I 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

Like me on www.facebook.com/sellfastrealty

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I 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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