I’m working with an investor on the Burdett property who is negotiating a short sale with my lender. I only have one loan on the property at 295. The property was worth about 315 when I bought it back in January of this year (2006). Now it’s appraising at 275. The appraisal was just done a couple of days ago by the lender.
So the investor submitted my short sale packet and an offer at 200,000 CASH. That’s a pretty reasonable offer for an investor - 72% of value - considering the property will need a little bit of cosmetic work, it has no garage, the area is a bit rough and the market is dropping. The investor needs to make a certain margin of profit and build in some padding for the risks. In return for a discount the investor will close quickly, as is, and pay all cash.
The lender is telling me the offer is unreasonable. The lender just brought in a new “negotiator” who wants to see the full appraised value of 275 or something close to it. The lender is also telling me I should list this property with an agent instead. The agent would list the home on the MLS and price it at 275. Then, drop the price incrementally until we get a buyer, hopefully resulting in a higher offer to the bank.
The investor says this new negotiator guy is screwing up the deal. It was going smooth and might have been accepted by the previous person, but then this new guy starts playing hardball.
But the investor tells me now to worry. He is going to submit a net sheet showing the lender their projected loss if they choose to reject the short sale. I am assuming the net sheet will itemize all the costs associated with taking the property, fixing it up, paying brokers and eventually selling it at an even bigger discount months down the road. I would like to see that net sheet when it’s ready. I’m curious. I don’t know enough right now to see who is right.
By the way I am trying to short sale the other Sacramento property via an agent. Two offers were submitted and now we’re waiting.
So what’s better…
1) List with agent and drop the price slowly and risk dealing with a flaky buyer… but possibly get the bank more money?
or
2) Work directly with investor who would buy quickly as-is at a deep discount… but may just walk away and leave me stranded if they don’t get their low price?
Tough decisions.
43 Comments
October 6th, 2006 at 3:11 am
Hi,
This is indeed a difficult decision to take, however, I think that you have to investigate yourselves if the price is “reasonable” or not. I think you should investigate all prices paid rencently (call brokers or people who just bought in that area) and compare with the offer you received.
For sure you have to accept a big discount, because the market is still going downwards, and all the running costs like property taxes, and not to forget the loan itself, are continuing when there is no deal at all. You should reduce your assets as soon as possible so whatever happens you have to go for a deal.
Succes, and let us know the result !
October 6th, 2006 at 5:17 am
The bank doesn’t care to make a good deal for an investor. Heck, $200k looks like a great deal and from the banks point of view the offer looks like they are being asked to pay the investor. Of course the investor is complaining, his sweet deal taking advantage of you ran into the real owners protecting their interests. You cannot afford the $95,000 in debt forgiveness anyway. Do what the bank says or get the investor to cut his profits.
I’m not saying there is anything funny going on but if I were the bank and I saw this deal I’d suspect the $200k involved additional “side money” to cover your tax bill. And face it, that’s exactly what the old Casey would try to do in this situation.
October 6th, 2006 at 7:38 am
Wouldn’t it be the lenders choice? The lender wants to recoup as much of the money as possible, wouldn’t you if you loaned someone money?If I were the lender I would want this poperty sold in a competitive enviroment. Having an investor come in with a lowball offer isn’t going to bring the lender the most money out of the deal. I really think you are at the mercy of their decision.
October 6th, 2006 at 8:45 am
It’s hard to say for certain what the best course of action is for either you OR the bank. But it’s easy to see why the bank is balking, they’d be taking a 32% loss on the loan.
I’m interested in hearing what your plan is for after the sales are complete. Once you sell all of your properties and you are left with $140,000 in credit cards debts and some $100,000 owed to the IRS, how do you plan to go about recovering?
Recovering from that isn’t by any means impossible, but it will be long and difficult. You might enjoy reading the blog of a couple who are over $100,000 in student loan debt and fighting to pay it off (no, not my website). http://www.makelovenotdebt.com
Best of luck to you.
October 6th, 2006 at 8:52 am
Dude. Get a lawyer. You may be publishing things that can be used against you in court. At 24, you can afford to make mistakes. But going to jail is a lesson you don’t want to learn.
October 6th, 2006 at 9:20 am
Casey,
Your investor is totally lowballing the bank. I’ll bet if he comes up to about 250k, they’ll accept. Otherwise the lender is right to try and recoup as much as they can.
Nigel
October 6th, 2006 at 9:58 am
I can’t believe anyone purchased an investment property in January of this year, but I digress.
List it at $270-$275 per bank advice and keep them politely updated on the progress.
The bank would probably take $250K quick cash, but your investor won’t offer that because he’s looking for a gift that’s not there, so ditch the investor.
October 6th, 2006 at 10:11 am
The lenders have a fiduciary duty to recoup as much as the money you stole as they possibly can. Yes, stole.
What a pity that the lenders didn’t live up to their fiduciary duty to make sure that you were qualified for the loans.
Yes, there is shared blame on both sides but…
What the lender did (or didn’t do) isn’t a felony. What you did was and you can bet that there is a very good chance that you are going to spend some time in prison.
Judging by your picture, your dance card will be full each night.
October 6th, 2006 at 10:19 am
You’re still at it, despite numerous earnest warnings that you’re just begging to have legal action taken against you?
Well, perhaps my failure is in giving everyone the benefit of the doubt. You clearly are intent on pursuing this line until you come to the inevitable ending.
I revise my prior advice to seek an attorney. You should seek psychiatric treatment.
That disposed of, I have some direct advice to this subject: Go for 50% LTV. Disintermediate your investor and handle the negotiations yourself. Tell the counterparties that you’re only going to give them $150K, and that you’re being generous. That strategy seems in keeping with the spirit of your approach.
October 6th, 2006 at 10:19 am
I clicked an ad for you. Don’t spend it all in one place.
October 6th, 2006 at 10:27 am
Bruh, Banks are not in the business to lose money!!!! Your deal smell like sh** to the bank. Plus you need a Lawyer ASAP!!!!!!!!!!!!!! If you keep putting your sh** on this Blog, You are going to jail.. BTW Don’t drop the soap. ; ^ ).
October 6th, 2006 at 12:11 pm
Your arrogance is so incredibly apparent, it is hard to feel sorry for you. But for some reason, I still do.
Clearly you have no one in your life that is capable of offering you guidance, OR, you are too arrogant to take that advice.
Being upsidedown on 6 properties can be pushed aside as inexperience, immaturity or whatever.
Now you are doing interviews with SFGATE.com? Blogging about your illegal actions over the last year?
“To succeed in real estate you have to have the right knowledge and the ability to take action. I fell down this year. But I’m not going to go out without a fight.”
Are you kidding? Are you really this stupid? Is anyone?
On second thought, I take it back, I don’t feel sorry for you. You deserve EVERYTHING that is coming to you. And believe me, it is coming.
October 6th, 2006 at 12:18 pm
Casey,
Your lender’s disposition costs will include legal fees, title guarantee for the trustee or attorney, advertising costs (posting and publishing), securing the property costs, other misc fees and real estate commissions.
Overall, they are looking at a minimum of 10% of the loan balance just to sell the property. Additionally there is the time value of the money they lent to you. CA foreclosures take a minimum of 111 days plus the time to market the property. Probably looking at another 60 days of lost interest and top of the interest they have lost since July.
These are all factors to keep in mind when making a short sale offer (in addition to the appraised price). The advice to find other comparable sales is also very important.
Needless to say, an offer of $200k is much less than their net in going through the regular foreclosure and marrketing process.
Best of luck, I for one hope that you do avoid a prison sentence. Some of these bloggers are just plain cruel.
October 6th, 2006 at 1:09 pm
Expose the companies you worked with! Expose the brokers! Bring down this sinking ship and everyone on board!
October 6th, 2006 at 1:09 pm
I am sure you will be getting a flood of traffic with the front page sfgate posting.
Wish I had time to read it all and see the early posts before they were edited.Congrats on getting 8 under your belt, too bad it looks like they have pulled down your pants in public
I’m guessing the bank won’t get interested until around 230k.
October 6th, 2006 at 1:16 pm
Sad this is what the US economy seems to be all about these days. Sometimes I wonder if anything is being produced at all. Just a bunch of traders, liars, and scammers winning and losing on someone’s hard work. It’s hard to imagine these things leading to a stable economy.
October 6th, 2006 at 1:31 pm
The bank has no obligation to pay another “investor” a profit. If the house appraised @ $275, that’s the value! That’s what a REAL appraisal is, a statement of value.
Your first appraisal was pumped up to make a bad deal look good. If it had been correct, you wouldn’t be in the situation you are in right now.
Thank goodness the bank regained just a bit of sanity. It’s about time.
October 6th, 2006 at 1:36 pm
You suck! Its people like you that contributed to the artifically inflated price of real estate. You helped to create an environment were affordable housing is not accessable to honest hard working people. Unfortunately, you get what you deserve….Oh yeah, did I mention that YOU SUCK!
October 6th, 2006 at 2:06 pm
Heh. This is funny. You’re a dead man and you’re blogging about this like it’s funny or some kind of joke. There are idiots and then there are big-mouthed idiots.
I hope you are just making this stuff up and you aren’t really this stupid. You seem smart enough to run your own business, but have wasted your life on fraud and theft. Sad.
October 6th, 2006 at 2:14 pm
Why would anyone do a short sale to start with. When things go bad why do you want to add to it by bringing in tax liability? Did you know that you will recieve a 1099C on all the money you get out of paying the bank. Yes, that is income and you will have a very big tax bill next year. I suggest you just shut up and let the bank take all the properties!
October 6th, 2006 at 2:23 pm
Sad but true. However, I wouldn’t suggest the US to go socialism nor preaching morality to Casey and the likes.
October 6th, 2006 at 2:39 pm
Couple of things…
First, to the people saying ‘get an attorney’, that is considered giving legal advice, and is illegal unless you are qualified to do so (i.e., youre an attorney). Even if you are an attorney, thats is considered unethical to solicite work to a person in obvious need and grounds for disbarrment (meaning abulance chasing is not cool).
Casey, I have to agree that its not in your best interest to post illegalities of which you have been a part of. Its actually downright foolish on your part. Even people who arent as intellectually gifted as yourself know better than to post their dirty deads in public…for gods sake, the 15 year olds who grow pot and post pictures of themselves with on myspace cover their faces.
Next topic, people want to feel sorry for you, because humans are inherently sympathetic creatures. But how can I feel bad for you when youve lied and basically stolen from the bank for no reason other than to get rich quick? There are families who are borderline poor saving every dime they can every month just to afforda home for their families, and had a hell of a time talking the bank into giving them a loan. Then there is you, who is a 24 year old kid who wanted to get rich quick and got your hand caught in the cookie jar.
I doubt youll go to jail, due to the current circumstances regarding the overpopulation in prison, but you deserve to sweat it out. If nothing else, remember this mistake and try to make yourself a better person. This blog business borders on the line of bragging, which is unneccesary for a person in your shoes.
October 6th, 2006 at 2:55 pm
BZ said:
“First, to the people saying ‘get an attorney’, that is considered giving legal advice, and is illegal unless you are qualified to do so (i.e., youre an attorney).”
BZ, You’re full of it. This is nonsense.
October 6th, 2006 at 2:57 pm
BZ,
As long as people represent their recommendations as laymen, they can say whatever they want. No one here is holding themselves out as a legal authority or giving Casey advice in a professional capacity.
October 6th, 2006 at 3:03 pm
Way to go!
Someone got in trouble at the lenders and banks. Greedy bastards at their end. If Banks and Lenders weren’t so anxious to get into bed with you in the first place none of this would have happened. Too bad our wacked system leaves you holding the bag. Good luck, and next time buy an apartment building and not a simple house. Donald Trump could use your talents!
October 6th, 2006 at 3:34 pm
“BZ, You’re full of it. This is nonsense. ”
You dont know what youre talking about, try researching a little and comprehend what youre talking about before running off at the mouth.
To say “get an attorney” is giving out advice with regard to a legal dilema, which = giving legal advice, which = illegal.
But I’m sure you have a JD, too right? And yes, I do.
October 6th, 2006 at 4:20 pm
Robert, you keep saying that I might be getting something out of this deal from the investor. While it’s true the investors usually offer something to the owner in distress to help them out.
However, IF the bank says that I’m not allowed to get any money I will not accept anything. I heard the banks on a short sale will make me sign something stating “I’m not getting any money on the side”. So if I have to sign something like that I *am* going to honor it.
Thanks for bringing up this point. If the bank is loosing money, I should not get profit out of it. That’s the right thing to do.
October 6th, 2006 at 6:10 pm
bz - most people who have JDs have some sort of background in writing. Your spelling and punctuation is atrocious. I’m calling bs on your having earned a JD. Learn to use google spellcheck for god’s sake.
October 6th, 2006 at 9:06 pm
Casey, there has to be a blockbuster movie (comedy) and a tell-all book
in this whole hopeless, hapless real estate flipper extravaganza.
With a little luck and some professional management you will come out of it smelling like a rose and with a couple of debt-free New York apartment buildings to boot. Maybe even a hefty financial interest/partnership in the Trump Tower!
Good luck to you.
October 6th, 2006 at 11:45 pm
BZ, I challenge you to cite an ethics opinion or case which supports the proposition that telling someone to seek legal advice is either illegal or a disciplinary offence.
We can take it from there, ‘K.
October 7th, 2006 at 6:58 pm
Casey,
The banks will LOSE money on your deals. You, however, have a screw LOOSE.
thanks,
fll
October 7th, 2006 at 10:03 pm
A professional investor is more likely to negotiate a faster deal than an agent for the reasons you outlined.
Most RE agents can’t negotiate themselves out of wet paper bags with slits cut in the sides. They’re trained to be “ethical” not effective.
Agents are typically housewives that have part time jobs as realtors that make about 20k a year to supplement their hosband’s income. They “work” with homebuyers on “feelings” and “emotions”. They wouldn’t know the difference between “GOI” and “NOI” if their lives depended on it; much less a prevailing “CAP”.
HOWEVER — if you are forced to use a realtor to negotiate for you, get a “manly” one; one with no children (none that survived), no husband (can’t prove she killed him), is at least 60 years old (looks 85), drives a 15-year old Ford F150 with a stick shift, and smokes cigars —- then, maybe you’ve got a negotiator!
On the other hand, Investors depend on getting to the bottom line efficiently, profitably, and professionally. Typcial agents can’t, won’t, and don’t.
So, Option 2.
October 8th, 2006 at 11:59 am
Casey,
I would suggest that you take a finance course. None of the Real Estate Guru’s teach it, or talk about it or even know anything about it (In case you are curious, they make much more money selling the courses than they ever did in real estate)
There is no way you should have been paying 11.99% on anything, unless it was at least 70% below market, and you were going to hold less than a few months (fix and filp).
None of your deals look good. Get a finance book and a calculator !!!
Also, make sure you know what the rents are for single family homes before you buy anything. You might need to rent or lease option if you get over extended !!!!
October 9th, 2006 at 1:32 am
BZ,
you are so full of s**t. If you have a JD then you should use it to sue the school that gave it to you.
October 9th, 2006 at 6:55 am
BZ
You are completely full of s**t. Advising someone to seek legal advice is not equal to offering legal advice any more than telling someone to consult their own investment advisor would be to giving investment advice.
What would be questionable would involve someone offering *specific and detailed* legal advice. Has anyone done so here? Show me.
By the way, if you’re a JD (at least one with any type of credible degree), then I must have a half dozen Nobels.
October 13th, 2006 at 6:20 pm
Alls well…for those who arent scammers.
October 13th, 2006 at 7:34 pm
What is most likely to happen, Casey, is that this thing will come right down to the wire. In other words, if an offer gets accepted by the bank from the investor, it will be just before the house goes to the auction. The lender wants to take as much time as possible to get the price up.
Having the investor submit a realistic net sheet should help, IF the sheet is realistic.
October 13th, 2006 at 7:38 pm
Another couple of things….
1) I agree with what Michael said.
2) If you insist on doing real estate in the future, I would highly suggest keeping in touch with a network of investors. You sound like you got the seminars and then bounced around on your own. Always stay in touch with the network. Maybe you are building a network already through this blog.
October 13th, 2006 at 9:22 pm
Greedy leaves one needy.
October 14th, 2006 at 7:51 am
BZ:
You are a moron. Did you get your JD at an accredited university? Can you cite one example in the history of the judicial system in this country where someone has been prosecuted for simply telling someone else that they should consult with an attorney?
December 19th, 2006 at 5:24 pm
I think you’re making a very good point there
December 21st, 2006 at 8:11 pm
appraisals don’t mean s*** . Comps don’t mean s*** . Your house is only worth what someone else is willing to pay for it.
Right now across the board people are pricing their houses to sell below comps and below appraisals and nothing is moving.
Appraisers are idiots anyway. They lied when the market was good to “bring in the appraisal” and close the deal. That is their job description in a good market.
Lenders too. Lenders are complicit with lying on loan appz all in the name of closing the deal. Casey was just a pawn in a series of sheister chess moves.