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Short Sale Flips- the best way

Home Forums General EHTrust/EHT Topics and Creative Real Estate Financing Short Sale Flips- the best way

This topic contains 103 replies, has 0 voices, and was last updated by Avatar of homesavers NULL 10 years, 9 months ago.

Viewing 15 posts - 1 through 15 (of 105 total)
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  • #5320
    Avatar of homesavers
    NULL
    Member

    There is a lot of activity out there in the area of Option contracting with Sellers to negotiate Short Sales and flip to a retail buyer(A-B-C method). I get a half dozen e-mails each day of investors trying to sell me on the A-B-C method using the Option. This method uses “one day cash” for the first buy price and then turning around and selling to an end buyer with a new loan. This requires two closes (two HUD-1′s) this is a clean transaction and a lot of investors are selling the system and making a lot of money doing this.
    However, I think Scott has a better way with the REAP/CAPP program. I understand there is only one close (one HUD-1)? The down payment from CAPP is a major plus. The other method requires a down payment from the buyer in the form of cash. Short Sales are the low hanging fruit out there. I understand there are Sellers with equity hiding in the dark somewhere but I want to work with what I can find.

    #27773

    @homesavers wrote:

    There is a lot of activity out there in the area of Option contracting with Sellers to negotiate Short Sales and flip to a retail buyer(A-B-C method). I get a half dozen e-mails each day of investors trying to sell me on the A-B-C method using the Option. This method uses “one day cash” for the first buy price and then turning around and selling to an end buyer with a new loan. This requires two closes (two HUD-1′s) this is a clean transaction and a lot of investors are selling the system and making a lot of money doing this.
    However, I think Scott has a better way with the REAP/CAPP program. I understand there is only one close (one HUD-1)? The down payment from CAPP is a major plus. The other method requires a down payment from the buyer in the form of cash. Short Sales are the low hanging fruit out there. I understand there are Sellers with equity hiding in the dark somewhere but I want to work with what I can find.

    Let me correct you on a few things. There is a lot of “hype”, not activity out there about using Option Contracts with Short Sales. It is hyped to sell courses and is not all it’s cracked up to be. When using the Option method, you need to sell your Option Contract or Assign it for a fee prior to an End Buyer taking title. You cannot get paid your Option paid off from the End Buyer’s loan.

    Using the EHTrust still requires 2 HUDS and 2 closes, not 1, but does not require that you sell an option or your interest to get paid from the End Buyer’s financing. It also keeps the entire transaction private. The “paying off” of the negotiated amount is still recorded as a Short Sale and treated as such with the bank. However, it is the Trust that is buying the property with contributions made by it’s benenficiaries. Since the Title is already with the Trustee and it is a RLT, there is no seasoning issues to contend with the End Buyer’s lender. Their offer is made to the Trustee/Owner/Seller of the property.

    You are correct in that using the EHTrust model allows for the use of CAPP, which is not available to anyone outside of NARS or anyone not using the EHTrust.

    #27774
    Avatar of homesavers
    NULL
    Member

    @Scott_L._Moyes wrote:

    When using the Option method, you need to sell your Option Contract or Assign it for a fee prior to an End Buyer taking title. You cannot get paid your Option paid off from the End Buyer’s loan.

    Not sure how they are doing these deals then because I see no fee listed on the HUD-1 statements(I have copies). Looks like they are doing what you are buying from the original owner with cash to the corp name then selling from their corp name to the end buyer. Two deals back to back. End buyers lender is funding the deal with the Seller as the corp name not the original owner. So no fee is paid to “clear” the Option from clouding the title. This whole process was created not by investors but by a title company.

    My objective here is to justify the CAPP method over this one because the method above is very, very simple in terms of the paperwork since the title company handles all the details.

    #27775
    Avatar of homesavers
    NULL
    Member

    I have not received any response to the above comment so I assume silence is acquiescence in terms of the Option flip method meaning it is a practical method. Private money used for the CASH buy on the A-B transaction is available from several sources. The end buyer in position C needs a conventional loan with X down. Eventhough CAPP is complex, I think this solves the end buyers problem of not having the 10-20 percent down providing there is enough equity to play with. This sets the method apart from all others. That is why we need REAP so they can handle the complexities. All I see is the end buyer only needs $2,500 to get into a house, correct?
    I would suggest we create a thread that deals with marketing only. Because all we need to concentrate on is making and getting offers accepted and finding buyers for the houses we have under an option contract(NEO or otherwise). Right?

    #27776
    Avatar of blackpuma
    blackpuma
    Member

    @homesavers wrote:

    I assume silence is acquiescence

    Always a dangerous assumption. :shock:

    There are a number of advantages of using a trust to flip, things that cannot be done with an option. However, selling an option is always an… option. :lol:

    #27777

    @homesavers wrote:

    I have not received any response to the above comment so I assume silence is acquiescence in terms of the Option flip method meaning it is a practical method.

    Absolutely the wrong assupmtion. Silence? because I can’t count the number of times I’ve addressed and answered this same question on this discussion board. There is no question that using the EHTrust is by far easier, cheaper, faster, safer, etc.

    @homesavers wrote:

    Private money used for the CASH buy on the A-B transaction is available from several sources. The end buyer in position C needs a conventional loan with X down. Eventhough CAPP is complex, I think this solves the end buyers problem of not having the 10-20 percent down providing there is enough equity to play with. This sets the method apart from all others.

    Yes, there are many sources of “Private or Hard” Money however, have you tried to get any lately? One, its HARD to get. Two, its exensive. Three, the LTV requirements are too low.

    The End Buyer needs financing, yes. However, it does not need to be “conventional” financing.

    I don’t know who you’ve been talking to but CAPP is not complex. What is complex about a beneficiary making a contribution to a trust and using those funds for the required down payment? Yes, it does set our method apart from any and all others since no one outside of NARS can use it.

    @homesavers wrote:

    That is why we need REAP so they can handle the complexities. All I see is the end buyer only needs $2,500 to get into a house, correct?

    You don’t “need” REAP. REAP has put this all in to a TurnKey system, thats all. If you “want” to do it all yourself, be my guest. It is not complex.

    Yes, other than the initial Setup Costs ($2500) the only other thing the buyer may need to come in with is some of their loan closing costs, if any.

    @homesavers wrote:

    I would suggest we create a thread that deals with marketing only. Because all we need to concentrate on is making and getting offers accepted and finding buyers for the houses we have under an option contract(NEO or otherwise). Right?

    Great suggestion. As a matter of fact, that is exactly what is happening right now. However, there are some other features and tools that have to be completed before we (Jeff, Dave, etc.) put up new threads for members.

    For those that were at the LA Workshop and those who will be attending the one in Las Vegas on the 19th, 20th and 21st of this month, they will be seeing some of the new developments etc.

    Here are just some of the things Jeff, Dave, Steve and myself are working on and actually have betas on right now.

    1. A specific (6th grade level) website just for Sellers complete with an auto-offer system, FAQ, Legal Area, etc.
    2. A specific website just for Buyers complete… same as above.
    3. Back Office tools for members for creating Terms of Proposal and Easy Offers.
    4. Offer tracking
    5. Prospective RB tracking
    6. Personal URLs for members which forward to these sites and “TAG” each Seller and RB/Buyer to them.
    7. National Marketing and Lead Generation for members
    8. A Structured 12 hour/week Intensive Training series for members and Success Pack Owners, designed to take you from Call to Close.
    9. Business in a Box. A Total TurnKey, “Deals Done For You” option.
    10. Addition of member only discussion board
    11. Training and Marketing Videos
    12. Approved REAP/NARS Marketing Materials
    13. and much more

    #27778
    Avatar of homesavers
    NULL
    Member

    @Scott_L._Moyes wrote:

    Absolutely the wrong assupmtion. Silence? because I can’t count the number of times I’ve addressed and answered this same question on this discussion board. There is no question that using the EHTrust is by far easier, cheaper, faster, safer, etc.

    I could not find the answer specific to the A-B-C method. I think you mentioned something about paying a fee to the option holder. This is not what I understand about the double close method. However, I agree with you that the EHTrust method is superior. Due to the lower initial cash requirement from the buyer. I presume I can advertise “Closing Costs is all you need to buy this home”?

    @Scott_L._Moyes wrote:

    Yes, there are many sources of “Private or Hard” Money however, have you tried to get any lately? One, its HARD to get. Two, its exensive. Three, the LTV requirements are too low.

    I was speaking of “flash funding” as they call it. Cost is 2 Points based upon cash price agreed by the lender or the seller. Very easy to get and usually within 48 hrs of the initial application submission.

    A= Seller (Owner on Title or Lender (Short Sale)
    Cash price= Offer to A above
    B= Investor that has a signed Option contract and recorded memorandum with the Seller A for the Cash price.
    C= Buyer that is going to occupy the property using a bank loan with X amount down
    Difference in price between A price and C price is the B’s gross profit.

    EHT method is better since the C buyer does not have to come in with X Down (usually 10 percent) and the transaction is private between beneficiaries of the trust.

    @Scott_L._Moyes wrote:

    You don’t “need” REAP. REAP has put this all in to a TurnKey system, thats all. If you “want” to do it all yourself, be my guest. It is not complex.

    I would rather not do this myself. I would rather just get offers signed and have agents or other forms of marketing bring me buyers. Then have the REAP team transact the deal.

    I appreciate all the tools you are going to provide for the NARS members in terms of marketing. I will be sure to use them to the fullest potential if they are offered to me.

    #27779

    Scott noted on the NARS board that most of the flips they have done are with NOO loans, with the investor keeping them, to place an RB with an normal EHTrust.

    This tells me that I must engender my own investors ( and us find our own buyers ) or I’m dead in the water.

    I am associated with folks that have good ( excellent ) credit and 401K funds.

    Do you all have an initial presentation approach to give them ?

    Also, the “elevator speech” Buyers can be told is what ?

    Thank you, Alan

    Don, get back with us when you’ve got the A-B-C method ironed out.

    The key, I believe is not what you need to add, but what has to be left out, to make one work.

    Laws. :wink: :cry: :x

    #27780

    @agross wrote:

    Scott noted on the NARS board that most of the flips they have done are with NOO loans, with the investor keeping them, to place an RB with an normal EHTrust.

    “Most”, yes. All, no.

    Most, if not all of the the Investors that have purchased these properties where brought to us by either a Realtor, Builders, Sellers, Title Co or other Investor because they could not do what they wanted to do LEGALLY. We were able to solve their problem with the EHTrust.

    It really doesn’t matter if they are NOO or OO, its all the same. The only difference is the amount of cash going to the beneficiaries and the amount of equity needed to make it work.

    I’ve never had to go find my own Buyers. They’ve come from the previously turned down buyers or from referrals from our network.

    One of our Builders, who we are closing two for right now, put up a sign in the subdivision and had their Realtor call back all the potential buyers that visited them over the last year.

    Sign:
    “Up to 100% Financing Available”
    Seller may assist with down and closing
    Only $2500… Moves You In!

    I also don’t “make presentations”. I make offers, including to buyers.

    As far as an “Elevator Speech” for buyer is concerned, I just use exactly what we tell the Seller or Builder to put on the sign or…

    “If you can qualify for the loan, we’ll pay the closing costs and down payment. And, ONLY $2500… Moves You In!”

    #27781

    Scott,

    Thank you, very much.

    I have a couple of $ 1M + Sellers with Realtors that may take 70%.

    The Realtors want Offers.

    I’ll send them a LOI.

    You are all about Offers !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8)

    #27782
    Avatar of homesavers
    NULL
    Member

    @agross wrote:

    Don, get back with us when you’ve got the A-B-C method ironed out.

    The key, I believe is not what you need to add, but what has to be left out, to make one work.

    Laws. :wink: :cry: :x

    I am not really trying to “iron out” the A-B-C method. I get associated with the exit plan since I have had a few bomb so I am checking different ways to execute an easy to understand contract.

    Bottom line is-just make offers and get them accepted and find the few buyers out there. REAP has it ironed out as far as I am concerned.
    There are so many ways to structure your message that you can be fishing with the wrong bait. Who wants to sit in the boat all day long and not catch anything?

    #27783
    Avatar of dave salcido
    dave salcido
    Member

    Amen brother! Why must everyone make this process so difficult.
    1. Find a seller
    2. Ask if he/she is willing to stay on loan for a few years for a full price offer (“Will you take payments for a while?”). If not, ask if he/she is willing to discount for a quick sale.
    3. If yes to either question, create offer and send it to the seller.
    4. If the seller has questions, ask the seller to first review the offer (I only first give them the Terms of Proposal to make things simple).
    5. Then answer remaining questions via email and phone (IF YOU CAN!). Be honest with yourself. If you can’t, get a partner who can.
    6. Get the offer signed and start looking for the beneficiary(s) that you will need to close.
    End of story.

    #27784
    Avatar of unclejim
    unclejim
    Participant

    Dave we have talked about this one. How does an owner with poor credit use REAP to refinance.

    Here’s a situation I’m facing. Patty bought an “investor house” and has spend some Hard Money to fix it up and now has it rented with positive cash flow.

    Now the Hard Money source needs to be paid back but Patty has bad credit so she cannot qualify for a loan or do a refinance. She does; however, have the ability to make the required refinance payments.

    Her friend Sandy; not the renter, has good credit but not the ability to make payments. Sandy is willing to use her good credit to qualify for a refinance to pay off the Hard Money lender.

    How does REAP help Patty get the Hard Money lender paid off without sacrificing her friend Sandy to the “barn yard pigs”?

    #27785
    Avatar of homesavers
    NULL
    Member

    Yes. I want to know how Sandy keeps from getting slaughtered too?

    #27786

    @unclejim wrote:

    Dave we have talked about this one. How does an owner with poor credit use REAP to refinance.

    They don’t. REAP/CAPP is not here to help owners with poor credit refinance.

    @unclejim wrote:

    Her friend Sandy; not the renter, has good credit but not the ability to make payments. Sandy is willing to use her good credit to qualify for a refinance to pay off the Hard Money lender.

    Sandy would have to qualify for a “New Purchase” loan and buy the house. It would have to be a NOO Loan since she don’t not intend on occupying it. If Sandy cannot show she has an ability to “make the payments”, then she would not qualify. However, she may if she can show a current lease greater than the monthly payment.

    If Sandy does not have any or enough for the required down payment AND there is enough equity in the property that will be placed in Trust prior to the sale, then REAP/CAPP may work by working with Sandy’s lener to allow her equity in the trust to be used as the down through CAPP.

    Of course this is all contingent upon her qualifying in the first place and the lender allowing the use of her interest in the trust to be used for the down.

    Patty and Sandy will now be co-beneficiaries of the trust along with the RB who is the one responsible for the payment and will simply work out a split arrangement for Sandy “bailing out” Patty. I would recomend… 25% Patty, 25% Sandy, 50% RB. Split the cash flow plus any umfont money too.

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