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About Dick Dennis
Expertise
With more than 37 years as a real estate broker, I can solve most any problem presented. If I can`t, I do my research. Problems with mortgages, trust deeds, foreclosures, odd ways of conveying titles. Most any good Realtor can answer questions satisfactorily, but I answer questions that most cannot. Also, ask about my hard-copy newsletter.
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Problem solving since 1980
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National Association of Realtors
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Publishes The Landed Gentry, guest writer in Who's Who in Creative Real Estate, First Tuesday, Financial Freedom and many newspapers
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You are here: Experts > Shopping > Home Buying/Selling > Buying or Selling a Home > short sale
Expert: Dick Dennis
Date: 7/21/2008
Subject: short sale
Question
QUESTION: Hi Mr Dennis...
I have a home in Naples Florida....I bought for 213k in 2004, and tapped equity in 2006 at 75% of the "value" in 2006...so my bal. is approx 325k now. The values and closed sales are recorded from 200k even-250k in the last 3 months...lower than my original sale price. I am needing to move...I have my home listed and also am working with a "middle" investor who is going to bid 20% less than the going value...so about 160k....the investor will submit the offer after I sign the option contract, and I belive wants me to sign my deed over. I am a mortgage broker, over 12 years now...I asked a million questions and I gather the investor is ultimately going to do a
"dry" close ....another words...the realtor gets a buyer now for 200k and draws a contract between the investor(as a trust)and new buyer, simultaneously the investor and I already have a contract on my home....for 160k....so 2 things I question here....one the investor wants me to sign the deed over and not record it...so why? I know real estate and a signed deed is a deed, recorded or not...I am not ok with that?? and the investor is essentially doing a dry closing...on her part..using the end buyer's money to fund the 1st contract to my bank....when in fact the end buyer is not buying from my bank....as a mortgage broker...Lenders want to see seasoning on title, for say 6 months at least...how is the end buyer going to get a mortgage with no seasoning? Hoping this makes sense....Thanks CK
ANSWER: You are not too clear, Christina, but I will try to answer the best I can based on the "information" I can decipher. To answer your first question, I am assuming the "buyer" wants to do an option. If that be the case, it is all right to sign the deed, BUT DO NOT GIVE IT TO THE BUYER! A signed deed is NOT a valid deed until it is recorded in the county records. You set up a real estate attorney to protect your interests, and let that attorney hold the signed deed. When the buyer has lived up to the terms, then the buyer may receive that deed and you can go on about your life. I do not recommend you signing any option to anyone without them giving you consideration and THEIR SIGNATURE, too. By the way, make sure they share the cost of the attorney, too.
The second question, the end buyer may have a "hard money" lender who usually uses the property as sole security. I am guessing that the investor (the person in the middle) will shave off his profit in conveying the property to the end buyer (if I understand what is going on). The title of this letter is "short sale" but I do not see any indication of a short sale.
I hope I understand what is going on based on what you have written. I wish you well
---------- FOLLOW-UP ----------
QUESTION: Hey My Dennis...I apologize for the confusion...it is a short sale, or attempting to be. I owe 325k and value is about 200k....the investor is expediting the short sale by submitting an offer to the lender, at about 160k, well below the 200k. This wakes my file so to speak...if the lender says ok to the 160k, the realtor who has listed my home needs to get a buyer higher than 160k, hence this is where the investor makes his/her profit. The realtor is really looking for any regular buyer, no hard money involved. So I understand the option contract a little more from your information, thank you. And I will read it and have an attorney do the same. However, I am still not clear about how the buyer the realtor gets is going to get a mortgage with no seasoning..it is a flip, a dry flip, at closing...in all my experience, this is not legal, especially since my bank will not have knowledge..and really if they knew there was a buyer out there to buy at a higher price, the lender would want that price. I just do not want to get caught in anything funky. I am A, the investor is B and the end buyer is C...I sell to B, then B sells to C..on the same day, and B never even gets a mortgage or has any money, ever...and my bank never even knows about C...and the money my bank gets is really from C, or the lender C gets in a mortgage....
I am just not clear that this is legal...flipping like this? Heard of this happening? I mean for all my bank knows, my mother could be C..and I/we keep the house, and now owe on a smaller mortgage....sounds fishy does it not? CK
Answer
Now I understand a little better, Christina. This is the way it should go down: B is buying A's property "subject to." That's why he doesn't need seasoning. In fact, A's lender doesn't even have to know about the transaction. B takes over the responsibility of making the payments to A's lender. A's lender probably will not care since the lender has a whole boatful of foreclosures already, so they are going to turn a blind eye to the transaction. B has to make sure he is covered on the insurance even though that is what alerts the lender.
When B gets the buyer, he sells it to C who gets a new loan IF A's lender approves the short sale at $160,000. If the A's lender does not accept the $160,000—or even $170,000 or $180,000, then B is still responsible for making the payments. This is where B might decide to deed the house back to A or just drop the deal altogether and let the house go into foreclosure. What does he care? The loan isn't in his name. This is why it is a good idea for A to require some kind of good intentions deposit from B at the recording of the deed in B's name. It can be returned should he perform as advertised.
If C does not have a credit record to warrant a lender (any lender) to make a new loan, then it is back to square one for B. All in all, A has to have reason to trust B. If there is no trust, then A should find another B. Maybe A can find his own C and sell the property, thus eliminating B. If A has a good Realtor, that might be possible. I wish you well.
Dick Dennis
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