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Close Encounters of the Late-Night TV Guru Kind

By
Real Estate Agent with Humphrey Home Connections Realty, Reno, Nevada

I have some clients, really fun people, Dick and Jane. Dick and Jane are engaged to be married, and would like to buy a home together prior to the momentous event. Both of them own their own homes now free and clear, as well as an assortment of rental properties that they manage and maintain, so they are far from babes in the woods as far as real estate is concerned.

After several years (yes, years) of forwarding them listings, something finally piques their interest. Their MUTUAL interest; there has been periodic individual piqueage that has occurred, but they agree on practically nothing. Jane wants a newer home in a nice neighborhood, and Dick adamantly refuses to be in a neighborhood with an HOA and especially HOA dues, etc. etc.

So joyous day! Praise the Lord! They finally discover something they both like. Love! Lust for!! Have to have!!!. It is a short sale, or so it says in MLS. Killer property in the larval stage. Someone took an old ranch house and began to remodel it with over-the-top finishes. But they didn't finish, and some of what they did finish was not done correctly. Fortunately my clients were not daunted in the slightest, and saw that this could be their dream home with a little work.

As is my habit, I first hit the county recorder's website to check for a Notice of Default and/or Notice of Sale. Both present, should have sold on the courthouse steps two months ago. Didn't, still listed in owner's name. But then <scary organ music> the plot thickened as I discovered an officially recorded "Memorandum of Contract For Sale and Purchase", signed by the homeowner, giving a local investment company the option to purchase the property. They only proposed to execute that option should they be able to successfully negotiate a short sale with the bank. It also states that the homeowner gives them permission to remarket it immediately. (Hmmmm, just because it is ok with the homeowner doesn't mean it is legal, I think to myself). The actual document is copyrighted by some seminar-giving guru. How to Make a Fortune in Real Estate Ripping off Banks and Flipping to Unsuspecting Buyers, or some such.

My people don't care...they are in love...offer written and presented. Back comes a counter, signed by a manager of the investment company...wait a minute! How can they be signing a purchase contract when they don't own the property yet? Yikes!  I start getting really nervous. Even worse! They insist on using Bob's Pretty Good Title Company, based in South Florida (we are in Nevada). As my son likes to say..."Whiskey Tango Foxtrot?" I pull up the MLS history on the property and discover the following: listed for sale on day one at really lowball price, in contract on day two, back on the market on day three at really lowball price plus about $150,000. Now I'm hyperventilating. Picturing myself in stripes. Hopefully they will be vertical ones, those make you look thinner, right?

Fortunately, the buyers are not interested in participating in bank fraud, and with their blessing, I have emailed the bank's negotiator (whom I have met) my concerns. Don't know what will happen. Maybe they won't do anything. Maybe they will be dragging the lake for my body by the end of the week. But I will sleep really well tonight.

 

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Linda S. Humphrey, M.D., CDPE, e-PRO, EcoBroker, GREEN

Broker/Owner - Humphrey Home Connections Realty, LLC

cell: 775-287-4665

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www.HumphreyHomeConnections.com

Jack Mossman - The Nines Team at Keller Williams in Stockton
The Nines Team At Keller Williams - Stockton, CA
The Nines Team at Keller Williams in Stockton

I "went" to one of those webinars ... same scenario ... "all perfectly fine - we checked with an attorney ..."  Well what's the saying about ducks ... if it walks, talks and smells like one ... it most like is!  The capper .... the title company!  Just how safe will the buyers be? .... not safe enough to bet your license!  As far as the attorney goes .... well, that's another story ....

Sep 01, 2010 05:47 PM
Linda Humphrey
Humphrey Home Connections Realty, Reno, Nevada - Reno, NV
CRS, Broker/Owner HHC Realty

Jack - You are SO right! That is exactly what I told my clients. I'm not the bank's mother, and if they actually do agree to this with full disclosure (which I doubt it was), then my job is to represent my clients, not the bank. But the buyers' only protection is the title insurance policy. One of the local escrow agents told me if the bank discovers fraud after the fact, they can unwind the deal. I'm sure in that case "Bob's" would step right up to the plate to pay off on that insurance....NOT!!!

Sep 01, 2010 05:54 PM
Fernando Herboso - Associate Broker MD, & VA
Maxus Realty Group of Samson Properties - Clarksburg, MD
301-246-0001 Serving Maryland, DC and Northern VA

I receive offers almost n a daily basis for my short sales listings . .must be the same guru's students

I love  your writing style.. very funny. .I'm subscribing to you if you don't mind. . 

Sep 01, 2010 11:05 PM
David O'Doherty
Clayton, NC
Clayton NC Homes, Raleigh, NC

Run, I would love to know how this plays out, can you keep us informed? Or we could just watch CNN for their trial dates!

Sep 01, 2010 11:40 PM
Renée Donohue~Home Photography
Savvy Home Pix - Allegan, MI
Western Michigan Real Estate Photographer

Just so you know, if the investment company is negotiating the short sale, it is now illegal for unlicensed individuals to negotiate short sales and loan mods.  You may want to check into that and file a complaint.  These people need to STOP and this law passed last October I believe........

 

Sep 02, 2010 12:52 AM
Home Loan Search.Online
Home Loan Search Online - Newnan, GA

Renee I was going to say the same thing. At last in GA they are going after those people.

Sep 02, 2010 01:51 AM
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Linda, I believe you and your clients did the right thing by doing an about face and walking away. Hope you find them another good place they can agree on soon.

Sep 02, 2010 01:59 AM
Tere Rottink
CoastalVa Realty Inc - Virginia Beach, VA

I almost participated in one of this transactions, but the short sale guru, which has done hundreds of purchases like this wanted to do the negotiating with the bank.  I don't enjoy short sales, so i initially agreed.  He wanted to use his own contracts, so I asked him to see what it said upfront.  What really scared me was when his partner told me that she tried to buy them for 10cents on the dollar and the would resell within 30 days, so they don't work with banks that put restricions on title....  the more I talked with them the more it sounded like fraud.  I walked away from these people feeling sorry for them because some guru is helping them make lots of money up front, but I know they will end up in jail.  The are totally convinced that what they are doing is legal.

Sep 02, 2010 02:14 AM
Linda Humphrey
Humphrey Home Connections Realty, Reno, Nevada - Reno, NV
CRS, Broker/Owner HHC Realty

Fernando - It is sad that there are so many of these "gurus" out there! In my opinion, they all push the envelope of legality (how's that for tactful?). Thanks for the subscription, I am honored!

David - Yes, I will post an update as best I can snoop it out. I love the Internet! So easy to search public documents and get the dirt on some of these "investment companies" and their associated gurus and business entities.

Renee - Excellent point, and you are exactly right! I was so busy worrying about the other aspects that I didn't even consider that.

Darrell - Thanks for chiming in, I overlooked that point until you and Renee brought it up. I am keeping extensive documentation of this fiasco, and will pass it along in the end if anyone at the Division is interested.

Michael - Thanks for your kind words, I think they are still holding out hope that there will be some way they can acquire this property. Like, the bank will be so pleased that we saved them all this money, that they will give us an award, and then foreclose and offer it to my clients for purchase. Ha ha, nice fantasy, huh? But I'm sure there is a house out there for them. And I think they now have a renewed respect for my ability to have their back.

Tere - You are right, these people are scary. They are totally brainwashed by their gurus and seminars. I really think it is the gurus promoting this nonsense and milking the uninformed for thousands of dollars to buy their program materials that should go to jail.

Sep 02, 2010 03:10 AM
Robert Slick
Beach and River Homes - Georgetown, SC
NRBA, RDCPro, Trident/CCAR MLS

Wow that was convoluted, sounds like a lot of red flags.

Sep 02, 2010 03:49 AM
Nona Swann
Swann & Associates Real Estate - Indialantic, FL
Serving the needs of the Sellers in Brevard County

Linda,

What a funny but real scary article. Just when you thought your YEARS of searching fo r this client had a rainbow in your sights, something bad happens. We in Florida are seeing this.

Congratulations on being a very smart agent and check out the property before going in blindly on a short sale. It amazes me how many agents don't check the county records for the state of the property.

Good article!

Sep 02, 2010 03:57 AM
Maureen McCabe
HER Realtors - Columbus, OH
Columbus Ohio Real Estate

It was convoluted but I read all of it.  WHISKEY TANGO FOXTROT!

Sep 02, 2010 05:37 AM
Tammie White, Broker
Franklin Homes Realty LLC - Franklin, TN
Franklin TN Homes for Sale

I said the same thing as comment #12 before I even saw his comment.  You are smart to stay clear.

Sep 02, 2010 05:42 AM
Rodney Mason, VP of Mtg Lending
Guaranteed Rate NMLS# 2611 - Atlanta, GA
AL,AR,AZ,CA,CO,FL,GA,IN,MI,MS,NC,NV,SC,TN,TX,VA,WA

The short sale arena is prime for fraud.  We have to do what we can to police that as best as possible. I have heard of some sellers doing a short sale with another family member as the buyer.  No intent to move, just to defraud the bank. 

Sep 02, 2010 05:42 AM
Vince McEveety
Gilleran Griffin Realty - Sherman Oaks, CA

i've gotten calls from people representing "investors" who want to engage me in helping them commit bank fraud

amazing

Sep 02, 2010 06:31 AM
Bill Gillhespy
16 Sunview Blvd - Fort Myers Beach, FL
Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos

Hi Linda,  Very interesting post and comment thread !  I suppose these are the same " gurus " we get spammed by all the time.  Please keep us posted on how this turns out.

Sep 02, 2010 07:00 AM
Linda Humphrey
Humphrey Home Connections Realty, Reno, Nevada - Reno, NV
CRS, Broker/Owner HHC Realty

Robert - Convoluted indeed. I think that the details are being intentionally obscured, another huge red flag. When you can't get a straight answer and nothing is making sense, there is a reason for that.

Nona - Thanks. So much information is available with minimal effort, I try to know as much as I can about the properties. Not like the old days when you had to drive down to the county offices and look things up!

Maureen - Thanks, lol!

Tammie - I am not completely clear yet, so maybe not as smart as I should be, but I am most definitely covering my behind. Plan to speak with our state association attorney today

Rodney - Sad but true, I have seen those situations as well, and many sellers have heard of them and can't understand why they can't do the same thing.

Vince - Wow. All we really have at the end of the day is our integrity. Unfortunately, some of us have more of it than others.

Bill - Thanks for your comment, I definitely will be back with some follow up. I got an email today from the short sale negotiator for the bank thanking me for the heads-up. He passed along the info and suggested that they have another look at that file. Will be interesting to see what happens.

Sep 02, 2010 08:21 AM
Donald Tepper
Long and Foster - Fairfax, VA
DC area investor helping heirs of inherited homes

I understand your squeamishness, and you were probably right to get away from that situation. Still . . .

You pose the question: "Back comes a counter, signed by a manager of the investment company...wait a minute! How can they be signing a purchase contract when they don't own the property yet?" That's probably pretty simple. I'll bet the owners gave the investment company a power of attorney.

You say: "I discovered an officially recorded "Memorandum of Contract For Sale and Purchase", signed by the homeowner, giving a local investment company the option to purchase the property." As an investor--before I became a Realtor--I recorded memoranda of agreement. Many investors do. It clouds the title, and prevents the owner from disposing of the property after he's agreed to sell it to the investor. Nothing wrong there. The only thing that surpises me is that you were able to get the details (contingent on a successful negotiation). Smart investors don't put the details in there. That's why they'll file a memorandum, rather than the actual option agreement.

You say: "They insist on using Bob's Pretty Good Title Company, based in South Florida (we are in Nevada)." Explanation: Investors want to use investor-friendly title and settlement companies. Some are. Some aren't. As for why it was based in South Florida, the likely explanation is that the investors were "newbies," who'd paid the real estate guru a fair chunk of change. In return, the guru (and this is how it works) agrees to make his network of experts available. Usually, the guru is also getting a cut of the action. It doesn't necessarily mean that it was a scam. Just that the newbies needed an investor-friendly title company, and the guru suggested the one in Florida.

As far as that $150,000 markup is concerned: I'll agree, that's hefty. But with a short sale, the lender is going to do a BPO, look at its own books, and determine what it'll accept. If the investor's offer to the bank--presumably the "lowball" number--is a figure acceptable to the lender--and if "lowball plus $150,000) is acceptable to your buyers (and, hopefully, with your input, it's at or below the CMA figure), then your buyers are getting a reasonable deal. The lender is getting what it wants. And the investors are making money. (OK, a lot of money.) The details you supplied are a bit sketchy, so I'm not sure exactly what was going on. But it's possible the investors are just profiting on the spread between what the bank--with eyes open--is willing to accept and what your buyers are willing to pay.

Again, I understand your nervousness with all those things going on. And your concerns may well have been justified. On the other hand, the things you cited may all have logical, legal, and acceptable explanations.

Sep 03, 2010 01:12 PM
Linda Humphrey
Humphrey Home Connections Realty, Reno, Nevada - Reno, NV
CRS, Broker/Owner HHC Realty

Donald - Thank you for your thoughtful response. I have no problem with investors making an honest buck, even a lot of them, with full disclosure to all concerned. That is not what I'm seeing here, which is what made me nervous. First of all, there was no disclosure to us whatsoever, in writing or otherwise; in fact, the paperwork has been very sloppy, and I only started sorting this out after doing my own research and asking questions. Most of my questions were answered in a vague and obfuscating way: for example, when I questioned the listing agent about the investor signing the paperwork, he stated that the investor had "authority". He said "that's the way it's done when you're working with these banks." POA was not mentioned, nor is one recorded. The only "authority" I see is the authority granted in the Memorandum of Sale, basically the owner's permission to market the property. It is possible that the investor in fact has a POA, but then what harm in saying so? C'mon, make us feel comfortable with this deal! As for what was disclosed to the bank, I have no way of knowing, but I have made the disclosures I felt were necessary and they seemed extremely interested to learn that the investor intended to already be in contract to resell at a much higher number than they were receiving at the time they closed with him. If they review it further and decide that what they are getting is good enough, well, like I said, I'm not their mother and my ass is covered. Eyes wide open, as you stated. I'm down with that.

As for the details in the memorandum, he (the investor) used a verbatim copy of paperwork created by a California attorney and sold at his seminars. I have no problem with that either, amateur hour like you said, although I wonder if it is legal in Nevada. Plus his potentially unlicensed status as a short sale negotiator is also an issue. Neither of these are really my problem as the buyer's agent. The title company, on the other hand, is absolutely my problem. I think your assessment of the situation is spot on. But I couldn't care less if the title company is "investor friendly." They can use whomever they want for the A to B part, but I can only think of one reason they would refuse to allow the end buyer to select their own provider of title insurance, and that is because they know no reasonable local company would be willing to issue it, or would ask a lot of questions. If everything is as legal and above board as they say, addressing those questions shouldn't be a problem. Instead, I was told "there won't be any problem with title because we will hold it for a month" in a condecending, don't worry your pretty little head about it sort of way, as if them holding title for a month makes all the mechanic's liens and property tax liens magically vanish, and buying title insurance from a company you never heard of will protect you if they go belly-up next week. My buyer's are putting a huge sum of cash into this deal, and they need the protection of the best title search and insurance they can get from someone I trust.

Sep 03, 2010 02:25 PM
Todd Clark - Retired
eXp Realty LLC - Tigard, OR
Principle Broker Oregon

Your buyers are wise to run away from this one or they may have a new room at the local prison.

Dec 12, 2010 01:05 AM