February Rant-It's Really a Compliment...REALLY!

Ok, Rebels…this is NOT a rant…this is an observation…or maybe a compliment…directed toward Real Estate Brokers and Agents we work with as short sale investors in the California San Francisco Bay Area.

I’d like to give kudos to the many, many Brokers and Agents (B/As, for short, and NO SNICKERING) who really get and understand the short sale process. How do I know them? Remember, this is my business…

I can always tell when I’m working with a B/A who knows what they’re talking about. If they are listing a short-sale property, they understand that it’s not the normal transaction. Their role in the process isn’t to get the highest price possible for their clients, but rather to quickly and efficiently get their client out from under the housing payment and off the foreclosure list. B/As in this situation know that they need to look at the buyer in a very different light. The question then isn’t who came in with the highest offer, the question is, who came in with the most dependable offer, an offer that the B/A knows is funded, an offer that won’t fall through because the buyer’s financing disappears, or will be subject to snags and delays, leaving the B/A’s client twisting in the foreclosure winds for another month or more.

This type of B/A also knows that they are in a little bit of a weird spot, in terms of their relationship with the owner and the banks. If they’re working on a short sale offer, they don’t take it back to the homeowner for approval, they need to negotiate with the BANK to approve the deal. Things like this are why many B/A’s don’t work with short sales-there’s not a lot of money to be made BUT it’s a very complicated and confusing transaction best left to experts.

Sadly, I can always also tell when I’m working with a B/A who hasn’t got a clue about how different a short-sale deal is from a regular listing. I’m actually fine with somebody not understanding a complicated and unusual set of circumstances, but I really have a hard time with B/A’s who are full of misinformation, inaccurate understandings of the law, and are operating on the basis of hearsay and gossip. The most common error I hear when I talk to these B/A’s is “I can’t work with you on this property if you’re planning to resell it quickly. Flips are illegal.” This, oh my dear readers, is absolute rubbish. Hogwash. Hooey. Even, dare I say it, Phoney Baloney. I apologize for the strong language.

I’ve been so surprised by this response, and the certainty in the voice of the people who utter it, that I decided to do some digging. Was it actually possible that my entire business model, and the model of many real estate investors much smarter and cooler than me (hard to believe, I know) was actually illegal??

And I found NOTHING, anywhere to indicate that buying and then reselling a house is illegal!! What I did find, and what makes sense, is a lot of fine print from places like Fannie Mae encouraging lenders to take a closer look at buyers who are intending to flip a property bought at short sale to avoid what is called equity skimming or predatory flipping. I won’t go into detail, but these activities ARE illegal, and involve lying, cheating, and stealing.

Let me repeat: equity skimming and predatory flipping are illegal, but buying a house as an investor at a wholesale price and then reselling it at market value is not illegal. It's called investing. Many lenders, who tend to take the safe road when under the microscope (but NOT when doing the things that landed them under it), are adding restrictions into their lending documents about title seasoning, however, that’s not law, that’s the CYA (Cover Your Assets) system at it’s finest. There are lenders have no title seasoning requirements on their loans. Guess who I work with and make money for??

Now, there is a LOT of fine print out there about this stuff, and B/As are wonderful salespeople who really good at organizing all the myriad pieces of paper that have to be in place to buy and sell a home. Sadly, many of them are NOT great readers of fine print, and so go with the “NO” when approached by me or a member of my team.

Now I ask you, is that really in the sellers’ best interest?

BUT, again, this is more of a THANK YOU and GOOD JOB to those B/A’s out there who get and understand what it means to work with a short sale property and an investor like me. And we’ll be making money for years to come!

And keep in mind, reading the fine print is REBELLION at its finest!!

Best,
Larry