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

Like me on www.facebook.com/sellfastrealty

 

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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

Like me on www.facebook.com/sellfastrealty

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