Earlier this year I represented a Buyer that had the misfortune of falling in love with an undisclosed Short Sale Flip. I learned a ton from this one failed transaction. This is the first in a series of posts that fleshes out the transaction from beginning to end. Every name of every person and institution has been changed. I hope that what my Buyer and I trudged through will help you be more alert to the potential pitfalls Short Sale Flips, particulary in the Commonwealth of Virginia.
THE SNOWSTORM
The Northern Virginia real estate market was out of control during the first quarter. First time home buyers were out in full force looking to take advantage of the $8,000 first time buyer tax credit. And the first week of January, a family member referred a friend of theirs to me--Vince. Vince was a forty-something first time home buyer. Single guy who'd relocated years ago to the Northern Virginia area for work. Vince was originally from Staten Island, NY and had a no-nonsense attitude and great sense of humor. In addition, he was extremely well qualified to buy what he wanted. Unlike many first time buyers, there would be no need of penny pinching in the home search, or offer writing stages. I just knew that I would love working with Vince to find him his very first home.
Vince was living a buddy of his at the time, Todd, who owned a Northern Virginia townhouse, but had fallen on hard times. Todd had lost his job and been unable to pay the mortgage on the townhouse. Despite Vince's attempts to help cover the mortgage as his roommate, Todd had refused the help and now they were facing eviction as Todd's house was headed to foreclosure. We needed to find a home for Vince fast. That meant we needed to eliminate Short Sales from his home search. Whatever Vince picked, it would need to big enough to accomodate his friend Todd and be move in ready. No one was going to be homeless on Vince's watch.
Vince wrote an offer the very first trip we made out. It was a foreclosure in need of renovation, but was livable. Unfortunately, it seemed everyone in Northern Virginia was competing in Vince's desired price range. He lost that home, but continued to write offers on homes every time we went out. Each a foreclosure bringing a unique set of fix-her-up issues.
And after about half a dozen unaccepted offers, Vince upped his price range and we scheduled another day of house hunting. It was the last Saturday inJanuary and we were supposed to get about four inches of snow by late afternoon. Knowing Northern Virginians they way I do, I figured this storm may just give us the leg up we needed to get an offer in before anyone else. Just as we thought we were strking out, the last house we saw seemed to glow from under the deepening snow. This was IT! A regular sale, listed at $275,000. I had double checked with Jane, the Listing Agent, before heading out. No Short Sale. No Foreclosure. And Jane even told me the Seller could settle quickly. It was perfect.
We got the details from Jane on what we needed to do in writing the offer. The home was being sold by a Trustee in a family trust situation. We needed to make the offer out to the Trustee, Lorraine Jones not the Seller listed in the tax records, Mehdi Mohammed. We were also told that since the family trust had been set up by an attorney working for WSCE (a title company in Northern Virginia) the Seller would really appreciate us using them. After six rejected offers, and the foreclosure on his current residence looming ever closer, Vince did what it took. Vince made an attactive offer at $285,000, no closing cost assistance, no home warranty, to settle in about two weeks (after consulting with Vince's lender) and submitted it.
That evening, as the snow continued to fall outside, Jane and I were able to get the contract ratified with only one change. Instead of having Febuary 15th as a settlement date, Jane's client Lorraine recommended February 26th due to her hectic travel schedule. Jane told us that if Vince's loan got approved sooner and Lorraine would do her best to settle on February 15th. Vince was estatic and we moved toward the goal of that Feburary 15th settlement by getting the home inspection and appraisal done right away. However, because Lorraine was out of town at a conference in mid-February, and wanted to attend settlement, it was postponed to the date agreed to in the Contract--Febuary 26th.
Read Short Sale Flip Volume 2: The First Red Flag by clicking the link.
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