-
Quick Tour
Connect. Share. Learn.Welcome to ActiveRain, the #1 social community for real estate professionals.- Explore the world's largest storehouse of real estate knowledge
- Access free training on ActiveRain University
- Share the experience of life in the real estate industry
- Grow your business through real estate blogging
- Blogs
-
Resources
Product Reviews Curious as to what others in your profession think about a certain product or tool? AR's community takes the time to leave honest and transparent reviews of their experiences so you can be a bit wiser about your purchase.
- Broken down by categories and subcategories for easy finds
- Get an unfiltered look at what real users are saying
- Leave a review yourself for others to benefit from
- Add new products as you use them and gain points for doing so
|
What I have learned, after spending lots of money and time, I am somewhat reluctant to share. You see, I consider most of you to be my competition and I am human, which means I am falible and greedy (let's be honest we all are!!) and the devil on my left shoulder says "keep this knowledge for yourself." Then I am reminded of the teachings of my coaches, mastermind groups and other angels on my right shoulder who say, "if you want to become the best possible person you can and you want the finer things in life you must practice the art of abundance and reciprocity regularly." For those of you who don't know what that means, It means in order to get you must give and do unto others as you would have others to do unto you. Plus, honestly, unless I had someone who was willing to share their knowledge with me, I would not know what I now know. So, brace yourself because I am going to spill the beans about one of the most important subjects facing real estate today and the foreseeable future. I am going to be blunt, so if you have a weak stomach or don't like constructive criticism then you should move on to the next blog.
Let's get on with the Flip or Back to Back Transactions are legal or illegal debate. 
;)
;)
;)
Find PA real estate agents and Levittown real estate on ActiveRain.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
© 2013 ActiveRain Corp. All Rights Reserved
31 Comments on Are short Sale Flip Transactions, aka back to back closings, Legal or Illegal?
My understanding of the sentence you have underlined is that this it is not an opt out, but a refusal of options or failure to contact that escalates the foreclosure sale, and is not in the borrowers best interest! This is very dangerous if your property has an eminent sale date. Servicers who have contracted under HAMP/HAFA must offer the short sale option prior to foreclosure sale.
Page 4 Supplemental Directive 09/09....If the servicer determines that a borrower is eligible for a HAFA offer based on its written policy and this Supplemental Directive, the servicer must follow the steps below to determine if a short sale or DIL offer will be extended.
If the servicer has not already discussed a short sale or DIL with the borrower, the servicer must proactively notify the borrower in writing of the availability of these options and allow the borrower 14 calendar days from the date of the notification to contact the servicer by verbal or written communication and request consideration under HAFA.
As soon as the borrower refuses the offer they can proceed with the sale. What is so nefarious is that if the borrower has previously discussed the short sale or DIL option the servicer may offer the option verbally to the borrower and if the borrower indicates they don't want to participate, or even more devious, a message (voicemail) is left that they are being offered this option, please return a call by XX date, and they don't call back -it is considered a refusal.
Note the link you put in in your response is to Guidelines Aiming To Ease Short Sales By Ruth Simon, The Wall Street Journal - not the supplemental directive.
I am sure you meant to put this link .......https://www.hmpadmin.com/portal/docs/hamp_servicer/sd0909.pdf
The second reference is to the option that you can submit an offer with an Alternative RSSA (Request for short sale approval) if you have not participated in the HAFA preapproval for short sale program and have not received the RSSA that is pre-populated with the minimal acceptable net proceeds from an offer along with allowable transaction costs that they have preapproved for payment. But you would need an offer that was fully executed prior to the borrower having been either contacted by or in contact with the servicer....
Excerpt page 6 of Supplemental Directive.. In the event that a borrower has an executed sales contract and requests the servicer to approve a short sale under HAFA before an SSA has been executed, the servicer must evaluate the borrower for HAFA as described in this Supplemental Directive and must utilize the Alternative Request for Approval of a Short Sale (Alternative RASS). There is more information on the Alternative RASS on page 8 of the directive.
Again, the Freddie guidelines have nothing to do with the HAMP/HAFA programs - the programs are for Non GSE mortgages. However I do appreciate the link.
I am enjoying this post and the debate of the Supplemental Directive 09/09. To paraphrase your comment in #4, No offense Kevin, but maybe you need to read up on HAFA. ;)
Thank you for a mentally stimulating exchange.
We can go back and forth forever on this but I'll maintain Lenders may be obligated to offer HAFA but HO's are not obligated to enter into HAFA.
Back to the original topic, Flips are here to stay HAFA will not make them go away as it will only effect a small portion of loans and home owners.
I did mean to include that link, not sure what happened there.
In PA, foreclosure takes about a year or so, at least, that leaves plenty of time to work a short sale even if the lender does not stop the foreclosure process. As you stated earlier, individual state laws have to be considered. Having a working relationship with private equity firms and lenders I know first hand, at the end of the day, lenders do not want to be owners. If you provide them with an agreement of sale with an acceptable price they will approve it HAFA or non HAFA.
and touche, but I have read it a few times myself as well and I guess just interpreted things a bit different than you plus I take into account PA law. To be honest, I rely on my attorneys and their point of view on it more than my own as the thing is not an easy read at all and that's what I pay them for.
I too am enjoying the conversation on HAFA even though it is not the original topic at hand.......gosh, we are geeks aren't we...lol
I am glad that flips are here to stay! Alot of my clients are investors, and I would hate to lose their business. Enjoyed the conversation greatly. If I am ever contacted by a homeowner in PA I will contact you about listing the property. But you would have to work with my company LOL ;).
Have a great weekend!
Thank goodness that FHA has decided to pull there heads out for at least a year to allow FHA mortgages on "flip" properties. This is not to say there won't be plenty of restrictions to come along with this new, yet exciting change.
Kevin is correct!
HAFA is a JOKE and does not help the seller. All agents need to really read up on this, because it is not good.
And for Tom B., if it wasn't for us investors and having access to transactional funding and getting these short sales negotiated and sold there would be even more sellers with foreclosures.
Our group has been performing Short Sales for over 6 years, when no one new what they were. This year is going to be overwhelming for sellers and short sales are going to be their answer. Most won't be able do a loan modification and can't afford to bring back payments to current.
We can help seller's that has to sell their property and avoid foreclosure. We get 94% satisfaction of liens for the sellers. We do all the negotiations with the lenders, so the agents can spend their time wisely getting more listings and buyers.
We are Nationwide! RC Real Estate Solutions at www.RCRealEstateSolutions.com
Rick -
I have been doing short sales for 8 years and have a similar sucess rate. I agree HAFA sucks. What I want to know is...is there a way for a HO to opt out of a HAFA short sale if the lender/servicer is participating in HAMP/HAFA? Kevin thinks so but I have not seen anything that indicates this is true.
Also what are straight flippers going to do to withthe 90 hold required by HAFA?
Hello,
There are VERY ATTRACTIVE SPREADS & and as little risk as any Liquid Investor would dare to RISK.
The Southeastern Tn & N. GA areas need 60 to 90 day transactional funding. This timeframe give or take a month give time for BOTH repairs & Loan TurnTime. I happened upon Transactional Funding thru trial, error and Losing a Great Deal with an end buyer. The "Investor" misrepresented himself as Principal investor (more than one mind you) when using trans funds but did not disclose. Therefore, the endbuyers that are already in place. (About 30 or so different tenants/properties only qualified FHA). The appraisals require repairs to move forward in the loan process.
I am aware Transactional Funding is Legal but when improperly disclosed. And the ingredients for trans funding w/immediate endbuyer is NOT there. IT DOES NOT WORK but the Unsuspecting loan officers, realtors, and sellers MINDS are WORKED OVER in the Process!!
Can be a Great Opportunity for some but MOST in my area are either HUSH HUSH. Or just now getting the hang of how it works. MAJOR NEED FOR EXTENDED TRANS FUNDS as MOST pre-foreclosures are in need of repair or EVEN vandalised but REALLY GOOD DEALS.
Please advise TIme is of Essence in one that I've worked hardest on.
Best Regards,
Brandon - Sure, there will be and are guidelines, but something is better than nothing!!
Rick - Keep up the good work, sellers need you!
Hi Evette - Yes that could be a potential problem when dealing with novice investors who have no financial backing other than the transactional funding and very little to no experience with these deals. There's always more than one way to skin a cat and most fly-by-night short sale investors think their only exit plan is to use transactional funding. In a very worse case scenario, they need to back out of the deal and let it go A-C so foreclosure is avoided and the C buyer still gets the house they want at a great price!! See my blog for tips to be sure you ask an investor or any agent who represents an investor before moving forward with a short sale!!! Lot's of wanna-be, Johnny come latelys out there who are neither experienced enough or prepared to adapt when something goes awry. Bottom line, if you are greedy and are only in the short sale flip game for the money, you need to be doing something else. People's lives and credit are at stake and that should not be something that is overlooked, ignored or taken lightly. Goal #1 always, ALWAYS has to be stopping foreclosure, even if it means the investor has to back out of the deal and make no money! You win some and you lose some, at the end of the day, money will be made but only for those who are in it for the right reasons.
A true investor will also have access to funds other than transactional funding. Including private money and hard money. Any investor who only has one exit plan is not a very good investor at all and I would be very wary of such investors!!! How do you know if they are experienced or not?? ASK QUESTIONS!! This is also another reason why it is best to have an agent involved who actually understands this process even better than the investor buyer. IMHO, as an agent, no way would I want an investor/negotiator team who I have never worked with before "control" these deals without showing me some kind of personal track record of success, at the very least. Even then I would not allow it, I'm the one with a license,career, reputation and livelihood on the line, not the investor!! To many speculators out there who bought a "short sale investment course" but really have no practical experience and can't be trusted. If an agent is going to be involved they should know and understand the process themselves or they shouldn't get involved at all. Think about it, a licensed agent allowing an investor (their client) to control every aspect of the deal?? That is not what being an agent is all about. We are supposed to be the experts, not our clients!! My investor clients know this and appreciate the fact I am just as knowledgeable, if not more knowledgeable than they are. At the very least we learn from each other, doesn't that make more sense?
Dawn - HAFA is entered into through the signing of a contract and like any other contract is not enforceable unless it is signed, sealed and delivered!!! That is common contract law, there does not need to be, and I'm sure lenders and our illustrious government will not ever include, specific language that states so in any document they create regarding HAFA. That does not mean the law does not apply, it just means they are not going to broadcast it out to the masses.
Thanks for all your comments!!
Kevin
Kevin,
Are you licensed to do business in TN or GA?? If so, I believe there is quite a bit of good business and give peace of mind to many good people. Who have been jerked around by the banking industry, place their faith in the investors only to fail there also.
REAL Investors needed in the deals but MUST SHOW:LIQUIDITY.....LIQUIDITY.......LIQUIDITY......
Please let me know whether there are some that may be interested in our area. Primarily TN but North Ga also. 15% to 24% pursuant to Usary Laws in state of TN AVAILABLE on their short term investment. LENDER APPROVAL not Mtg Broker approval letter (With all Due Respect) AVAILABLE on a couple endbuyers. Bank approvals for 2 others but MUST MAKE Repair and the Seller can not get credit, does NOT have the capital, and does not have the clout to have worked done and paid at closing.
I have taken heed your message for proper Proof of Funds NOT Transactional FUNDING letter. I gotta get back at it. I will look at the blog you mentioned this evening.
FORECLOSURE PREVENTION STRATEGIES????
Currently researching other strategies with regard to principal reduction??, Mortgage Purge??, etc. Lots of people out here some scamming and some on the level. Some validity in principal reduction concerning proper assignment, etc. but does NOT mean BANKs Have to agree to shortsale terms. But may give a little leverage. If you've experienced success where this program is concerned. Please advise me. Otherwise, I will update as I can in that regard.
Thank You All,
Evette - contact me via e-mail with your contact information and I will get back to you to discuss the opportunities in GA and TN. Investors don't necessarily have to show liquidity and transactional funding is NOT a totally bad way to go. More important is you definitely want to see a track record of success and they should have more than one exit strategy in case they get a 30 day anti flip approval letter! What is their plan gong to be if that occurs? What is their plan going to be if the C buyer backs out? Will they be in a position to buy it anyway? E-mail me and I'll help you with all the stuff you asked about!!
Kevin@Envirian.com
Kevin
We're in the 5%...and foraging forward because of it. I'm excited about HAFA as well. THanks for the post!
This is a good back and forth on the subject. Very little mention of the initial customer and how they are properly taken care of...but a good dialog.
Robert,
thanks for the feedback, you just gave me an idea for another topic. This subject was on legal vs not. Benefits for the seller vs risks is another subject entirely. stay tuned.
Kevin,
Great points, I'm glad Real Estate Agents are gaining clarity on the legalities of these processes, we are in North Dallas, and have helped many sellers here and all the agents who bring us deals love the ability to have a buyer willing to stay in the game and even handle the process no matter how long the bank takes.
We close 80% plus of our transactions, and the question of an investor buyer backing out because there is no end buyer, in reality is no different than the likelihood of the transaction completing in the first place, unless they have no marketing effort going into the back end selling efforts.
The typical reason for an investor not moving forward has more to do with the BPO evaluation and less to do with there genuine intention to purchase the property. Real Short Sale Investing Experts can be a huge assets to Real Estate Agents.
Some keys to weed out not so savvy investors, ask for proof, like HUD's. And more than just 1 in the last 4 months. Second, ask them what they will do if the bank gives a real shallow discount, a good investor should still know how to get the deal done. We are willing to make no money and get the short sale done if that was the only way to do so, and we get verbal agreement with our agents likewise. Both of our reputations and the chance to save someone from foreclosure, and get a future referral is worth more than making all the effort and just letting a deal die.
Use your gut, and you'll find us out there. My agents are making a killing on short sales with me as there buyer, and they have much less work involved, I hope more agents can find groups like us. A ton more lives will be helped.
Regarding HAFA... well read closely there are some real concerns there. Don't want to burst anyones bubble, but take a look if you care to know why HAFA's might not really be the best solution for your sellers - http://skywardblog.com/hafa-and-short-sale-investing
Good luck to all investors and agents alike, lets help turn this market around together.
Skywardguy
This was...amazingly educational. Thanks to everyone who made this such a great discussion, especially Kevin and Dawn!
This is for Tom at Exit Realty. Tom, I understand your concern about nothing holding the investor to the deal, but what makes that different from ANY BUYER THAT WALKS before the short sale is approved. ..or even after approval?? I had an agent call me last week that had a two family go to foreclosure because over the period of 18 months trying to get this sucker sold, he had THREE buyers walk!! Now none were investors. The same risk for the seller is there whether it's an investor or just a regular home buyer. If they walk they walk.
Sorry, but I've encountered agents saying that to me before. There is no difference between an investor or regular home buyer if either chooses to walk.
Lenders continue to change Short Sale requirements, processes and timelines it seems like weekly if not more frequently!
I am a Realtor in So Cal with a few new investor clients from an investor association. They want to do back to back closings, but I don't have a good title/escrow that will do this. My Broker says they are illegal and he owns an escrow company, so i will have to look elsewhere. He says we have to close an escrow before we can open another one on the same property.
Your articles above give me a smile - there's hope! But I may have to sever relationships with my Broker unless I do it his way. Can you send me in the right direction to find title/escrow in Southern California that will do a back to back closing (on the same property)? It can be a few days between, but certainly not a 30-60-or 90 day wait!
Thanks.
Awesome blog. It should have been a feature. I am also sick of people stating that short sale flips are illegal. Great conversations all around as well.
Finally, I process short sales for other agents. I can understand your concerns, however, one of my clients is a savvy short sale agent who decided to outsource the short sales to leverage his time, especially since our services are free. So if you can find someone who gives it the same attention and knowledge as you do, then there should be no issues with outsourcing. After reading Dawn's responses, I consider her as a sister in the family of short sales!
Thanks for the info and all of the discussion and comments from others.