or representing a buyer, approaching a distressed home owner. You would automatically be in conflict of interest with yourself. Also, if you’re not an agent and just an individual or an investor, how can you attempt to purchase a home from someone and at the same time, represent their best interest? One more ‘also’, the bill is so vague about what constitutes a “distressed home”, that almost any real estate transaction could be argued that the Seller was a “distressed homeowner.”

4. It would be very unlikely an investor would be willing to risk their money for a 5% - 8% return over two or three years. Here is sample math if the homeowner defaults or decides to ‘cash out’ under the proposed bill:

$200,000 ‘Value’

$164,000 82% paid to Foreclosed Homeowner

$200,000 Listing price if Foreclosed Homeowner leaves

$12,000 Real estate commission (6%)

$6,000 Excise tax and closing costs (estimated at 3%)

$5,000 Minimal repair cost (carpet, paint, cleanup, etc.)

$13,000 ROI if no significant repairs are needed (8%)

In short, this bill has gotten this far without the input or involvement of real estate professionals who can provide real world input. There is no doubt that something should be passed to protect homeowners from those few unscrupulous investors who wrongfully abuse the situation of distressed homeowners. But this bill will cause most honest investors to change their foreclosure business to buying at auction, rather than pre-foreclosures in order avoid the potential frivolous litigation that has been increasingly plaguing this industry. Investors who buy pre-foreclosures provide a vital resource for distressed homeowners who have no viable alternatives to resolve their situation other than a quick sale prior to the foreclosure auction. That resource will be greatly depleted by this bill, thus more homes will go to auction.

Foreclosure Lease Back Legislation proposed

Jack Burns (Estate Rescue, LLC) — Sat, 12 Jan 2008 22:31:21 -0600

Last week, a local Senator asked me my opinion about proposed legislation he was considering sponsoring in next weeks committee.

My name is Jack Burns and I agree that something should be done to put in place some restrictions that keep unscrupulous investors from unethical behavior. I have heard of lease back situations where, for example, the investor sold the property out from under the lessee. However this legislation is not the right way to protect the homeowner.

Estate Rescue, along with many other companies stopped doing lease backs, not because it was wrong for the homeowner, but because predatory attorneys prey on honest investors by coaching the foreclosed homeowner to lie about what they thought they were doing. So even though we are doing it right, some predatory attorneys are still suing because most investors will settle to avoid the stress.

This proposed legislation sets the stage for:

Government setting values of a property by trying to put a number on a fluid, moving target that adjusts around various circumstances.
More streamlined frivolous law suits against honest investors. Estate Rescue was sued in one of these frivolous law suits.
Moving toward turning a lease back into a loan and thereby increasing the ability to sue, using the lack of proper documents and licenses required by a mortgage broker as justification.
Decreasing the options available to distressed homeowners who want to stay in their home because even fewer investors will be willing to do lease backs due to the even more dangerous, frivolous law suits.
Committing a crime if this legislation is followed, because this draft demands the homeowner be paid when it is illegal to give money back to a distressed homeowner in a short sale situation.

In response to that proposed legislation, I prepared a document that was sent to the senator's analysts for their perusal. Here is that response:

Overview
I didn’t major in economics but here are my thoughts: Keep in mind, these pre-foreclosure transactions are often of a fluid nature. Meaning that the terms may adjust between Purchase & Sale and closing out of necessity. For example, at the time the purchase & sale is signed, usually the homeowner is the only person who knows all the liens or judgments against their property. On EVERY deal we have done, there has been something that shows up on title that the homeowner omitted; or they grossly underestimated a payoff(s). The combination of these intangibles and the fact that we, or an investor who may be buying the contract on assignment may have additional requirements before we or they will agree to do the transaction, makes it illogical to quote on paper or verbally with definitive conviction any rigidly detailed specifics on numbers, etc. We often play a balancing act between the homeowner’s needs and the investor’s requirements to do the deal, if we are assigning instead of closing as the buyer. If either party is dissatisfied, nobody gets a resolution. The seller won’t sign the deed or the investor (or ourselves) won’t buy the deal. The buyer could sue for specific performance, but I have never heard of a defaulted transaction where that has happened.

In practice, this legislature is in large part impractical. It would be more logical to perhaps propose legislation for an intermediate step, between Purchase & Sale and closing, that requires that the homeowner be given a day or two of advanced notice of the final details of the transaction. There would be ideally more time allowed, but sometimes a looming foreclosure runs out the clock. Even this requirement would prohibit some transactions from closing due to there not being enough time to allow for a two day notice. If banks and/or trustees were also required to allow for an extension upon being Cced these final terms, such a requirement would be more practical.

The Draft Specifics
The definition of “Foreclosed Homeowner” is somewhat confusing in industry terms because it is past tense, implying a homeowner who has already lost their home to foreclosure. Being “in” foreclosure typically describes the 90+ day period, during which the homeowner may remedy, after being served a “Notice of Trustee Sale.” Is the author referring to the time between the notice of trustee sale which puts the homeowner “In Foreclosure”, or the time after the remedy where the homeowner is no longer in foreclosure and is instead “renting to re-own” the property during the lease back term? If so, they are no longer the home’s owner until they satisfy the terms of the lease back. Either way, the home was never foreclosed on at a trustee sale and thereby not past tense.

The “entire agreement” section would mean that any side contracts would be prohibited and would limit options to the homeowner. Additional agreements, arrangements, disclaimers or understandings may be required, that would be inappropriate for the actual purchase & sale agreement. They also include the homeowner’s personal information and would be made public if it is necessary to record the Purchase and Sale agreement with the county. It may be necessary to record if for example, there is a dispute over who is the rightful purchaser by date sequence if the deal is poached by a competitor. All the additional documents are in place to disclose items to the seller and/or defend against fraudulent law suits.

Sec. 1. (1) There are other reasons why a property is being foreclosed on than just “90 days delinquent on any loan that is secured by the property.” A utility lien, if unpaid, can take the first position in front of all mortgages and foreclose.

Sec. 2. The use of the term “property reconveyance” is confusing because the definition of reconveyance means to “To convey to a former owner or place. Or to convey back to a previous position or place.” The reconveyance term would only apply when and if ownership of the property is conveyed back to the previously distressed homeowner after the term of the lease back. Since the context referred to in the draft is regarding the Purchase and Sale of a distressed property, it would be more appropriate to call it just that or conveyance. “Reconveyance” in this context usually applies to a refinance or reissuance of an existing loan where the lender is satisfied and reconveys its interest to a pre-existing state.

Sec. 3. We include this info on our agreements.
(3) In many cases the consideration will be $0 to the distressed property owner because there may not be enough equity to justify consideration or it may be a short sale, which prohibits any cash from going to the homeowner.
(4) Describing the services in detail is not unreasonable either, however it seems like a set up to gain ammunition to sue if the specific circumstances of the transaction do not warrant every service or step that may be indicated in a description. We provide a lot of services not indicated in our contract and the details of each transaction vary. For example, we now provide credit repair services for all our clients by paying for the first $1,000 of credit repair. I hesitate putting such language in the contract because there is so much potential frivolous litigation around these transactions. If the client doesn’t do their part to improve their credit, it won’t improve no matter how much we try. So if it doesn’t improve due to their shortcomings, we may be held liable regardless. I would rather leave it out of the contract and help them as a practice.

(6) We have stopped doing Lease Backs because of fraudulent law suits. We have since had many homeowners pleading for a lease back remedy that gave them another chance to stay in the home they love. Requesting a complete description of the terms of any such agreement is not unreasonable, however we have provided that and still gotten sued.

“NOTICE REQUIRED BY WASHINGTON LAW”
I am working on a case right now where I am in fact asking the homeowner to sign over his home prior to closing on a straight purchase. Here’s why: His property is over mortgaged. I’m asking the 1st and 2nd to discount so we can keep a foreclosure off his record. I got the 2nd to take $5,000 in stead of significantly more, only they want their money immediately if they are going to do the deal. The 1st is still processing the short sale and we won’t know for sure if they are discounting too for another week. They have to discount too or the property is still over mortgaged. If we pay the 2nd off, the homeowner can still file bankruptcy or go with another buyer, or just go AWOL. We would lose our $5,000. Since he is not getting any money from the sale, it would only benefit him from deeding over his house. During the transaction process, there are also times when the homeowner needs to sign additional documents, especially in the case of a short sale when the bank requires financial information signatures or signed hardship letters or addendums to the purchase & sale regarding price, closing dates or other items. There are also other circumstances where deeding over makes the most sense for the homeowner’s sake.

Sec. 4. In theory this is good. However it doesn’t really work, nor is it necessary.

Estate Rescue's typical Process: Here’s what we do when we get a contract: 1) We send authorization to their lender so they’ll talk with us. 2) We send a copy of the P & S to the title company so they will pull title. 3) We contact the lender(s) and order payoffs. If it’s a short sale, we request their short sale packet and fill it out along with the other supporting documents. 4) We get a realtor to pull comps and help appraise an estimated value range for the property. 5) We open escrow and provide the numbers for the contract sales price, liens, judgments, payoffs, commissions, etc.

We do all this as soon as possible out of necessity, because of the looming foreclosure date. If there is a default, we lose…not only our time and energy, but our relationships are taxed. Losing an escrow company for example, because they got tired of false starts, would be costly. Typically the main reason a homeowner cancels their contract with us, is because of poaching from a competitor. This happens frequently because some unscrupulous wholesalers will bad mouth the entity working with the homeowner so they will get fearful and change over to them. I am adamant about my reps NOT poaching. If a homeowner is already signed with someone, we walk. To my point about this being unnecessary, the only way these transactions can be completed, is if all parties close. If a homeowner is unsatisfied with the deal, they simply refuse to sign the deed. There are people who will ‘tie up’ a property as a Buyer, never take any action to purchase, then impose a les pendence if another buyer steps in. This hurts everyone because the clock is still ticking on the foreclosure and it imposes yet another fee to cure the debt, assuming the entity will accept an amount to release.

(4) This is fine, but what would be more beneficial to the homeowner if the transaction was terminated would be the return of any documents they provided the Buyer, such as tax returns, paystubs, bank statements, etc.

Sec. 5. As previously mentioned, we expend a substantial amount of time, money, relationships and effort with no upfront fee. If a homeowner defaults on a contract, we typically impose a $2,500 - $5,000 lien to cover expenses. This is in no way a predatory act on a victim, it is usually a deterrent for poachers. If a homeowner changes their mind and defaults immediately, we may not impose a lien if they are doing so because they are changing to a remedy other than going with a competitor.

Sec 6. Again, our experience has been that 99% of the time there is a cancellation/default of a contract, it is because of an unscrupulous poacher. If this legislature is passed, those such people will rejoice in the way it will be easier to steal deals. People like that are not the kind of people who will look out for any interest of the homeowners.

Big Red Flag Sec. 7. This item is placed there so that the step of arbitration can be skipped and a predatory attorney can go straight to a law suit. I would bet that whoever wrote this document has a legal practice that thrives on suing investors of pre-foreclosures. Of all I have seen so far, this appears to be a the most blatant attempt to streamline ‘ambulance chasing.’

Sec 8. (1) I requested and was provided a signed letter from a homeowner, stating that he had been temporarily unemployed and now has a much higher paying job that allows him plenty of monthly income to cover a lease back. After not making a lease back payment to the buyer/investor for four months, he still sued, under coaching from his attorney.

“Fair Market Value” of a property is practically impossible to ascertain. You can get 3 appraisals from licensed appraisers on the same property that may vary tremendously. Bank commissioned appraisals for example, typically come in at contract value. To rely on a service like Zillow is a joke to people that know how ‘off’ the website can be in either direction. To impose legislation that rests on an intangible is impractical and opens the door to unsolvable disputes. There should not be a government approved value on a property. A big factor is “time.” If there is only two weeks to cure the foreclosure, the price would be dramatically different than if there were six months to sell the house. What if there were only two days to sell?? How much would you price your home at if you had to sell it in a week to someone who would pay cash? Various circumstances can affect the price. Also, if the lessee defaults, would you prohibit the homeowner/investor from selling their house at any price they need to, want to or have to?

In the last sentence in this item, I believe the author is trying to say that the Buyer/landlord/leassor of the property to the leasee in a lease back transaction, must provide the same type documents as in a full doc loan. I strongly reject this, because it begins to lean in the direction of what could be confused as a loan. I am being sued right now on the accusation that I was facilitating a ‘loan’ instead of assigning a sale with an option to purchase. If there were documents provided to this effect as this draft suggests, it would support a predatory attorney’s case.

            (2) (a) In a lease back situation, it would be impractical to ensure title has been reconveyed to the foreclosed homeowner. NO buyer/investor is going to put up $300,000 to cure the debt against a property and have no ownership. The only way title should be reconveyed back to the homeowner would be upon satisfaction of the lease and buyback terms. Otherwise it is a loan and that would change everything.

(b) There are two transactions going on here:
1. When the investor buys the property from the distressed homeowner.
To request that 80% of the fair market value of a property be paid to the homeowner is unreasonable. I assume this is referring to the first transaction. First of all, investors are not paying any more than 70% of ‘value’ at auction or for a pre-foreclosure these days. The market is too unstable to go higher. Secondly, there are many situations when NO money or consideration should be going to the homeowner in the transaction, especially in a short sale where it is illegal to do so. Another valid point is, if the value doesn’t meet the 80% after purchase, who pays the buyer the difference if they then sell the property back to the original homeowner?

2. When the distressed homeowner/lessee buys the property back from the investor after the term of the lease option.
If the author is referring to the 2nd transaction from the lesser back to the lessee, the property value may have decreased during the term of the lease back. If the investor sells the property back at less than the 80% of the original “value”, who pays the investor the difference to cover their mortgage?

The author may not be using the “buy back” term because they want to continue to imply that the distressed homeowner would go back on title as owner during the term of the lease back. That would make this a loan and the investor/buyer would be on a deed of trust instead of the owner. Would you loan money to a distressed homeowner without any way of recouping it?

(3) To ascertain what is “fair” is relative and intangible. Each circumstance is in, for the most part, a ‘gray area’ because impressions of values can vary greatly; lease terms may vary; and property debts are never the same. Deceptive acts or practices should never be tolerated. It would be more practical to advise the seller to seek legal council prior to closing. We do this as a practice and now even offer to pay $300 toward their legal council.

(4) There is currently no certification required to be in the real estate investing or pre-foreclosure business. I would not be opposed to some kind of certification, but it should be devoid of the “rush to the back of the room” kind of pitch and rather have a standardized curriculum.

Estate Rescue discloses to all our clients that we are not attorneys or realtors. There are many situations however when our knowledge about the foreclosure process surpasses the homeowner’s and the homeowner greatly benefits from our experience. As previously mentioned, we often play a balancing act between the needs of the homeowner and those of the investor, if we aren’t buying the property, who would be curing their foreclosure headache. We often represent the seller in the case of a short sale because our ability to negotiate with the lenders far surpasses that of the homeowner. We used to represent that we could save their home, until we stopped doing lease backs.
(6) (a) To imply that “inducing” someone into a transaction is bias and presumptuous. It opens the door to even more litigation against honest investors or wholesalers. If there are misrepresentations being made to get the homeowner to convey prior to the end of any unnecessary cancelation period, that would be unethical and wrong. It would be more practical to impose more requirements regarding written documentation of verbal representations and/or lead time for an attorney’s review of documents prior to closing. As previously mentioned, it is sometimes in everyone’s best interest to convey the property and the timing of that conveyance may be crucial. The ability for a homeowner in distress to transfer their property to another party quickly should remain for their benefit.
(8) We do not enter into any conveyances where the seller is not signing the deed on their own behalf. This is not an unreasonable request. We do maintain the need to represent the homeowner when it comes to revising dates or amounts of a contract during a short sale process.
(9) This is impractical. There are situations during a short sale where the lender will not allow a full settlement, and rather a lien release, which may maintain responsibility to the seller for the balance of the debt. In such cases, the seller is aware and must sign the lien release prior to conveyance. There are also situations where an IRS lien for example, may be released with a Certificate of Discharge so the seller can transfer ownership of the property prior to foreclosure. The IRS would still go after the seller for the debt. So the seller may have a choice between having a foreclosure sale on his/her record and still owe lenders and lien holders (like the IRS) after a foreclosure sale; or complete a pre-foreclosure transaction and have some or all of the debt cured by a skilled negotiator acting on their behalf in addition to keeping a foreclosure sale off their record.
(10) There have been situations where we have a conveyance set up at escrow, only the seller could not make it to closing for some reason. Because of the looming foreclosure, we arranged for a notary to witness signatures on documents prepared by the escrow agent and return the documents to closing. Had they been required to be present at closing, they would have lost their house to foreclosure. Notaries are authorized to notarize real estate documents anyway.

Sec 9. (3) Four years seems like an extremely excessive time to allow for litigation on this kind of matter. The time passage and subsequent appreciation, depreciation and/or renovation makes it even more difficult to reason a legitimate resolution.

The Truth
It is again, very apparent that the author of this document is masking ambulance chasing with an insincere interest in distressed homeowner rights. The incentive to author or to be associated with this kind of legislation may be so that one could say they proposed legislation to “save distressed homeowners from fraudulent investors.” In reality, it would have an adverse affect that causes more homes to be lost and pad the pockets of predatory attorneys.

Already people are losing an option to stay in their home with a lease back because fraudulent law suits have altered the terrain. The fraudulent lawsuits are founded on a fabrication that the homeowner did not know they were selling their home, regardless of the documentation and disclosures to the contrary. A predatory attorney will coach the homeowner/renter and pursue litigation because they understand that if they falsely accuse enough people, somebody will settle to avoid the stress. Point being, this legislation seems to be geared toward obtaining more ammunition to attack investors or buyers through litigation for the financial gain of predatory attorneys, instead of looking out for the best interest of the distressed homeowner, home buyers AND the investors that can help distressed homeowners out of an impossible situation.

The fact is, the more illogical restrictions that are placed on the role of the buyer of a distressed property, the more it will hurt the seller. The ‘free market’ affect regulates itself because the more buyers that are out there, the more choices the seller has to remedy. Civil courts should be there to take care of legitimate grievances from legitimate victims.

A Second Opinion
I read a couple paragraphs of the draft to an experienced and very well respected escrow agent and this is what she said: “The author of this is obviously not an economics major and surprisingly, doesn’t know that much about real estate transactions. It seems to attempt to either put restrictions on educated adults that can make sound decisions and implies that they are idiots that need the government to make decisions for them; or it sets the stage for more successful and lucrative fraudulent law suits. Either way, this would adversely affect the economy in the near future and even more so, many years from now. I would like to see what gives the author the authority or qualifications to attempt to justify this kind of control. It seems to fly in the face of the classical econ theory of supply and demand and borders on communistic mentality. Do homeowners lose the ability to make a decision for themselves just because they are in foreclosure? Will we also attempt to impose legislation on behalf of the people on the other side who bought distressed property and suffered financially in doing so?”

Please feel free to discuss any element(s) of these comments.