An interesting short sale-auction conversation

[bill_gattenParticipant]

For those who want to know how to handle the short sale/auction combo, here is a very succinct Q&A session between our member Leon Bolieu and our Master Affiliate (of Scott and Dave fame), Dave Salcido.

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From Leon
To Dave

Re. Texas Short Sale Leads

Dave,

A Realtor in Texas contacted me regarding sending me short sales yesterday. Today, she sent me 116 short sales in various counties in Texas. The properties range in value from $299,000 to $700,000. Many of them are ‘pretty’ and need no repairs, and all are listed with various Realtors.

What kinds of things do you recommend saying to the listing agent for an auction & short sale scenario?

Thanks,

Leon

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From Dave

To Leon

Texas Short Sale Leads

The trick is getting the agent to ask the owner-seller to let us auction the property using our funds for advertising. They must also know that we must first place the property into a land trust before we can proceed (in order to protect our interests in the transaction).

I’m not sure how many agents would be willing to take a back-seat on these transactions, even though they will still be a part of the transaction as the seller’s or buyer’s agent. If the agent’s seller will give you a position as a beneficiary, this agent could be a great resource. If not, you are just another potential buyer to the agent. I’ll need to know a little more about the open-mindedness of the agent before proceeding.

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From Leon
To Dave

Texas Short Sale Leads

Thanks Dave. So, if I understand correctly, the steps would be…

1) Contacting the listing agent proposing to get it sold for them utilizing an auction (at our expense) and taking the highest bidder to the bank and negotiating the short sale for them.

A: We cannot sell for an agent. That would be practicing real estate without a license. We want to acquire a beneficiary interest in the owner’s land trust. We then want the first right to sell as a beneficiary to the highest bidder.

2) After some initial questions mention to them that in order to be in compliance with RESPA guidelines, we would create a trust for the property so that we are a principal in the transaction

A: We do not have to discuss issues of RESPA compliance because we are acquiring personal property. We are later exercising our right as a directing beneficiary representing the trustee and other beneficiaries to sell the property as any owner of real estate would. Some real estate agents may get hung up on this point because this concept is foreign to them. Nevertheless, we will continue plugging away with our desired intentions, seller willing.

3) Set up a conference call with the agent and seller to get the seller on board.

A: Yes

4) Assuming an ‘oh my god you are my hero’ response from the seller, collect documents (2 mos check stubs, 2 mos bank statements, last 2yrs tax returns, financial statement,cash flow analysis, hardship letter, deed, mortgage docs). Am I missing anything?

A: Completed Trust Input Form and county tax statement

5) Set up trust (would hand that over to you)

A: Yes

6) Let Dave do the auction and short sale negotiation thing?

A: Yes, with your help and that of the seller and his agent

Q: How do I work in the agent that brought me the lead? Do I simply make her a beneficiary of the trust? Would the beneficiaries be the seller, the listing agent, me, you/scott, NARS, Bill, the buyer agent?

A: Yes. The seller’s agent can appear as a line-item on the HUD and share commissions with the auction real estate agency

Thanks

Leon

[NULLMember]

@bill_gatten wrote:

I’m not sure how many agents would be willing to take a back-seat on these transactions, even though they will still be a part of the transaction as the seller’s or buyer’s agent.

This is the kicker. Agents are into control. Sellers pass control to them for this very reason so they can solve the problem of having a property that they can no longer afford. Agents for the most part are not going to relinquish control. They are looking for a buyer and they have a one track mind. If we can somehow convey to them we are buyers or have a buyer then we will get their attention but for the most part, and I have talked to many Realtors, they will not entertain the idea of doing non-conventional methods. I think we can solve this by selling it in exactly the right manner. This is something your “field work” will test and prove.

[scott_l._moyesParticipant]

There’s only one answer regarding the Realtor.

SHOW THEM THE MONEY!

[dave salcidoMember]

@homesavers wrote:

@bill_gatten wrote:

I’m not sure how many agents would be willing to take a back-seat on these transactions, even though they will still be a part of the transaction as the seller’s or buyer’s agent.

This is the kicker. Agents are into control. Sellers pass control to them for this very reason so they can solve the problem of having a property that they can no longer afford. Agents for the most part are not going to relinquish control. They are looking for a buyer and they have a one track mind. If we can somehow convey to them we are buyers or have a buyer then we will get their attention but for the most part, and I have talked to many Realtors, they will not entertain the idea of doing non-conventional methods. I think we can solve this by selling it in exactly the right manner. This is something your “field work” will test and prove.

You are missing an important element here. Yes, agents are control freaks, just like we are. But agents are also CHEAP. I will show them the money; my advertising money to find auction bidders (future buyers) to get the property sold at auction or to continue SS negotiations with the bank using a post auction report. Incidentally, they are not really losing any control. I can show them that when I speak to them and they will believe me. Once again, it’s all in the presentation. Forget the close minded agents. They are a waste of time. If they can’t get the property sold, it will just go back to the bank anyway. We can then contact the owner that just lost the home, get the bank info and deal directly with the bank that now holds the property as a pre-listed REO. For me, even better. Locate the agent with an open mind. They are easily identifiable. Most are skinny and hungry. You can also ask all order takers at McDonalds if they have a real estate license. The odds are better today than yesterday.

[areyesMember]

Hey Dave,

Can you itemize the cost of using the auction company and the marketing? This would also help me present to the seller and agent that worthiness of adding this piece to generate more buyers without them having to put up money since we’re paying for it.

I also like how you said that we can withdraw from the trust if the agent happens to find an end buyer on their own marketing efforts and allow them to close without us interfering.

[dave salcidoMember]

@areyes wrote:

Hey Dave,

Can you itemize the cost of using the auction company and the marketing? This would also help me present to the seller and agent that worthiness of adding this piece to generate more buyers without them having to put up money since we’re paying for it.

I also like how you said that we can withdraw from the trust if the agent happens to find an end buyer on their own marketing efforts and allow them to close without us interfering.

There are different price points when advertising using the auction method. $1000 in advertising is about right. When was the last time an agent spent that much on his client?

I’m not giving away the advertising costs if the agent finds a buyer before me. Funds are already spent. I will back out as long as my marketing expenses are returned at closing.

[NULLMember]

@Dave Salcido wrote:

@areyes wrote:

I’m not giving away the advertising costs if the agent finds a buyer before me. Funds are already spent. I will back out as long as my marketing expenses are returned at closing.

This is why you need to fund the Trust before you spend a dime. Dave who eats the 1000 dollars if you cannot find a buyer or the lender will not agree to the price? What is the close ratio for short sales using your method? The National average is terrible-8 percent. For us it should be much higher. Seems whoever is coming out of pocket for the advertising costs is going to lose some of that money in order to gain elsewhere.

[dave salcidoMember]

@homesavers wrote:

@Dave Salcido wrote:

@areyes wrote:

I’m not giving away the advertising costs if the agent finds a buyer before me. Funds are already spent. I will back out as long as my marketing expenses are returned at closing.

This is why you need to fund the Trust before you spend a dime. Dave who eats the 1000 dollars if you cannot find a buyer or the lender will not agree to the price? What is the close ratio for short sales using your method? The National average is terrible-8 percent. For us it should be much higher. Seems whoever is coming out of pocket for the advertising costs is going to lose some of that money in order to gain elsewhere.

Don’t you worry about poor ol’ Dave if the lender rejects the short sale offer. One door closes, another opens. New negotiations will begin with the lender who now holds an REO. I come in with a totally new proposal to turn their non-performing assets into performers using an EHT! Do you know how many non performers there are out there just waiting for a solution that only someone familiar with EHT and AHA can bring? This a whole different subject that I will not get into here. Suffice it to say, rejected short sales don’t bother me at all. In fact, I welcome them.

[NULLMember]

Your my new best friend, Dave.

[scott_l._moyesParticipant]

@homesavers wrote:

What is the close ratio for short sales using your method?

Our Close Ratio using the EHTrust will always be 100% since we don’t even go forward until and unless we have a fully qualified and approved transaction.

[NULLMember]

@Scott_L._Moyes wrote:

Our Close Ratio using the EHTrust will always be 100% since we don’t even go forward until and unless we have a fully qualified and approved transaction.

So you are saying the owner/seller agrees to the short sale, the lender agrees to the discount and the end buyer is identified and agrees to the higher price all before you move forward?

The way I understand it there are several moving parts that need to be greased.

1. Seller agreement in writing
2. Seller cooperates with documentation of financials and other requests
3. Trust created
4. Lender negotiations and final acceptance of NET price
5. Market to an end buyer via Realtors
6. Indentify end buyer with lender
7. Satisfy all conditions from both sides
8. Close and fund deal

Except for step 3 anyone of these are outside of our control. There is no way to know what is going to happen before you get to step 8. I am not sure how you can get 100 percent out of that.
Help me understand how.

[Author]

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