Frequently Asked Short Sale Questions – Video Transcript
Nicole 0:16 Hey guys, Nicole and Stephanie here, we are going to go over the frequently asked questions. And hopefully this will be helpful if you are an investor that’s wanting to become a partner or a realtor that’s wanting to learn and refer things over to us. So let’s just dive right in. Stephanie, what’s the first question that we’re going to go over? Stephanie 0:35 Okay, so first question we get asked a lot is how long is this going to take?Nicole 0:40 So that’s always the hardest answer to give. I’m like, Oh, I hate that question. But it’s a great question, because obviously everyone needs to know if you’re buying the property or if you’re the seller, and you’re wanting to move like, things like that. So what we always say is that every short sale is different. So we there’s no way for us to know exactly how long it’s going to take. Unless we are, you know, in negotiations because it can go every which way. But what we can tell you is that we will keep you updated every step of the way. So every Monday from our office, you’re going to get an update. So you’re going to know where we are in the process. For sellers, that’s a huge deal. Because one, it’s the constant communication with the homeowners, so they know that we’re working on the file, and that they know where we are in the process. And we will give them plenty of time, as far as moving, because that’s like the number one thing that comes up. Yeah. And then for the investors, if you’re an investor watching, it’s really important that you know, the timelines that you are going to be able to purchase the property or where we are, you know, in the process to answer your questions.Stephanie 1:40 So let’s talk about things that would delay it and why would it take longer than our two to four month money, Nicole 1:47 okay, that that’s tough. Stephanie 1:50 Our timeframe is typically two to four months, and that’s all going to depend on the lender and the value that the lender comes back in at. So let’s say that appraisal value comes in too high. So let me back up, the lender will order an appraisal, and that’s how they get their value. So that value comes in too high, then we have to dispute the value. Most of the time, we can get the value lower, and we can get it closed. But if the lender denies the value dispute, then we’re back to square one. And depending on the loan type, FHA, Conventional, or VA, then most of them we’re gonna have to wait three months until we get a new appraisal order.Nicole 2:29 But like Stephanie was saying, you know, it’s the timeline is going to depend on what strategy, what works, what doesn’t work. And every homeowners situation is different and every lender situation is different. So there could be a file where both of them are Wells Fargo, but one has two liens that we have to get approval from and the other has one, so one may take a lot quicker than the other. So that’s why it’s hard to answer that question.Stephanie 2:51 And we have to have the sellers cooperation we have to make sure we could get into the property for the appraisal. So sometimes the sellers go M.I.A or they move and we can’t get into the property. So you have to get a locksmith out there. So there’s a lot of different things. But the appraisal is one of the most important parts of the short sale going quickly.Nicole 3:09 So yeah, once we have a value back, and it’s in line with either your offer as an investor or the offer that we currently have, then it’s a pretty smooth process. So our average check-in and like she said, is anywhere from two to four months from start to finish, and we will keep you updated every step of the way.Stephanie 3:28 Okay, so next question is how do I send a lead? A lot of investors want to send us leads, and what’s the best way to do that?Nicole 3:38 Yeah, so we actually made it really simple. Because of Stephanie O’Hare, she’s awesome. All you do is go to helpmewithmyshortsale.com. And at that link, you’ll put all of their lead information, including your information and it goes right into our database. So it goes into our system, and that way myself or somebody on the team can call the lead really quick, they get an automatic text message, saying, “Hey, we got the lead from, you know, whoever put it in”, that way the seller is immediately contacted. And then we’re following up until we get a response.Stephanie 4:11 Then we send the package to the seller, and the seller fills it out the back, and then we start processing the short sale.Nicole 4:17 So once we get the lead over, like Stephanie was saying, then we’ll prequalify the seller, make sure that they qualify, we’ll ask them all the questions for the information that we need. We’ll send the paperwork over to them, they’ll send it back, and then that’s when we’ll start the actual process.Stephanie 4:30 Yes. And now what are some things that could happen that would have a short sale denied or we can’t do a short sale?Nicole 4:37 So first of all, it doesn’t matter if they’re in foreclosure or not. There is a rule that 37 days before the foreclosure. Now, we get most referrals like two weeks before Til Due, and, we do the best that we can to try to get them postponed. We also explain their legal options, if worst case scenario we’re not able to get it stopped but, it doesn’t matter if they’re in foreclosure or not, really what’s not going to get a short sale approved is that they have too much income. So if they are sitting on, you know, $50,000 in their savings account and they’re behind $15,000, that’s going to disqualify them. Now, there are circumstances that will change that. So for example, if it’s a divorce situation, and they now have two sets of expenses, things like that. So we always say just send it over so that we can talk to them and make sure. The biggest thing I think that the most conversations I have are investors that talk to homeowners or realtors that talk to homeowners and they actually have equity. So they think, okay, they’re foreclosure. So that means it’s a short sale, and they don’t understand that it has to be those two factors, they have to owe more than the house is worth, and they also have to have a financial hardship. So if they’re in foreclosure, yes, they qualify because they have a hardship, right? They can’t afford it, but they also have to not have any equity. So that’s also part of the prequalifying process, because we want to know how much the investor or the realtor thinks it’s worth, which they’re going to offer, but also, you know how much they owe.Stephanie 6:08 But can they sell it as is?Nicole 6:10 If we were to just stick it on the market, and that’s what the bank’s gonna look at, they’re gonna look at, hey, what’s the actual retail value as-is, not just what somebody is willing to offer. And that’s going to include all fees. So the only time that the homeowner really would not qualify, or a short sale wouldn’t work if they had equity in the property, or if they have way too much money and they’re just trying to get rid of the property.Stephanie 6:33 Yes. Now equity in a property like let’s say the seller owes $100,000, but it’s only worth $95,000 as-is. That’s still a short sell because the seller would have to come to closing with realtors’ commissions, closing costs.Nicole 6:47 And that balance is only going to increase. If you’re almost upside-down, then 99% of the time they are upside down.Stephanie 6:57 Yeah, and a lot of people don’t understand that they owe more. Once a once you get behind, the fees start adding up and adding up. We’ve seen payoffs double and it’s crazy, especially if a seller’s in a loan modification, then the HUD will put a second lien on the property, and sellers don’t realize that. So a lot of realtors will go through the whole process, get a buyer and then all of a sudden they’re like, oh, a second liens pulled up and the seller has no idea. Well, that’s if they do a loan modification. It’s going to be typically a second lien that pulls up.Nicole 7:30 I love when they say that it just popped up. So it’ that they just didn’t check the title.Stephanie 7:35 Yeah, so make sure you pull the titleNicole 7:38 Yeah, make sure you’re aware. I mean, it’s like you said, it’s not about the seller lying or anything, it’s just they don’t know. They had no idea. They’re just like, “okay, I’ll sign this for a loan mod” and then you know, most homeowners hardships are not temporary, they’re permanent. And so even if they qualify for the loan mod, it’s still a temporary solution because if you are not making that much money or if you are, maxing out all of your debt or your bills just to pay, it’s not gonna last very long, like a domino effect. Stephanie 8:09 The other question is investors always ask, How do I make an offer on the property?Nicole 8:15 That’s a good one, that does come up a lot. So what are we tell the investors is don’t overthink it. I think those are Kimberly’s words, I’m gonna steal it because it was a really good point. Don’t overthink it.Don’t complicate it. I mean, it’s literally what you’re willing to purchase for the property. So don’t focus on that. I think we get a lot of questions like, “Hey, they owe $200,000, so do you think they’ll accept $180,000?”
You can’t think that way, because now if it’s a short sale, and if the bank is taking a loss, it’s no longer relevant how much of a loss they’re taking. It’s solely going to be based off of the as-is condition and as-is price that comes back.
So now the bank’s not going to say “Hey, I’m only gonna take a $20,000 loss.” They look at it as “Okay, well, yes, they owe $200,000, but the as-is price is $150,000, we’re going to take a percentage of that $150,000.
So if you’re an investor and you’re wanting to make an offer, you need to look at your numbers, what you’re willing to offer for the property, just treat it as a free and clear. That will be the starting point.
Now, we always suggest, if your max is $100,000, offer $75-$80k. So at least for us, we can kind of go back and forth with the bank and be like, “Well, they’re at $80,000 but they’re willing to go up to $100,000 to try and show some good faith.” But besides that, let us know what those numbers are so we know what we’re working with.Stephanie 9:35 Yes, and if you have repair estimates, really high repair estimates, go ahead and send those in, because we can send those to the appraiser that goes out to get the value. So repair estimates are super important, you want the high ones, not the ones that you would be paying, but the high ones. Nicole 9:52 Right, because with the bank, as far as pricing goes, we don’t want to know what you’re getting a discount at, we need to know what the actual repairs are going to cost just like a traditional buyer, because otherwise, it’s not going to be able to be factored into the price.
And so the way the banks look at it, or the appraisers that are doing the assessments, they’re doing it dollar for dollar. And so it’s hard to if it only cost you $10,000, but really $20,000, the appraiser is going to take the $10,000. So, we need your help as the investor to try to justify your offer.
At the end of the day, yes, the bank is going to make the final decision. But if it’s a property that’s not going to finance, it’s going to sell to an investor anyway.
So we always want to get the highest and best but at the same time, we are going to advocate for your offer. So help us do that. Send us any repair bids, anything that you know about the property so that we can include that in negotiations.Stephanie 10:41 Okay, so next question is investors always ask, “Do I need to get an offer from the seller?”Unknown Speaker 10:46 So as far as when you’re sending over a lead or when you’re building rapport, it’s up to you. I always say that because sometimes if you have a homeowner that is talking to 10 different investors, sometimes the best thing to do is, even if we’re going to rewrite the offer to the lenders terms, is getting under contract.
So that way the seller mentally is committed to you as the investor. So if that is what you feel is going to secure the deal or secure the lead for them working with us, then absolutely. But it’s not required, because we will make sure to get your offer.Stephanie 11:19 Yes. And if you do send an offer, it has to be on a promulgated form with your state.Nicole 11:25 It can’t be like a one piece of paper that you’re like, Hey, I promise I’ll pay it.Stephanie 11:28 It has to be that way because the lender requires it. But it’s an actual state form.Nicole 11:33 And if you don’t have that, because obviously you’re not licensed, then that’s not a problem. That’s where we come in. We’re going to do all the paperwork, so you don’t have to worry about that. But definitely like Stephanie said, you know, make sure we need to make sure that it is on the right form, so that it’s going to be acceptedStephanie 11:47 And if you’re going to buy under your LLC, the lender requires your LLC docs, sometimes your operating agreement, and we definitely have to have proof of funds. So make sure you have valid proof of funds. If it’s a big statement showing cash, it has to have your name on it, or the company name on it. Nicole 12:10 And that’s a good point, too, that it has to be under the name that your submitting the offer. So a lot of times they’re like, “well, I got the back end buyer”, and I understand the theory of that. But remember, your offers are the ones that were submitting, not anything else. So if you’re submitting an offer, you’re the one that they’re going to approve to close. So they have to see that you have the funds to be able to do that. So whether it’s a hard money, loan, cash, whatever, it has to be a valid proof of funds within the last 30 days, that’s going to be acceptable.Stephanie 12:37 Let’s next talk about double closings, because we have a lot of investors call and say, “Hey, can I sell this property? The number one thing we have to say is we are just an agent, and we can not know about your second transaction. We don’t want to know anything about it, but we’ll tell you that some investors do it. If there’s no deed restrictions they can resell it to a end buyer.Nicole 13:04 The biggest thing is that if you are going to wholesale it, like Stephanie said, I mean, we just our responsibility is to the seller and to the bank. You’re the buyer, you can do whatever you want the property, that’s what Stephanie was saying.
You can do absolutely anything you want. We just can’t be involved in that second end transaction, because if we are aware of it, if you send us a contract, we’re legally liable, we have to present it to the bank, any offers that we get so if we are aware, and we see a higher offer, then we have to present it.
So just do whatever you want with the property after you buy it from the bank. If you are going to wholesale it, just understand that it has to be a completely separate transaction.
So if you’re going to do that, you have to do a double close, because if you’re the buyer, the approval letters are buyer specific, which means that the approval letter is going to have the buyer name. So you can’t swap it out.
You can’t say “okay, it’s not an assignable contract.” You can’t submit an offer and say, “Hey, I got this buyer, he’s gonna end up closing for me”, like a traditional transaction. You have to be the one that actually closes.
So just keep that in mind when you’re doing your investment strategies or how you’re going to purchase the property that if you’re the one that’s going to have to end up purchasing, whether it’s a double close, whether you’re selling LLC, however you’re doing it, the actual buyer has to be able to purchase from the bank.Stephanie 14:21 So another question we get asked often is, do we have to list it right away?Nicole 14:25 So that’s definitely a common question. Because we do have a listing agreement, and we are representing the homeowner. But we don’t, and we even have in our listing agreement that everything is contingent on the lender for a couple reasons.
One, we have no idea what the bank is wanting to approve. So we’re not going to play the guessing game of just putting it online and confusing everyone because honestly, it does a huge disservice to the seller for the house to just stay on the market. It causes so much confusion because when we get all these offers, and then the bank comes back higher or whatever the case is, it’s such a mess.
So that’s the First of all, and then second of all, we don’t have to list it because we already have most of the time, a contract. And so that’s really important. Because, especially if it’s coming from an investor, now, if it’s coming from a realtor and you refer it over, then you know the we will already have somebody that’s interested that will help us out with the seller to be able to put in an offer.
But at the end of the day, if we listed, it’s going to be at the approved price, because we’re not going to just stick on the market and say, “Hey, hope it works out for you.”
So it does always cause a lot of confusion. Whenever people see that we list a house, they know, it’s Nicole and her team, it’s an approved price, and it’s pretty straightforward.Stephanie 15:42 Yeah, and so most lenders or pretty much all lenders are going to have to have a listing agreement, and most are going to require an MLS sheet. So you really need a listing agent to do the shortsale to get over that hump or they’re just going to keep asking for and asking for it. You’re never going to get anywhere. You’re going to be stuck. Nicole 15:58 You definitely need an agent involved anyway, because like she said, they’re going to require representation.
So as an investor or buyer, if you’re wanting to just purchase the property and just negotiate, the bank will never work with you directly. Because they know it’s a conflict of interest, you’re going to try and get the lowest lowest price, favorable terms, and no one’s gonna really be looking out for the homeowner to make sure that the debt settled and it’s the most favorable outcome for them as well. So it’s got to be a win for everybody.Stephanie 16:28 Let’s next talk about building rapport with clients. So these clients are typically behind on their mortgage or they’re upside down, and they’re probably getting bombarded by other investors, realtors trying to get their business. So you have to build rapport with those sellers.So let’s talk about building report. Nicole 16:46 Yeah, absolutely. So I go into depth in the short sale course, and I break it down as far as all of the options and I always say the same thing. I have many taglines, apparently but one of them is “educate, don’t sell.”
And so you have to have a full understanding of all of the homeowners’ options that they’re getting bombarded with, in order to know how to really get over those objections, because if a homeowner is sitting here telling you, “the bank told me that I need to do a loan modification”, I don’t understand like, even though they have no income, but hey, no thread told me if you don’t know how to overcome that you’re never going to get a contract.
And these distressed sellers, it goes way beyond short sales, because if you’re driving for dollars, if you’re out there, it doesn’t matter because it’s going to be anybody, like anybody that’s just in that situation.
So it’s not just people with no equity, it’s people with equity too. And so we kind of go dive into that on the course that we have available about all the options but it’s really, really important that you understand that because even as as a realtor, so I know we’ve been talking a lot to investors but for realtors too.
How are you gonna get the listing or how can you show them that a short sale is the best option or to list it and to sell it is the best option if you don’t know why it’s the best option?
So building rapport means that you have the education and you have the understanding of why this doesn’t work, and this does. So that’s the biggest thing. Thank you guys so much for watching. I hope that this helps, at least, with the most common things that we get, and especially Stephanie, thank you for sitting down talking with me. If you’re working with us, you’ll interact with Stephanie as well. And if you are on here, and you like the content like, comment, subscribe, share, you know, all that fun stuff.
Because we want to keep doing videos to help with your business. And you know, help everyone make more money. We win, you win, everybody wins. We have the audio book and the book, The Short Sale Uncensored that I wrote, that’s available on Amazon. And then if you’re interested in the courses, we’ll have the links below on that.Stephanie 18:53 And the book is also available on Audible, and it is the number one selling real estate book right now. So go get your copy.