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Fighting Value on Short Sales

number1The number one thing you need to understand about a short sale is that the short sale lender must realize the true market value of a property.  Recently we got a house in Sanford that needs everything and I mean everything redone inside and out.  The house has multiple types of siding, the tile inside the house has been pieced together, various sizes and colors, and is pushing up from the ground due to water damage, the rotted wall from the 3rd bedroom was removed which makes the house a 2 bedroom, the air conditioner is not working, doors, lights, fixtures are all missing, and the kitchen cabinets have mold all over them.  SPS is the servicer for the Short Sale Lender and they are really easy to work with.  In fact, they normally process a short sale within 30 days, so you need to be ready when you submit the short sale package to the bank and ask them to provide you with a Broker Price Opinion (BPO) or an Appraisal.

We submitted everything into the bank and were very excited to immediately hear from a BPO Agent (Real Estate Agent) stating that she has been instructed by the Bank to go out and get value.  We scheduled an appointment to meet her out there.  We had everything ready in a BPO/Appraisal Package to provide to her.  We had the following items:  Purchase Agreement, Estimate for Repairs from a Contractor, Comparables and liens from the City for major code violations.  We were at the house 30 minutes in advance so that we could be ready to meet, as some BPO Agents/Appraisers will come to the property earlier than what they stated and we did not want to miss meeting her there.  However, to our surprise, she sent a guy to take pictures of the property which we call “a picture taker.”  Now you would think that pictures are worth a thousand words, however, this picture taker did not provide the Real Estate Agent with any information about the repairs, comparables or liens on the property.  However, we did forward it to the Agent, but since they only make $50 to $75 on a BPO, she was pretty much done with the value on the property.  As you would guess, the value came back “HIGH.”

This was very disappointing knowing that SPS works quickly now we have to fight the value of the property.  First off, we instructed SPS that the Real Estate Agent did not even come to the house and sent a picture taker doing a MAJOR disservice to the Bank.  What that means is that she as a Real Estate Agent is giving her opinion of value on a home that she didn’t even look at.  Of course we pointed out all the problems with the house to the picture taker but the physical smell and condition alone would have had this Real Estate Agent rethinking her value by far, had she actually shown up.  This house can only be sold to a cash buyer due to the condition of everything!!  A conventional buyer would not be able to even get financing due to every single room in the house has major damage including the roof!  The house is not habitable as it stands.

When you fight value of the property depending on the type of loan, the purpose to dispute the value is to get another BPO Agent that will come out to the house and report all of the repairs needed.  Obviously, if you have been doing short sales for sometime you understand that any cosmetic repairs such as paint, carpet and updating is not considered.  However, non-functional use of the property such as it has missing doors, tile pushed up from the ground, mold, entire walls removed, air conditioner not working, roof leaking these items are not cosmetic and need to be considered in the value.

So now the fight is on!!  We have to send in all the pictures, repair costs with pictures of the condition and the repairs needed and comparables to justify that their price is too high.  I wish we could send them the smell or the feel of the property when you walk in, as you can’t even catch your breath!  Then we need to wait for the investor to review the pictures, repair estimates and comparables to see if they are willing to order another BPO.  If they do not, then we need to wait out the BPO value for 90 days, as that is how long the value will be effective with the Bank.  During this time, the house will just deteriorate even more which is disappointing.  All it took was for a Real Estate Agent to come out and do her job instead of just looking at pictures.  Our goal is for the Bank to see the injustice that the BPO Agent did and re-order another BPO so that this property can be sold asap.

 

The lesson learned on this situation is if the Real Estate Agent states that she is coming out and sends a picture taker instead, refuse to allow access to them and call the bank and request another BPO Agent as they are suppose to spend a minimum of 15 minutes in a home, per another BPO Agent.  If you know anything about BPO Agents, they race through the home in 5 minutes or less and they don’t tell the true story to the Bank which causes lots of delays in short sales.  Always meet the BPO Agent, have a list of repairs from a contractor and comparables.  Remember though, they do not have to take this information from you, but the Bank will always want to see them, so you need to be prepared!!!

 

Please keep sending me your questions and topics that you would like to hear about, so I can be sure to keep feeding you with the information that you need in order to move confidently through 2016 and bring your Real Estate Dreams to Life!

 

Kimberlee Frank

www.ForeclosuresGoneWild.com

www.RealEstateJunkie.com

www.ShortSaleNegotiating.com

www.SellFastRealty.com

Like me on www.facebook.com/foreclosuresgonewild

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You Can’t Buy & Flip Houses in Sloooow Motion

buyiyflipitAs a Mentor, one of the biggest things I stress to my Students/Partners is that you can’t buy and flip houses in sloooow motion. As soon as a Seller calls you, you should fill out a Seller Information Sheet and schedule for the following day (within 24 Hours) an appointment to see the house. Most of the information that is needed on the Seller Information Sheet you can get directly from the Seller. I have been asked “How long do you talk to a Seller about their home?” Since this is your first communication with a Seller and you NEED to build rapport, you should be on the telephone for a long time. What does that mean to you?

I would suggest at least 30 minutes on the phone to talk to the Seller about their home, their life, where are they going…anything and everything you can think that you might have in common with the Seller. Sellers like to do business with people they like. So, if you are only on the telephone for 5 minutes, then did you build rapport or even completely ask all the questions that are on my Seller Information Sheet? Probably not. Call the Seller right back and ask ALL the questions on the Seller Information Sheet so that you will know what he/she wants for the house, why they are moving, where they are moving and when they want to leave.

What if the Seller doesn’t give you all the information? Then you need to look it up on the public records. You also need to immediately drive by the exterior of the home and if it is vacant, look in the windows and/or secure the home for some people. Sellers assume you have already driven by the house and you are to give them an Offer right over the phone without even knowing anything about the house. You want to know everything you can about the Seller, as the only thing that makes a great investment deal is a motivated Seller. If you don’t have one, then you won’t get the price you need to make it a great investment deal for either a flip or hold.

Recently, I dealt with one of the most difficult Sellers. A Partner and I wanted to go to his personal house in Orange City to get him to sign the Purchase Agreement WITHOUT seeing the inside of the 2nd house he owned. He insisted for us to wait. We overnighted the Purchase Agreement to him, based on the facts that we drove by the vacant home, looked in the windows and knew the values in the neighborhood. We called him to see if he would sign the Purchase Agreement and return it and he informed us that we could now get inside the house to see it. We went inside the house and immediately called him back. Again, we wanted to get him to sign the Purchase Agreement. He had an excuse that his daughter also had to sign and we even offered to drive it to her. In the end, he sold the house to the neighbor at the same $50,000 price that WE had negotiated, for a house worth $140k with minor repairs. He didn’t even allow us to counter our price. What is the lesson on this deal? Drive out to his house and just stop by and see if you can get him to sign it. What if he said no, can’t come in and/or no he won’t sign it right now? Well, we lost the deal anyway so what do you have to lose? See if you can get both Sellers in one location for signing.

Another Student contacted me about a great short sale that had loads of equity in the home. She went by the house, took pictures and even secured the house with new locks since the house was unlocked. I sent the Seller the Offer overnight with a return envelope, at the asking price that she wanted. The Student went on vacation and I called the Seller several times. The Seller had built the rapport with the Student, not me, so I did not have the relationship that the Student had. I finally got a hold of the Seller and she informed me that she received another offer which was $6,500 higher than ours. I told her that we could match it, as the Student did get in to see the house after our last call. She refused to sign with us and said she was going with the other person. The Seller lived out of town, so how do you think you could have made this deal work? I believe constant contact with the Seller with long discussions to build better rapport. Obviously, the other investor offered higher, offered to pay for an attorney and could close in 10 days or less. Which doesn’t always happen due to inspection, title work and closing package; however, they locked the deal. Next time, I would suggest that listening longer as to what the concerns are with the Seller will get us the deal.

Another Student spoke with an elderly woman who owned a vacant home. The student gave her the amount that she wanted, prepared a purchase agreement and even went to her location where she lives. She then said that she had things in the house that she wanted and needed to wait 2 weeks prior signing the purchase agreement. The student did offer to help her move her belongings and extend the time of closing on our Purchase Agreement, however, she still wouldn’t sign. As to the status of this deal, I don’t know yet. The Student definitely needs to go again to the vacant house and see if there is any activity there and go to the Seller’s house and get the deal signed. However, obviously we did not really find out her main concern why she won’t since the contract, so it will take another 30 minutes at her house, face to face, to get this deal done.

My hope is that this article will deeply impress upon you the importance of a 24 hour contact with the Seller, going to the house, whether or not you can get in, filling out the Seller Information Sheet with all the information on the home, knowing your comparables and having the Purchase Agreement ready to be signed the day you go to the house. Let me ask you as a Buyer: Do you have to buy the house, if after the inspection you found out that your repairs are too much or you won’t make any profit on the house? No, you don’t have too; however, you have locked the house up for at least 15 days for inspection and no one else can buy the house. Also, if the price is not a good deal for you, you can always counter the Seller at that time, after inspection, to see if you can make it a win-win situation. If not, then you didn’t lose anything. You did receive the knowledge and the experience of dealing with a Seller, identifying repairs on the house and how to make the next deal better!

Please keep sending me your questions and topics that you would like to hear about, so I can be sure to keep feeding you with the information that you need in order to move confidently through 2016 and bring your Real Estate Dreams to Life!

 

Kimberlee Frank

www.ForeclosuresGoneWild.com

www.RealEstateJunkie.com

www.ShortSaleNegotiating.com

www.SellFastRealty.com

Like me on www.facebook.com/foreclosuresgonewild

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Finding Deals in a Seller’s Market

findingdealsThe number one thing that makes an Investor successful is finding, buying and selling properties from a Motivated Seller. As I have stated in previous articles, the only thing that makes Investors money is a Motivated Seller. So … how do you find motivated Sellers when it’s a Seller’s market? There are several ways to become successful and as an Investor the key to your success is having a marketing machine running all the time. A Seller’s market means that when a property is listed on the Multiple Listing Service, the Sellers receive multiple offers from Investors, homeowners and landlords. Obviously a homeowner is willing to pay list price or more for the house since they are going to live in the property and there is a personal attachment. Landlords will pay up to 75% to 80% of the market value and Investors pay 60% to 65% of market value. Yes, the repairs come into consideration for the Landlord and the Investor, however, the homeowner is more accepting of repairs needed to the home, as they are planning on making changes anyway. Therefore, submitting offers on the Multiple Listing Service is very time consuming for an Investor and the rate of acceptance is much lower than for a homeowner.

The first thing that I would recommend to all Investors is that you need to find a List Source that is accurate and updated every 30 days, at minimum, so that we could mail to them and/or door knock. Recently I have been mentoring a group of students and we were all using the same list provider and we decided that since we were not getting as many calls as I truly believed we should have received, we started comparing this List with another List Source. What we found out is that the List source that we had been using was more than 1 year outdated, meaning that when the property was sold to another individual, the old Seller’s name was still on this list, wasting all of our marketing dollars. I know that Investors get disappointed easily as many people sell the sizzle of investing in real estate and not the meat and potatoes of what is required to get your business up, going and successful.

Every Investor should have 1-2 List Sources to use for marketing. They should also review their leads and make sure that the information that the List Source is providing is correct information. I am not saying go through all your leads, I am just saying go through the first three to four leads to determine if your List Source has the correct information.

What I have also found, as a Mentor, many Investors will spend most of their money on training and not leave a marketing budget to implement the training and allow you to become successful. Yes, there are several cheap ways to market such as business cards, bandit signs, flyers, social media and websites; however, to be successful in real estate you will need to do 5 different types of marketing. During my 1 Year Mentor Program, I help get you properly “business” structured, build a team, set a marketing budget and teach you how to find Sellers in several ways other than just making offers on the Multiple Listing Service. I truly do believe that Investors should do what their pocket book allows, meaning if you have to write, print and mail your own letters then let’s do it. However, when I Mentor individuals, I find out that life gets in their way, stopping them from mailing out letters, handing out business cards, putting up bandit signs, handing out flyers, and even marketing on social media. Therefore, I am recommending to my Students and everyone that is reading this article it is time for a SHIFT. You need to hire a company that specializes in sending out marketing letters and have them send out at least 500 letters for you to start your marketing machine. I know what you are thinking . . . I can’t afford it. Well, I am telling you that you can’t afford not too! Take the time to find a company that will write, print, stuff and mail your letters immediately. Trust me, you will start seeing a big increase in your deals!

I suggested this to one of my Mentor students from Michigan and on his first mailing, he got at least 7 Seller leads. He went and met with a Seller that is willing to sell her house to him well below market value. Your leads are ‘hot leads’ which means when a Seller calls you about their house, you should have an appointment set within 24 hrs to go look at their house even though you may not know for sure that it is a deal. Honestly, I can tell you that most Sellers will advise you that the house is in perfect shape and needs no repairs. That could be true for a house built in 1969, however, if we are buying that house to rehab and then competing to sell that house in this market, I will need to update the house to today’s standards to get top dollar when I sell.

Prior to going out to the house, you should have done research on the property so that you can see the values of the property (Zillow, RealtyTrac, Trulia) no more than .5 miles away and specifically in the same subdivision. If you are going to buy and then resell to a new homeowner, you will need to know what your market is bearing. Comparables need to be houses that have sold no more than 3 to 6 months ago. I also look at what is pending and active with contract, as they will also have an effect on the value of my home when I sell it.

You also need to do research on public websites to see who the owners are on the property, what they bought it for and all liens on the properties. Obviously, we can ask the Sellers these questions, however, sometimes that will not tell you the truth and/or they will believe that the second loan on the house is not owed because maybe it was taken out by their deceased spouse, sister etc. Every question that I have on my Seller Information Sheet is vital and needs an answer from the Seller, as there are several ways to purchase a home. Subject to, Cash, Installment for Contract, Option, Lease Option or a combination of things.

When you go to the house, make sure you take pictures of every room as if you were going to market the house. Also, in every room of the house, take pictures of all the bad things that need repairs and/or questions you may have. You should be at a house for at least 30 minutes or more in order to take your time and build rapport with the Seller. You should also have a purchase contract ready to be signed on the property the day you go or within 24 hours after seeing the house. You should fill out a Property Inspection Report (provided in my System) that will help you determine what you think needs to be done to the house, versus trying to remember everything.

Many Investors are afraid that if they make an offer on the property and it is too high, that they will lose money on the deal. You all need to get over this! A Purchase Contract has a minimum of 15 days inspection period so during that time, you can have contractors, inspectors and/or Mentors/Partners come out and review the condition of the home. If the price is too high on your offer, you can counter the Sellers and if they won’t accept the offer, then back out of the contract. Stop thinking about it, just go get a deal and make a mess! If you have a good Mentor, then she will clean up your mess! That is what I tell all my Student/Partners!

I am going to summarize this Article to break it down and make it so simple for you.

1) Obtain a List Source,

2) Pay to have a minimum of 500 letters mailed out for you,

3) Fill out Seller Information Sheets and set an appointment with the Seller 24 hours from the time of their call,

4) Do research on the property such as values, deeds, mortgages or any other liens,

5) Have a Purchase Contract ready to sign when you go to the house,

6) Take pictures of the house good and ugly, fill out the Property Inspection Report to determine the possible costs for repairs (Take a guess if you don’t know and then learn costs for future deals,

7) Fill in the amount of the Purchase Contract whether it is terms or cash,

8) Have an inspection with your contractors, mentors/partners or maybe even possible buyers,

9) Counter the Seller if the numbers don’t make sense,

10) Close the deal and make MONEY!!!

I hope that this article has helped you all move past the FEAR of failure, as in any deal, there is an escape clause and Buyers always can walk away from deals without losing money.

Please keep sending me your questions and topics that you would like to hear about, so I can be sure to keep feeding you with the information that you need in order to move confidently through 2016 and bring your Real Estate Dreams to Life!

 

Kimberlee Frank

www.ForeclosuresGoneWild.com

www.RealEstateJunkie.com

www.ShortSaleNegotiating.com

www.SellFastRealty.com

Like me on www.facebook.com/foreclosuresgonewild

Like me on www.facebook.com/sellfastrealty

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Still Crushing Short Sales!

crushingshortsaleMany Investors don’t think that they can short sale an FHA loan and still make a profit, due to the guideline that FHA accepts a minimum 88% of the appraised value. I am here to tell you about an FHA deal that will bring a Pretty Profit!! This house is a 3 Bed/1.5 Bath/1.5 car garage, approximately 1200 sq ft in Casselberry. From the beginning, it was challenging since we had non-paying tenants in the home that were not as cooperate as a Seller would be for access to the property. The best part of a typical short sale is that a lender will obtain a value that is good for 90 days and if you are in a Seller’s market, you end up with a higher profit, since the values are increasing based on the sales.

The Seller just wanted out of this house debt and didn’t know what to do with non-paying Tenants!! The lead came in from my office signage. The property was listed and an offer was submitted. It took the short sale lender about 90 days before they ordered the value on the property. We were very concerned about having access to the home when the appraiser came out from the short sale lender. On an FHA deal, the short sale lender requires an appraisal on the home which is good for 4 to 6 months, versus the standard 90 days for a BPO value.

I knew that the Tenants were going to be a problem and I was prepared to handle that situation. The Tenants had knowledge of how a short sale worked, so they wanted to live in the house as long as possible without paying rent. Since the number one thing in a short sale is to meet the BPO Agent/Appraiser to make sure that all the repairs were considered when determining value, I knew the Tenants needed to go! The Tenants were evicted so there were no problems with meeting the BPO Agent/Appraiser out at the house.

The house was built in the 1980’s and was not in bad shape at all. The repair was a light rehab which consisted of a new roof, new air conditioning, adding a shower in the master bathroom, paint, carpet, new garage door and new kitchen cabinets. The cost for the rehab and the supplies was approximately $20,000, most of this was from the new roof and new air conditioner.

Whenever I purchase a property and plan on rehabbing and then reselling it, I include a minimum of 4 months hold-time due to the seasoning on the property. Seasoning is how long the new Seller has owned the property. If I wanted to sell the property to another FHA buyer, then they require 91 days of seasoning and two appraisals to make sure that the value on the property is correct. If I wanted to sell the property to a conventional buyer, as long as that lender was not mirroring the FHA guidelines, I could sell to a buyer in 31 days. Obviously, there is no seasoning required for a cash buyer.

The property was purchased for $78,000 and I will not be listing it through the MLS, as I am going to sell the house quickly without paying a realtor commission. The property will be sold for $145,000.00 with a profit of $25,000. Not bad for a light rehab!

Please keep sending me your questions and topics that you would like to hear about, so I can be sure to keep feeding you with the information that you need in order to move confidently through 2016 and bring your Real Estate Dreams to Life!

 

Still Crushing Short Sales,

Kimberlee Frank

www.ForeclosuresGoneWild.com

www.RealEstateJunkie.com

www.ShortSaleNegotiating.com

www.SellFastRealty.com

Like me on www.facebook.com/foreclosuresgonewild

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Short Sales Still Sailing Strong!

short sale floridaRight now, in my office, I am receiving short sales from sellers who decided to do a loan modification which was only valid for 3-5 years. In my opinion, this is the second wave of short sales that you will be coming across. Many Investors stay away from short sales because they say it takes “too long” or they do not want to the negotiate the short sale itself. After speaking with them, I find out that they really don’t understand the short sale process. So they miss out on BIG profits that are available by making offers on short sales that are listed and/or controlling the whole deal by finding the seller that needs to do a short sale, list it and have a title company process the short sale. When you close and make your $thousands$, that would get you real excited about short sales! The key to a successful short sale is making sure that the Short Sale Lender has the correct value on the property and this is where so many Investors and Realtors fail!

Many title companies will agree to negotiate the short sale on the property for the cost of title work so all they need is the financial package from the Seller and a Purchase Agreement from YOU! In fact, title companies are contacting the Seller directly, so you do not even have to obtain the information from the Seller when it is needed. Why, then, are Investors not making offers??? I believe it is due to a lack of knowledge. You have to know what to tell the title company’s negotiator to say to the short sale lender’s negotiator if you want to create a great discount. My Home Study Course teaches you what to say and ask, in order to create your great discount.

I believe that every Investor should have the knowledge of how a short sale works so that when they make an offer on the house, they make sure that the Realtor knows the key to a successful short sale which is the value of the home! The process of the Short Sale is very simple, you need a HUD, Purchase Agreement, Financial Package, Proof of Funds letter from the Buyer and an Authorization. Once the Short Sale Lender receives this information, they will schedule someone to come out and obtain the value on the property. That someone could be a Realtor or Broker which performs a BPO (Broker Price Opinion) or an Appraiser who completes a full appraisal. I always recommend the following:

  1. Make sure that the lock box code to the house is not on the MLS or they will sneak in without you.
  2. Make sure that there is not an electronic lockbox on the home.
  3. Make sure that YOU as the Buyer are able to meet the Appraiser or Realtor.
  4. Make sure that you bring a copy of the Purchase Agreement.
  5. Make sure you have 3 Sold Comparables, no more than .5 miles away, that have closed within 3 to 6 months.
  6. Make sure you have a Rehab Estimate, or two, including all the major problems with the house with pictures of what needs to be repaired
  7. Make sure that YOU are at the house 30 minutes prior to appointment time, they often show up early and you’ll miss them.

groupMany Investors/Buyers will allow the listing agent to control the BPO/Appraisal and they don’t even meet that person there to provide them with the information of the house. Therefore all parties, Buyer, Seller, listing agent and selling agent are always confused as to why the value did not come in at a reasonable value for the house. Many Realtors/Appraisers will not even consider any of the repairs and they are left to guess because it takes extra time for them to figure out the cost of the repairs, which they are not willing to do. Also, the Short Sale Lender does not consider any cosmetic repairs as a “qualified” repair. What are cosmetic repairs? Carpet, paint, appliances, landscaping, and updating the kitchen and bathrooms. What are qualified repairs? Air conditioner, plumbing, roof, electrical, drywall damage, missing cabinet doors where the cabinets will need to be replaced, mold, and major damages, etc. On the Rehab/Repair Estimate, should you still include the cosmetic items that the Short Sale Lender does not consider? Definitely yes; however remember you must have other qualified items included on the Rehab/Repair Estimate as well, or the BPO Agent/Appraiser will state there are no repairs needed in the home.

An Appraisal value is good for 4-6 months on a Fannie Mae, Freddie Mac, and FHA file. A BPO value is good for 90 days. So … if your Rehab/Repair Estimate is considered along with comparables, you should be able to purchase the short sale at a great discount!! Remember, if you are in a Seller’s market and you are seeing the values increasing monthly, you should have a slam dunk!

Please keep sending me your questions and topics that you would like to hear about, so I can be sure to keep feeding you with the information that you need in order to move confidently through 2016 and bring your Real Estate Dreams to Life!

Happy Negotiating!

Kimberlee Frank

www.ForeclosuresGoneWild.com

www.RealEstateJunkie.com

www.ShortSaleNegotiating.com

www.SellFastRealty.com

Like me on www.facebook.com/foreclosuresgonewild

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Are You Following Up or Tripping Up??

Short sale FloridaBIG Reminder:  Follow up, follow up, follow up is crucial for capturing real estate deals!  What makes any deal is a Motivated Seller.  There are 13 main Seller motivators such as a vacant home, in pre-foreclosure, loss job, job relocation, etc.  But how do we know when the “price” of the pain of home ownership becomes more than the price they want for the house?  How do we know when they’ve reached that tipping point, therefore agreeing to take a discount to allow an Investor to purchase the property and make a profit?  You guessed it….we follow up.

Over 1 year ago, I was tracking a pre-foreclosure vacant home and I went to the next door neighbor to find out if they knew where the sellers moved.  During my conversation, I was informed that they hadn’t seen the neighbor in years and really didn’t even know them.  The couple I was talking to was an elderly couple who owned their home free and clear.  I asked them if they were interested in selling their house and John told me that he and his wife just might sell it at the right price; however, he and his wife were going to the doctor’s and he would call me to talk about the home and set an appointment to see inside.  I also got his telephone number so I could follow up in case he didn’t call me.  My first thought was whenever I hear the Seller say “at the right price,” that they always want more than what the house is worth and/or retail value.  I did ask John what the “right price” was and he replied again that he will call me back.

Tip:  If the Seller says “at the right price” and won’t give you a price, I will always jokingly say, “How about a $100 Dollars?” and laugh, waiting on a response.  Most of them will tell me a price after that joke.  I remind them “I haven’t looked at your house, I don’t know what kind of condition it’s in, I need to purchase a property to fix up and resell, so I need to make a profit.  If they won’t tell me the price then I will do more research and then before I go out, I will discuss a price with them again so I am not wasting my time.  The only time I make an appointment to actually go to the house is when it’s owned free and clear, because then I can structure a “terms” deal that would make sense.

I waited 24 hours and had not heard from John and I called him back.  I spoke with his wife, Mary, and she and I instantly “connected.”  Honestly, we had so much in common, we felt like we were related.  She informed me about the condition of the house and also about both of their physical conditions.  John was at the doctor’s, however, I made an appointment the next day to see the house.  I called one hour before my appointment and Mary informed me that she didn’t feel well, so I rescheduled for the next day.  When I arrived at the house, John and Mary showed me their home.  John was very proud of the texture job that he did, which looked like old plaster, and Mary explained about all the unfinished projects that were started and never completed.  I was at their house for over an hour and I really liked this couple.  I felt compassion for their situation, so I wanted to make the best offer I could to create a win-win situation.

I went back to my office and called them the next day with an offer.  I offered $75,000 cash and would close in 30 days or less.  The home needed about $30,000 in repairs and was worth $130,000 when completed.  There was a large tree in the backyard that needed to be removed.  It  was literally growing under the house, on top of the house, and damaging the side of the house.  John and I went back and forth on a figure and since I was unable to reach his number of $90,000, we did not come to an agreement.  I knew that they both had medical issues and for the next couple of months, I would follow up with them to see if they changed their mind.

I received a call about 6 months later and unfortunately John was in a temporary nursing home.  He wanted to know if I could give him $80,000 “net.”  I informed him that I could and we agreed that we would meet once he was out of the nursing home and back at his residence.  Well, this took months before John came home, but what did I do?  You guessed it….I kept following up with his wife, Mary.

These Sellers had now become Motivated Sellers; however, their illnesses were getting in their way, plus they wanted to find a place to move to before signing the purchase agreement.  Unknowingly, I contacted Mary less than one week after John had died, and we reached an agreement for the $80,000 “net” CASH closing.  I asked for 30 days to close so I could get all of my quotes on the repairs and the cost of cutting down a large oak tree which was $3,500 just for the tree.  When I approached Mary, I presented her with two offers.  A CASH offer and then a “terms” offer of $10,000 down upfront and the remaining balance when the house was sold, meaning after I did my repairs and sold the property to my end-buyer.  Mary really wanted a full payment at closing and did not want to delay getting her money.  During our meetings, I informed her that if she accepted a terms offer we could close earlier and then asked her again for terms.  I increased the down payment to $40,000 and she amended the contract and we closed.  We spoke several times during the first two weeks of the contract and I was also able to negotiate for one of my Partner’s to purchase John’s truck.  I am always creating WIN-WIN, which is so important.

The house has now been remodeled, which took about 3 weeks, and I am ready to sell after the tree is cut down this week.  Since our original conversation, the neighborhood has increased to values in the $150,000’s.  Remember, when I first met them, values were in the $130,000 range.  I will hold an open house this weekend to find my buyer.  When all is said in done on this transaction, there is a profit of $30,000 after all repair costs, closing costs, holding costs, and cost of the money.  This number is based on having to sell to an FHA Buyer, in which I cannot sign a contract for 91 days from the date of my purchase, so I have factored in an additional 3 months of holding costs.

Remember, 80% of our business is in follow up with the Sellers that don’t initially seem like deals.  Is it possible that you’ve lost $30,000 because you didn’t follow up with unmotivated Sellers?  Bygones….but certainly don’t let it happen again!  You never know when their circumstances change and I always teach for you to follow up with the Sellers until the house is either foreclosed on or sold to another buyer.

The relationship that I have with Mary will continue, in my opinion, as she can be my private lender on future deals and has also become a good friend.  I am very grateful to have met her husband, John, and look forward to helping Mary make easy money in real estate in her retired years.

You have to see the big picture when speaking to Sellers, that if you are willing to reach their number, you may be able to help them make more money by reinvesting with you.

Please keep sending me your questions and topics that you would like to hear about, so I can be sure to keep feeding you with the information that you need in order to move confidently through 2016 and bring your Real Estate Dreams to Life!

 

Happy Negotiating!

 

Kimberlee Frank

www.ForeclosuresGoneWild.com

www.RealEstateJunkie.com

www.ShortSaleNegotiating.com

www.SellFastRealty.com

Like me on www.facebook.com/foreclosuresgonewild

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SHORT SALE….. OR SUBJECT-TO??

short sale sign held by ladyI recently marketed to people who have second homes and are either close to being upside down on the mortgage or they are in foreclosure.  So far, I’ve closed on 2 deals from this marketing.  One of the leads owned a house in Sanford:  1,050 sq ft, 3 bedrooms, 1 ½ baths, living room, kitchen with dine-in area, separate laundry room and 1 carport.  The house was in great shape it was a block house and really only needed about $3,000 to $4,000 worth of work if I wanted to retail it.  I partnered with one of my Apprentice Students and we reviewed all the facts about the house.  The A/C unit was only a couple years old, it still had a wall furnace that could be disconnected, it had newer vinyl windows and just needed a little TLC.

There was an outstanding mortgage on the home for $29,000 and my offer was $27,500.  The mortgage payment amount was $600.00 a month (PITI), principal, interest, taxes and insurance.  I really wanted to take this house subject to the underlying financing and keep it as a rental.  I was dealing with an 80 year old Seller, via his children.  They just wanted to be out from underneath the home and didn’t want to keep the mortgage on the property.

After several changes on the contract, we agreed to purchase the property CASH for the mortgage balance ($29,000) and pay all the closing costs.  There was a family member living in the house and we couldn’t close until he vacated the property.  We filed an Affidavit of Purchase and Sale on the Property and chose not to show the house during the time we had it under contract, and we waited until it closed.

The issue was that the family members just wanted the mortgage out of the Seller’s name and would not consider a subject-to; however, in my opinion, if we would have just walked away from the deal to let it sit for a day or two, they might have agreed to our subject-to terms.  My partner didn’t want to wait and I was still arguing over the difference of my price and their price.  She came into my office and said “Let’s just take it for $29,000 and move on!”  So … we took it for that price.

The comparables in the area ranged from $65,000-$103,000 and we could have decided just to fix it and then retail it.  One determining fact was that, in that price range, it would probably be an FHA buyer.  An FHA Loan requires that the new Seller (us) hold the property for 91 days before signing a contract with a Buyer.  This loan also requires two appraisals to justify the sales price (which meant we needed 6 solid sold comps to justify our price, no more than 1 mile away which I usually will only go .5 miles away).  In light of those guidelines, we decided just to sell it as-is.

Due to the other deals in process, neither of us had the time to hold my Open House Auction that I teach in my Foreclosures Gone Wild Course, so we decided just to list it on the MLS with a 3% commission to selling agent, when I normally only offer 2.5% commission on this type of deal.  We priced the house at $56,000 and received multiple offers and asked for the highest and best offer.  We ended up with a CASH offer at $57,100 which we accepted.  We purchased the property in January and then closed in February, which was a total of 18 days.

Our gross profit was $23,000; however, we broke it down further as to how many letters we mailed out, how much we paid for labor, supplies, postage and the cost of the money plus holding costs including utilities.  In the end, it was a total of $18,000 true profit split between the both of us.  This did not include the 2nd house that we did take subject-to in Oviedo for $143,000 that will sell for $210,000 in June with the current tenants paying $1,500 a month with a management company.  This house has a negative cash flow of $400 a month, needs minor repairs and will soon bring us a profit of $50,000 after all expenses are paid off.

When looking at all types of deals, especially pre-foreclosures, you should know how much it costs to bring a mortgage current and see if there is any way that you can bring it current and profit more on a subject-to, versus the cost of private or hard money.  Also, you need to have two exit strategies, either fix it up and rent it or sell it “as-is.”  Look at all of your holding costs and how long you will have to hold it to get a buyer.  I would always suggest using a 4-month holding costs number, as FHA Buyers are the bulk of our buyers right now and seasoning is an issue for a Seller using an FHA Buyer.

Just remember when you are marketing, you may come across a deal that you might be able to offer terms and cash.  Always figure out your holding costs and make a win-win situation.

Please keep sending me your questions and topics that you would like to hear about, so I can be sure to keep feeding you with the information that you need in order to move confidently through 2016 and bring your Real Estate Dreams to Life!

 

Happy Negotiating!

Kimberlee Frank

www.ForeclosuresGoneWild.com

www.RealEstateJunkie.com

www.ShortSaleNegotiating.com

www.SellFastRealty.com

Like me on www.facebook.com/foreclosuresgonewild

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Short Sales can be “SHHHHORT!!”

shortsales_keepupI know that many of you believe that short sales can’t be short; however, on this deal, the time frame from beginning to end was approximately 35 days. The Seller had lived in the property for years and the foreclosure action had been going on for approximately 4 years. During the 4 year period, the seller attempted to do a loan modification and had never attempted a short sale. There was a Foreclosure Auction Sale date scheduled for December 15, 2015. We had to act quickly as there were two loans on the home.

We pulled title work and found out that the $80,000 second mortgage was discharged as so many second mortgages were, due to the Banks being fined for all the fraudulent things they had done to the Sellers.   This was a great break for the Seller, as now we only had to deal with one Lender with having a court date so soon.

The property was built in 1950 and was wood framed. The house had 2 Bedrooms, 1 Bath, 1 car garage, and 792 square feet in Madeira Beach, Florida. The home just needed some cosmetic repairs in the eyes of the Short Sale Lender. However, to the Buyer, there was approximately $20,000 needed to update the home to a “2015” buyer’s expectations. The property was listed in late October, 2015, and an offer of $100,000 was submitted to the Ocwen for review. After we submitted a complete short sale package to the Lender, which consists of a Purchase Agreement, Proof of Funds Letter, HUD Settlement Statement, Authorization to Release Information, Listing Agreement, MLS Detailed Sheet, Financial Statement from the Seller, 3 months of Bank Statements, Letter of Employment, and Tax Returns, we found out that Ocwen had sold the Loan to Caliber Home Loans. Normally it takes the new Lender at least 2 weeks to 30 days to get the loan into their system so we could submit a package. We contacted the new lender and submitted a complete short sale package to them on October 27, 2015.

The new Short Sale Lender ordered a value on the home, which is called a Broker Price Opinion or an Appraisal.   The Appraisal was on November 10, 2015 and we provided to the Appraiser a list of repairs, but no comparables, as there were none that justified the low offer of $100,000. This Appraiser was very persistent that he was very familiar with the neighborhood as he too lived in Madeira Beach and had been appraising for years. We spoke to the Lender on November 18, 2015, regarding the offer and the value on the property. The Negotiator informed us that the offer was way too low and that they would not take anything less than $165,000 for the property.

At this point in the negotiations, we had to counter the buyer to bring their highest and best offer, provide us with contractor estimates to justify the repair costs along with 3 sold comparables. This loan was in foreclosure for 4 years so the short sale lender was not willing to postpone the sale date and the Seller couldn’t hire an attorney to request a postponement in order to fight the value. The Seller was very familiar with the short sale process, the dispute process for value, and knew the legal process. The Buyer did not counter any higher as the Seller would not accept an offer for less than the $165,000 price that the Short Sale Lender stated they would accept.

The likelihood of us getting a Foreclosure Sale Auction postponed just to do a short sale was very slim due to the fact that the house had been in foreclosure for 4 years. At this point, knowing all the facts of the condition of the home, the comparables that were much higher in the area and how long the foreclosure action had been going on, the property would now have to be listed for the $165,000. Only a cash buyer would be accepted, as we did not want the Seller to lose the house at foreclosure, so there was no time for a mortgage buyer.

We increased the listing price on November 20th, 2015, and gave the buyer stipulations, such as, inspection period was only 3 days and closing needed to be before December 4, 2015. I am also working with a Title Company who will NOT close a short sale with a sale date less than 30 days away from closing and requires that if we close during that 30 day period, that an attorney would need to be hired to make sure that the Foreclosure Auction Sale would be postponed. I know you think this is a weird request from the Title Company; however, Short Sale Lenders don’t always dismiss the foreclosure action even though they closed on a short sale with a buyer. This has happened before on files that this title company had closed. So … make sure you know the rules and regulations of your Title Company, as it could cost you an additional $1,200 to order an attorney if the Seller could not afford one. However, to be a great negotiator, when you close on a short sale, you need to make sure that the Attorney representing the Short Sale Lender in the foreclosure action does dismiss the foreclosure action. You should always fax the Final HUD Settlement Statement and Proof of Wire to the Attorney and YOU request that they dismiss the foreclosure action and make sure that they follow up with their client (Short Sale Lender) to get it dismissed.

This property ended up being a direct sale to an individual who was purchasing the home as a vacation property, as there was no spread for the Investor buyer based on the value that the Short Sale Lender placed on the home.

On November 22, 2015, we received a Cash Offer from a Realtor that was representing the Buyer who complied with all of our terms and conditions and we closed on December 2, 2015. The foreclosure action was dismissed on December 14, 2015. I only received commission on this deal; however, I did save a Seller from going into foreclosure and they also received $3,000 relocation money. It was quick cash in my pocket for a deal that blew through my office in a quick 35 days.

What’s the message in this article? If you are an Investor only and your Seller needs to sell to a Buyer other than you, the only way that you could make any money on this deal is if you were a Realtor and received commission. So … You may strongly consider becoming a Realtor so you can benefit from multiple income streams. In addition, Short Sales can be Short! I just gave you the proof in the pudding, now take a bite and get back on the phone and call some leads!

Please keep sending me your questions and topics that you would like to hear about, so I can be sure to keep feeding you with the information that you need in order to move confidently through 2016 and bring your Real Estate Dreams to Life!

 

Happy Negotiating!

 

Kimberlee Frank

www.ForeclosuresGoneWild.com

www.RealEstateJunkie.com

www.ShortSaleNegotiating.com

www.SellFastRealty.com

Like me on www.facebook.com/foreclosuresgonewild

Like me on www.facebook.com/sellfastrealty

 

 

 

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Fighting the Short Sale Lender Values

bizfightI have spoken with many Realtors and Investors who informed me that they are not interested in listing or buying short sales because the Short Sale Lenders are always higher than the actual value of the property. I have stressed over the years how important it is to meet the Realtor or Appraiser that was sent from the Short Sale Lender at the house with the Purchase Agreement, Hardship Letter, Comparables, Crime Report of the Area and Repair Estimate for the property in order for the Short Sale Lender to have the actual value of the property. The BPO Agent/Appraiser does not provide to the Short Sale Lender the Crime Report or the Repair Estimate on the property this information is provided by the Listing Agent or the Negotiator representing the Seller when you have to dispute the value. In fact, a BPO Agent may only have 3 little boxes to include the costs of the repairs so they can’t always include all the repair costs that the house really needs. The BPO Agent/Appraiser has been informed from the Short Sale Lender that they do NOT consider cosmetic repairs. So what are cosmetic repairs? Paint, Carpet, Appliances and updates of kitchens, bathrooms, roof and air conditioning unit that are functional. When I work with investors and ask them to provide me with a Repair Estimate on the property, I find that they normally include all the cosmetic repairs making their Repair Estimate in the $50,000 to $60,000 range. I believe that your repair estimate should not be more than $30,000. The Short Sale Lenders are not interested in updating the house, they are just looking to sell it at the highest value, even if your house is outdated and all the other houses are updated.

So you met the BPO Agent/Appraiser out at the house and there are times when they still don’t give the bank the true value of the property. What went wrong?

First off, once the value is provided to the Short Sale Lender and they counter the Buyer, you will need to ask the Negotiator about the comparables used for the property and how much repair costs were reflected on that value. I also ask the Negotiator “is the value a Reconciliation Value?” What is a Reconciliation Value? This is where the BPO Agent/Appraiser provided the actual value of the property and the Short Sale Lender doesn’t like the value that they were given. So, they send the BPO/Appraisal report to their Reconciliation Department who looks on Zillow and other internet systems to adjust the value of the property that they received in order to increase the number to a value that they like! You would think that since the Short Sale Lender hired a third party (Realtor or Appraiser), that they would believe the value that was provided, however, they don’t. Therefore, you will have to dispute the value that the Short Sale Lender has on the property.

A value on a short sale is good for 90 days if it is a BPO and if it is a full Appraisal it could be good for 4-6 months depending on the type of loan the Seller has on the property. Each Short Sale Lender has a certain way to dispute value. You will need to ask the Negotiator how you can dispute value. Some will use Homepath.com and require you to upload all this information into their system or others will just tell you to provide them the documents and then they will send it back to the Reconciliation Department for consideration. So what do you provide to the Short Sale Lender to dispute value?

  1. Comparables of similar sales in the neighborhood no more than ½ mile away that have sold in the last 6 months.
  2. A Crime Report of the Area
  3. Articles of the area that state the values are down in that area (Note: please make sure you read the article to make sure there is no upswing in the article that will say the property values in the areas are rising)
  4. Repair Estimates with pictures
  5. An Appraisal of the property from an Appraiser (other than the bank’s 3rd party Appraiser)

You will also need to know that if you dispute the value and they review the value on the property, does it add additional time to when the value is good. For Example: I was disputing a Fannie Mae loan through Home Path and was informed after they reviewed all the information including an Appraisal that they added an additional 2 months to the time that the value is good until.

The Short Sale Lenders will refuse to order another value on the property when they have a value that they consider valid. If after finding out how long the value is valid until, you disputed the value and they didn’t change it, the best thing is if you can’t buy it for that value or sell it for that value, you will have to wait until the Short Sale Lender’s value has expired and request another BPO or Appraisal on the property.

The lesson on this Article is to be prepared and always, always, always meet the BPO Agent/Appraiser at the house. Remember to ask the Short Sale Negotiator if the value they have on the property is a reconciliation value, what comparables were used, how much was taken into consideration for the repairs and how long the value on the property is valid. Once you know all of this information, you should be able to fight the value on the property correctly. When you win in the dispute, don’t think that it is over, as the Short Sale Lender will then order another BPO/Appraisal on the property to confirm the information that you provided to them is correct.

Thank you so much to all of you who continue to send me your questions and topics that are most helpful for you to read about. Your Success is important to me, please let me know how I can help!!!

Happy Negotiating!

 

Kimberlee Frank

www.SellFastRealty.com

www.ForeclosuresGonewild.com

www.RealEstateJunkie.com

www.ShortSaleNegotiating.com

Like me on www.facebook.com/foreclosuresgonewild

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The Meeting with the Mighty BPO

shortsalefloridaI have spoken with several Realtors and Investors who say that they don’t like short sales and I always ask them “WHY?” They tell me that the Short Sale Lenders never come back with a value that matches the offer that they have on the property. I always ask them did they go out and meet the real estate agent or the appraiser who was sent from Short Sale Lender to provide the value back to the Lender? Their answer is always “NO.”

In fact, many Realtors who list short sales will list high because they are paid on commission thinking that the house should sell at list price. However, they never take into account all the repairs needed or the updates that are required to allow the house to obtain an appraisal at list price. Therefore, their short sale sits for months and ends up going to foreclosure sale. In fact, because they said they didn’t go meet the BPO Agent and just gave them the lockbox code or they have an electronic lock box on the house, the BPO Agent is able to get into the house and only spends about 5 minutes at the house.

As a Real Estate Broker who gets commission on short sales, I would always like to get as much as I can, however, not meeting the BPO Agent can cost me big time and big money.

Since I am a Real Estate Broker and an Investor who buys short sales, this is what I always recommend to Realtors and Investors. Always list the property low, as it is not up to the Realtor, Seller or Buyer to tell us how much the property is worth; it is up to the Short Sale Lender. I never allow an appraiser or a real estate agent obtaining value on a home to go to the house by themselves, not even for my straight sales. The BPO Agents only receive $50 to $75 on a BPO and the Appraisers are receiving a lesser amount than they would receive if this was an appraisal specifically for the Buyer’s financing. The Appraisers receive $350 to $500 for mortgage appraisal when an individual is buying a non-short sale and they would receive $100 to $200 if it is a short sale appraisal completed for the Seller’s short sale Lender.

So … what do you say and take with you when you meet a BPO Agent/Appraiser for the short sale Lender? You must provide the following information: Purchase Agreement, Sold Comparables in the last 90 days if possible no more than 6 months and no further than .5 miles away, Repair Estimates from Contractors, Hardship Letter, Crime Report of the area, and anything else that would provide the BPO Agent/Appraiser with the facts about the house so that they can determine the “real value” of property.

Unfortunately, some BPO Agent/Appraisers will not take this information. Then what do you say when you meet them? Make sure that they are aware that the house is in foreclosure and the price that the buyer is willing to pay.   How do you do this? EXAMPLE: I normally say I have an offer to give to you on this house in the amount of $150,000 and this is a foreclosure. I will then say that I have several contractor estimates for the repairs that are about $25,000. I might even make a joke that I am surprised to see an offer so high on this property of $150,000 with soooooo many repairs. I will say that it looks like about $25,000 worth of repairs and ask them if they agree.

Remember, you always start by telling them that you have a package for them including the Purchase Agreement, Comps, Estimates, etc. Always remember to build rapport with them so that they are likely to work for you versus working against you.

If you don’t meet the BPO Agent/Appraiser out at the house and provide them with the above information your value will always come in HIGH and you will have to wait another 90 days or up to 4 months before you have a chance to order another one from the Short Sale Lender.

Thank you so much to all of you who continue to send me your questions and topics that are most helpful for you to read about. Your Success is important to me, please let me know how I can help!!!

Happy Negotiating!

 

Kimberlee Frank

www.SellFastRealty.com

www.ForeclosuresGonewild.com

www.RealEstateJunkie.com

www.ShortSaleNegotiating.com

Like me on www.facebook.com/foreclosuresgonewild

Like me on www.facebook.com/sellfastrealty

 

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