What Do You Really Know...When You are in Foreclosure, Part 3
by John Occhi REALTOR
Realtor Consultant to Foreclosure Investors
I just posted an article that I wrote addressing some of the issues that homeowners face once they are in foreclosure. Most of what a typical distressed homeowner believes is just a myth - passed on from one uninformed do-gooder to another and soon the myth is believed to be a fact (Heck, Bill Clinton got away with it for 8 years). After the first article, I knew there was still more half-truths floating around, so I finished the first article with a second on the same format.
After reading through the first two articles, I started thinking what other information do I typically hear straight from the homeowners I work with, who are in a pre-foreclosure situation. What I cam up with is not so much the myths they here but the objections they have.
So, I thought I would cover a few of those here...
OBJECTION: We spoke with an investor who claimed he would give me back $5,000 cash, when escrow closes.
TRUTH: There are creative ways for a homeowner to receive cash from an investor. I have an ongoing series of articles about Short Sales that I publish in another blog, and you might want to check out this article... So You Have a Short Sale Lined Up - When Does a Short Seller Receive Money from the Sale - Step #8 .
You should know that the rule is that a homeowner cannot receive any cash back from the transaction and if you do, it may be considered to be fraud - especially if it is a government insured loan.
I have heard of other creative ways around these rules - but just because they are creative does not make them legal - so please be careful.
One way of testing an investor's credibility is to ask them for a promissory note for the amount promised. Chances are they will not sign one - especially since they haven't even spoken with the bank yet and have no idea what will be involved in clearing your debt. So, if you are going to go the investor route - make sure you are dealing with one how has both integrity and ethics - they are easy enough to test.
OBJECTION: We want to stay in the house - our kids have friends here and we like the schools.
TRUTH: Staying in your house should not be a consideration if you have decided that you can't mitigate the losses with the bank. Many of the shady investors will contort some scheme that will allow you to rent back the house. This is not a good idea to get involved in - certainly not for more than a month if you are near the foreclosure date. Typically the home you are in now has been the center of much stress in your family and for what your monthly mortgage is, you can rent a really nice home or condo not far from where you currently live - chances are keeping your children in the same schools - for a lot less money. You need to stay away from anything that sounds too good to be true...
OBJECTION: My cousin (friend, or anyone else the homeowner knows - there are a lot of Realtors out there) is a REALTOR and can help me.
TRUTH: Servicing a Short Sale is a very specific area of expertise that most REALTORS simply don't posses. It is a very time consuming and detail oriented process.
When working with a friend or relative, realize that they will become privy to all of the intimate details of your financial life - and what you are at you low spot, this may not be the time to bring in someone you are close to. Remember, you'll be seeing them for years to come at family gatherings and such and do you really want the memory of your problems to be triggered every time you see each other again in the future.
There is a flaw in the law that works against REALTORS in representing buyers who will not be the owner occupier of the home. To represent an investor in a pre-foreclosure transaction, a licensed agent must post a bond - a bond that is not sold in California - so therefore, a REALTOR cannot represent an investor in the transaction. However a REALTOR who has had experience with Short Sales will undoubtedly have a private network of interested investors who may be willing to write an offer on the real estate. Realize the importance of this, because lenders will not accept short sale packages until there is a bona-fide offer on the table.
I know this cannot begin to answer all of the questions that are raised in a stressful time like this. If I have missed any that are on your mind, please drop me an email and I'll be more than happy to answer your question the best I can. Please include as much information as you can, as well as your personal contact phone number.
If you are a homeowner facing foreclosure and want a sympathetic ear to hear your situation, please call me - perhaps as a REALTOR, I can offer a different perspective than what you have heard from so many others.
If you are a bona-fine legitimate investor looking to invest, please contact me and lets see if I can't find you the right opportunity.
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