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Investor Short Sale Model Part 2

Last time we discussed part of the short sale process in an attempt to avoid Denver Foreclosure. 

Let's recap - short sales take a long time, something you don't have a lot of if you want to avoid foreclosure on your Denver home. Part of the reason for this is because you have to wait until you have an offer before you can begin and currently you are waiting around 135 on average for a contract. As well, your pool of buyers is reduced because of the uncertain nature of the transaction. 

How does an Investor solve these issues?

First, I want to be quite clear up front. We are in this transaction for profit. A very smart woman (my better half!) once told me about this about her business (weight loss) - "I am in business for profit, I am in THIS business to help people". This is very true for us at Venator Properties. We want to make sure each transaction we are involved with is profitable for us. But we also want to make sure you, as a distressed property owner, is also helped to avoid foreclosure. Venator Properties will submit an offer to purchase your home today. We will make that offer regardless of the state of your home. You don't need to spend any money improving the curb appeal. If your home's combined debt is $400K or above we will agree to buy it for the amount that we can negotiate with the bank, regardless of how much you owe. Instead of waiting for the 135 days on average to find a buyer, we can begin negotiations now. We remove the delay that is consuming your limited time window to avoid foreclosure. 

Your Denver area agent is a Realtor. He or she is highly proficient at finding sellers and buyers, marketing homes and negotiating purchasing sales offers. If they were honest about it, most would admit that short sales are a pain in the butt (excuse my french!). Some Realtors avoid them at all costs. They are time consuming and frustrating. Nationally only 20% of short sales negotiated by the listing agent alone close successfully. That means they have to get 5 listings for every one that is successful. Each negotiation takes as much as 10 hours a week so they may spend as much as 50 hours a week working on their 5 listings, only to have 1 successful transaction.

We take over the negotiation responsibility from the listing agent so they can focus on what they are experts at - marketing your home and finding a buyer. Each bank has different requirements for submitting their paperwork. Different types of loans require different negotiation strategies. Many homeowners have multiple liens on their property. How many agents know what to do when the primary lien holder says that the secondary lien holders can only receive $10,000 of any settlement? How many agents know all the nuances of these negotiations? Our team has successfully negotiated over 500 short sale transactions. We have worked with IRS liens, mechanics liens, HELOC's, 2nd and 3rd mortgages. Venator Properties and our team have closed more than 80% of the transactions that we are involved with.

Once the BPO is processed we work with your listing agent to begin to market the home to find an eventual end buyer based on the market value price that allows us to make a profit. This happens before the negotiations have been completed but after the BPO has been executed. The difference between what we buy the house for and what we can sell the property for is our profit. We don't charge the homeowner or agent anything to complete the transaction. At this point there are 4 possible outcomes.

1. Our negotiations with the bank are successful and we find an end buyer. We close our transaction with you and then close with the end buyer. We don't use any of the end buyer's money to fund our transaction. We have our own funds to use in the transaction. You may be asking ‘If you were able to find an end buyer then how come I wouldn't be able to?' The main reason for this is because by submitting our offer to purchase to the bank weeks or months prior, we have more than likely completed the negotiations with the bank and thus can offer the buyer a closing date that they can count on. The buyer doesn't have the uncertainty that he/she has if they approached the deal before the negotiations have started.
2. Our negotiations with the bank are successful but our purchase price and our sale price isn't enough from a profit point of view. If this happens, we will remove ourselves from the transaction and allow the homeowner to close directly with the buyer at the price we have negotiated with no risk or cost to the homeowner.
3. Our negotiations with the bank were unsuccessful. If the bank won't agree to a debt amount that we feel is warranted, we will walk away from the transaction. However, in this case, you have a completed short sale negotiation with the bank and your agent can market the house at the negotiated price. While we were unable to conclude a deal with you we have removed the uncertainty from the transaction for another buyer
4. Our negotiations with the bank are successful but we were unable to find a buyer. Eventually, if we can't find a buyer, the transaction will fail and we will not close. For this to happen we will have gone through scenario 2 where we priced the resale price low enough all the way to the negotiated amount of the debt and were still unable to find a buyer. Depending on the time in the foreclosure cycle, we will go back to the bank to try to re-negotiate the price. If we can't find a buyer at the negotiated price of the property, there there is either a flaw with the bank or our valuation model for the house and we will attempt to start over. After all other attempts have been exhausted, the bank could eventually foreclose on the property.

One of the key points to this is that we won't back out of the transaction after 3 months. We will stay in until the end so the transaction doesn't risk losing the momentum needed for these to close. In 3 out of the 4 outcomes above you are better off completing the transaction with us; either we have completed the transaction or, at minimum, we have completed the negotiation. In the last scenario it isn't likely anyone would have completed a successful closing. Also - if you don't like the result of the negotiations, you can terminate the transaction - without cost. If the negotiations meet with your approval your house will be sold, or you will have removed the largest barrier to a successful closing - bank negotiations.

Our team has been very successful at getting the negotiations completed with a very real goal in mind. We want to do what we can to ensure the homeowner exits the transaction without a deficiency judgement or promissory note. We can't guarantee you won't have one, but we can guarantee that we will do everything we can to eliminate it or make it as small as possible. We want you to be able to move on financially and emotionally from this experience as quickly as possible. This is at the core of who we are as a company. We also provide our homeowners with a free of charge credit repair service once the transaction is complete.

There really isn't a downside for you as a homeowner that wouldn't be there if we were not in the transaction. If we are successful you will have sold your home as quickly as possible. If we are unsuccessful but we find a buyer at a price the bank has agreed to, we will exit the transaction and you will be able to close directly with that buyer and with a negotiation result you can live with. Plus, we are ready to do the transaction immediately - which means instead of starting the negotiations after the 3, 4 or 6 months it takes to find a buyer, we can use that time productively to negotiate with your lien holders and remove the barriers to sale.

Some Realtor don't have much experience with Short Sales or much experience with the investor model, and thus may not be capable of advising their client accordingly. Some Realtors aren't sure if this is a legal transaction - which it is! The State of Colorado passed HB - 10-1133 in July 2010 to provide guidelines on how same day short sale transactions should be disclosed to buyers, sellers, and their respective banks. 

About the Author

Darren Hunter is the VP of Acquisitions for Venator Properties LLC, A premier Denver Luxury Short Sale Investment Company. Please contact Darren at info@venatorproperties.com or call us at (720) 381-3435 to discuss your Denver Short Sale.

www.venatorproperties.com

Can I get money from the bank that foreclosed on the property I was renting?

I rented a home for 6 months in early 2008, during which the landlord became significantly behind on the mortgage payments and the house went into early stages of foreclosure.

You can not put a lien on something the landlord does not even own. Liens are not randomly placed on property.

The bank owes you nothing, you need to deal with the landlord.

Roe v. Wade Oral Argument - Part 3 (1971)