Land Trusts Revisited For Short Sales
March-13-2009
It has been a few weeks since my last post regarding Land Trusts VS the Option Contract. I have discussed the Land Trusts with a few attorney friends of mine, some investors and some colleagues over the past few weeks and am still very unclear. From what I can surmise Land Trusts are not being used for short sales as widely as previously thought. We all know the land trust works for several types of investing including the newest introduction by Jeff Adams and buying REO's at auction. The question was never about whether land trusts actually work.
I have not questioned the validity of the land trust nor the use of them. What I have questioned is the willingness of the banks and the legalities of using them during a short sale specifically. I have yet to speak with anyone using them for short sales successfully, currently and frequently enough to show me that they will hold up against scrutiny with the amount of files we currently service. I would love and am very open to someone proving me wrong. What I know is that we have entirely too many files on a monthly basis to "test" how they work. We are successfully and frequently using the Option Contract for ours and they work wonderfully!
That still raises the issue of seasoning with FHA and some conventional lenders. The only way around this issue is to buy and actually hold the property for a period of time to satisfy the specific seasoning requirements of the buyer's lender. With the prices of funding for short term being so high I prefer to just avoid FHA financing altogether.
What I have also noticed is the willingness and acceptance of the Option Contract with several title companies. Flagship Title, Old School Title and now Fidelity National are all comfortable closing with the Option Contract provided the process is carried through properly. I was a little shocked when I heard that Fidelity trained nationwide on the Option but pleased none the less to know that it is catching on. There certainly are other title companies around that have closed with the option but our company works on a national level and prefer to keep things uniform. The afore mentioned title companies offer title services nationwide.
At any rate, I am still open to hear your success stories with land trusts and short sales specifically. Please feel free to email me at donna@americanlms.com or visit our main site and use the contact us form. I would prefer if you comment here on the blog so everyone can benefit from the clarity but if you feel the need to privately speak with us please use the methods mentioned above.
March 13, 2009 Land Trusts Revisited For Short Sales
It has been a few weeks since my last post regarding Land Trusts VS the Option Contract. I have discussed the Land Trusts with a few attorney friends of mine, some investors and some colleagues over the past few weeks and am still very unclear. From what I can surmise Land Trusts are not being used for short sales as widely as previously thought. We all know the land trust works for several types of investing including the newest introduction by Jeff Adams and buying REO's at auction. The question was never about whether land trusts actually work.
I have not questioned the validity of the land trust nor the use of them. What I have questioned is the willingness of the banks and the legalities of using them during a short sale specifically. I have yet to speak with anyone using them for short sales successfully, currently and frequently enough to show me that they will hold up against scrutiny with the amount of files we currently service. I would love and am very open to someone proving me wrong. What I know is that we have entirely too many files on a monthly basis to "test" how they work. We are successfully and frequently using the Option Contract for ours and they work wonderfully!
That still raises the issue of seasoning with FHA and some conventional lenders. The only way around this issue is to buy and actually hold the property for a period of time to satisfy the specific seasoning requirements of the buyer's lender. With the prices of funding for short term being so high I prefer to just avoid FHA financing altogether.
What I have also noticed is the willingness and acceptance of the Option Contract with several title companies. Flagship Title, Old School Title and now Fidelity National are all comfortable closing with the Option Contract provided the process is carried through properly. I was a little shocked when I heard that Fidelity trained nationwide on the Option but pleased none the less to know that it is catching on. There certainly are other title companies around that have closed with the option but our company works on a national level and prefer to keep things uniform. The afore mentioned title companies offer title services nationwide.
At any rate, I am still open to hear your success stories with land trusts and short sales specifically. Please feel free to email me at donna@americanlms.com or visit our main site and use the contact us form. I would prefer if you comment here on the blog so everyone can benefit from the clarity but if you feel the need to privately speak with us please use the methods mentioned above.
February 15, 2009 Short Sales Option Contract VS Land Trust
Recently we have noticed a renewed interest in performing short sales by use of the infamous Land Trust. Our company and nationwide investors stopped using the tired, red-flagged land trust over 3 years ago. So, when I am asked if I see the benefit in using it my initial reaction is to say no. There are, however, some differences between the two contracts that are worth mention.
There are several people still using the trust documents and have said they are actively successful. The one problem that the trust seemingly avoids is seasoning issues. IF a short sale is successful and does close as a flip you CAN have an FHA buyer. This is a HUGE plus for many areas in the United States.
The sales have increased but where the amount of buyers have increased the ratio of FHA loans as opposed to conventional or VA loans seems to be extremely high. This poses a problem for those investors currently using the option contract. FHA's guidelines on seasoning are very specific thereby inhibi the flipping of a short sale with the use of the option contract because there are two actual closes. We refer to the transaction commonly as an ABBC transaction in which A (homeowner/short selling lender) clearly sells to B (investor exercising their option) and B (investor/now owner) clearly sells to C (end retail buyer). Because transfer of title or sale actually occurs or must occur before the transferring of title to the end buyer flipping to an end buyer using FHA financing is not possible. FHA guidelines specify that a property must be held in title by the "owener of record" for at least 90 days.
The trusts, to me, have always been muddy for all parties involved. Also, in recent months with over 30 acceptance letters a month, we are seeing wording that specifically addresses deed transfers or the ability to close without the "individual" homeowners name on the deed. I have heard that some of my colleagues have had to quit claim the deed from the trust back to the homeowner just so the bank would issue an acceptance letter. This seems like a CRAZY risk to take only to find out at the end of a deal and hours spent that the deal will have to convert to a straight transaction from A to C buyer. In addition, there is some confusion surrounding the legality of the beneficial interest.
Now in all fairness I have tried desparately to come to grips with the trust issues and get some clarity. I have boiled it down to two issues. You can close a trust one of two ways so I have heard. One way would be to have one single closing in which the short selling bank has agreed to take 200k as a payoff and an end buyer wishes to purchase for 240k. In this scenario I cannot seem to wrap my mind around where you put this infamous spread of 40k ON THE HUD without raising serious flags with the bank and getting an ultimate red light! The other option is to use a similar structure as outlined with the option using ABBC and transactional funding. My unanswered question here is the legal ability or legal WAY to assign beneficial interest to someone other than the homeowner. I imagine having one close and making a quick run down to the court house to file the changing of beneficial interest in order to appease the C buyer's lender.
Quite frankly I have a headache from all the reading and conversations linking to these two looming questions and am certainly open to someone's clear and legal answer.
This is EXACTLY why many have begun to turn to the option contract. We have been told by quite a few C buyer's lenders that they completely understand and approve with the way the transaction is being handled and closed. In addition, the option contract lends a hand in FULLY disclosing what the deal will entail. This appeases, not only the C buyer's lender, but the short selling lender as well. Having used the option contract for 3 years on now thousands of files we have NEVER had a bank reject the option contract with the exception of ONE!! It was actually not the opinion of the lender itself but rather only the opinion of THAT mitigator. It was easily solved by allowing the file to close and then resubmit so as to get a different mitigator assigned to the file.
I still sit here scratching my head in hopes of understanding the land trust strategy simply for the seasoning issue. With so many buyers using FHA financing I feel as though we are closing the door on half of our prospects. The other option, of course, when using the option is to find a funder/lender, be it private or otherwise, that will allow the use of their funds for a 90 day period to allow the facilitation of the seasoning. I imagine there is a level of risk here that turns off some investors but they ARE out there!
Until proven otherwise I will happily continue to use the option contract for our nationwide investors and seeking more 90-120 day funders. I just wish there were a clear answer on these trust questions simply so i can understand it fully!
December 29, 2007 Are Traditional Short Sales Dead?
In recent weeks yet another shift has occured in the lending industry.
I have been asked many times if i thought traditional short sales are
still alive today. Most investors are finding it difficult to get
banks to approve their short sales and end up either walking away from
the deal or just giving it up to the end buyer. In the worst case
scenario, a short sale investor has not taken precautionary methods to
line up other buyers in the event they could not come to an agreement
with the lender afterall. What happens to the client in this scenario
is they will find themselves weeks, sometimes days away from a sale
date and an investor backing out after promising they would buy their
home. They won't have a buyer in place to submit an offer directly to
the bank and they in turn will lose their home to foreclosure.
So
what is the right way to do short sales? We here at American Loss
Mitigation work for our clients. We teach our teams unique strategies
to ensure that they have an end buyer lined up. In worst case scenario
the client will still potentially avoid foreclosure and everyone walks
away feeling much better about themselves. As a short sale investor we
do not want our clients to get the wrong impression. We make it
absolutely clear that yes, in some cases we will purchase the home but
ONLY if the bank will agree to our offer. However, all is not lost
because while we are negotiating we are also lining up emergency buyers
and when push comes to shove our main concern is helping the client
avoid foreclosure.
If you are currently working in the short
sale arena you are well aware of the changes coming down the pipeline
and new requests from the insurance companies and investors to protect
themselves from as much loss as they have been experiencing. It is
important to keep yourself educated on the new law changes and tax
ramifications and breaks for your clients. Be sure that you have armed
yourself with knowledge for your clients' sake. Make sure you have
lined up a back up plan for your clients so that they are not left
holding the bag in the end only to have paid you hundreds of dollars to
help and back at square one.
February 15, 2009 Drop in Pricing - Complete Short Sale Course
We had a huge response last year when we released our COMPLETE short sale training program. Because of the name we have made for ourselves many knew what to expect. Our pricing was also more than reasonable in comparison to the high prices of other courses that lacked the completeness to even be compared to ours. We did receive hundreds of requests to offer some type of payment program or special promotions to allow those that might not have the full amount the opportunity to join our elite group of investors.
It took us a little while to get the breath back that was knocked out by the amazing response and after having reviewed the success of our new group of students we just can't help but make it affordable to everyone. Our previous price of $3,995 for our FULL advanced training course and our JV Team course for $2,495 have each been reduced by FIFTY percent. Yep, you read it right! Both courses, for a limited time, will be offered for 50% of the original price.
In addition to the reduction of pricing in our short sale training courses we also launched our nationwide loss mitigation/loan modification consultant program was launched! The response was overwhelming. We did anticipate a prettly large response but I think even we were surprised a teeny bit!
Keep in mind that if you are a short sale team/student our loss mitigation/loan modification consultant program is included as one of the perks!
December 29, 2007 Special Price Reduction
Short Sales can be a tough industry and involves some very daunting tasks when handled alone. In addition this market is continually changing and staying on top of the newest, hottest and latest can be difficult. When American Loss Mitigation Services was created the intention was to attract like minded individuals who weren't afraid to roll their sleeves up. Now, one of the most important components that we look for in a team is their work ethic, compassion for their clients and their ability to learn. If one of those characters are missing than the fit may not be right.
Short sales can be a very profitable business but it can also be very rewarding emotionally. It is important to know and keep a balance. We focus strongly on developing community relationships and programs to not only help your clients avoid foreclosure but to keep them from that point again in the future. We do this through education, credit programs, budget planning, rental programs and various other tools which are currently already in your community. We show you how to reach out to these individuals and build a strong working relationship with them so that everyone has their hand in on helping your clients avoid foreclosure and financially rehabilitate your lives.
There are plenty of manuals, training tapes and cd's, websites, webinars and seminars out there that can teach you the basics of short sales and some cost in excess of $25,000. We feel that that is totally outrageous especially since most of these so called "gurus" are teaching about short sales as they were 4 or 5 years ago. Now, you may say that 4 or 5 years isn't long. In any other market time you would be absolutely correct. But think about this for a minute - Have we ever been in a market such as this? Have we ever had this many foreclosures and rates still rising? Have we ever had this many lenders close their doors due to loss of income and ultimate bankruptcy? We are in a market that is warranting that the lenders, investors backing these loans and insurance companies protect themselves against as much loss as possible. They are becoming increasingly difficult to negotiate with for those that were accustom to approaching a bank 4 years ago asking to buy a property for $.60 on the dollar. Four years ago they weren't mitigating nearly as much loss as they are now. The national average is supposedly now 1 in every 55 homes is in foreclosure. That is almost 2 out of 100. That is 2% of our entire country facing the loss of their home.
We are in a different market and this market calls for creativity, innovation, quick thinking and most of all the ability to recognize change and adapt quickly. After we started building teams nationwide we realized that it wasn't just the homeowners that were suffering economically, but mortgage brokers and realtors as well. Being a company that was open by invitation only we charged for our training sometimes in excess of $4,000 and truly thought that was fair. However, as of late, our fellow professionals are suffering financially along with many of Americans. We have done very well for ourselves in this market and felt it necessary to bring down our prices even more than previously reduced. We wanted the right people, good people, to have a shot at helping families across America.
So we are announcing another price reduction in our team start up fee. We are reducing our one time sign up fee by 33% from $2,197 to $1,445. Given the wealth of ongoing up to date information and tools made available to our teams this is a steel in itself at $2,197. We aren't worried about the money though. What we are looking for is quality individuals that TRULY want to help and make a difference in their community and that have the drive and the ambition to roll up their sleeves and dig in with us. If you feel like you are the kind of person we are looking for please contact us for more information.
