Real Estate Investors Offer Big Pay Off, If You Can Keep Up.

Deadline News.com article originally published on Feb. 3, 2012

JULIE WYSS – Today’s Silicon Valley real estate investor isn’t necessarily a high roller, but more often a working stiff with a small-business, who is tapping existing non-real estate investments to cash in on affordable real estate properties to flip or rent.

If you are a real estate agent looking to serve them, you’d better bring your A-game.

These younger investors aren’t “suits” sporting fancy cars, but are more likely to dress casually and drive a hard bargain, offering all cash or sizable down payments on the properties they buy.

Many are smaller, newer, more innovative-thinking investors with one or two rentals under their wing, looking to acquire more. One thirty-something investor with three children chose to drain the kids’ college accounts and buy three houses with 15-year loans. By the time the kids graduate, mom and pop can sell the farm and pay cash for college.

Some are trading in two-, three- and four-plexes for single-family homes (SFH), considered diamonds in the rough, valued at half what they cost at the peak of the market.

Investors with cash in the bank are getting off the fence because they no longer trust that their money will perform as well in conventional investments, including money market funds, stocks and other investments.

In the business to make money, investors also favor Section 8 housing’s guaranteed rental income.

San Diego-based DataQuick says absentee buyers – mostly investors – purchased a record 23.8 percent of all Bay Area homes sold, up from 21.7 percent in November and 20.2 percent a year earlier. That’s an average. The share is higher in some counties, cities and neighborhoods.

If investors sound like tough cookies, they are, but you can serve them well if you have the energy and expertise to meet their demands.

The average real estate agent thinks the job is to write a contract and pray it gets accepted. Here’s what’s really required.

Going the distance

Investors aren’t in the mood to manage. That’s what they do for a living. They expect you to take the lead on acquiring their investment and expect you to understand their investment goals.

Be prepared to show an investor as many homes as they wish to see in a day, six, eight. And not just any homes. They include short sale properties occupied by families down on their luck and homes in horrid shape.

When a hot property is available, the investor needs to be convinced to tour it.

“You need to see this property and I am picking you up at your office in 30 minutes and will have you back in an hour….” Worker bees may say “no” at first, but later will agree, because you insisted. They appreciate your initiative and ultimately enjoy the thrill of the chase.

Bring hard core negotiating skills to the table. An investor needs a real estate agent familiar with the distressed property market. After several investment purchases, a skilled agent should recognize a good deal and advise the buyer what to offer. Hit the nail on the head and you gain their trust.

When the investor trusts the agent, the investor is more often willing to offer a higher price, if that’s what it takes to get the offer accepted. However, if the investor is an all-cash buyer and can forgo the appraisal contingency, even the property inspection and disclosures contingency, then a lower offer with a quick close is a more effective strategy.

Investors have little time to spare, including the celebratory two-martini lunch after the deal closes. Instead, they’d prefer you to pick them up, get them to the sign-off and back to work in an hour.

Other investors prefer not to leave work, but complete the transaction without leaving their desk. They appreciate the convenience of electronic signatures, when permitted. Electronic signatures are not allowed on a short sale, but offering to send a traveling notary or providing curb-side pick up can overcome that obstacle and help them maintain a sense of control without actually managing you.

Investors don’t care to read the fine print, but they do want to know what’s in the deal. You, along with the lender, must review the note to be sure the rate and the terms are what the investor wants. You must sign off on the title report and be certain there are no problems with liens or easements. The new title must be in the correct name of the investor or the investor’s living trust.

After escrow, the tough keep going

The real work begins after escrow closes.

Whether the investor will flip the property or rent it out, chances are, the property could use some help.

You’ll have to have at the ready a database of trusted vendors available for any work necessary – termite work, painting, hardwood floor finishers, roofers, general contractors, landscapers, pool repair guys, HVAC companies, virtually any provider you can think of. But not just any contractor, great contractors with competitive prices.

You can manage the work by installing a lock box and setting up appointments with the contractors. This allows them to quickly get to work transforming the purchase into an investment with hefty returns.

Source: Julie Wyss is the top producing individual broker associate with Intero Real Estate Services-Los Gatos, CA. For more information about Julie and her real estate services, please visit her website.

MARS' Loan Modification Protections Extend To Short Sales, Other Foreclosure Relief

Rules protecting consumers from being taken by modification services also extend to short sale services and other forms of mortgage assistance, including some assistance offered by real estate agents.

Effective Jan. 31, 2011 modification assistance firms have been banned from collecting fees until a home owner agrees with a written foreclosure or modification plan approved by their lender or loan servicer.

The ban and other related disclosure and regulatory provisions are part of the Federal Trade Commission's (FTC) "Mortgage Assistance Relief Services (MARS) Rule", designed to curb fraud, scams and rip-offs in the distressed mortgage services industry.

While MARS news has been focused largely on the cottage industry of private companies offering modification services to consumers, the rule impacts all mortgage assistance relief services including those offering short sale services and other assistance.

Some real estate agents must comply

Laurie Janik, National Association of Realtors' general counsel, recently reviewed the new rule at a forum during the Realtors 2011 Midyear Legislative Meetings & Trade Expo in Washington, D.C. and put on notice, real estate agents who provide short sale services, according to a recent DSNews report.

"As the leading advocate for homeownership, NAR supports efforts to ensure that mortgage assistance relief services truly benefit consumers. Nevertheless, NAR has some concerns about the rule and its application to real estate professionals involved in short sales transactions," Janik told DSNews.

But it's not just short sales. The official Federal Register Vol. 75, No. 230 rendition of the rule is pretty clear, as federal regulations go.

"The Rule is intended to regulate for-profit providers of mortgage assistance relief services...defined as 'any service, plan, or program, offered or provided to the consumer in exchange for consideration, that is represented, expressly or by implication, to assist or attempt to assist the consumer' in negotiating a modification of a dwelling loan…stopping, preventing, or postponing a foreclosure or repossession; or obtaining one of several other types of relief to avoid delinquency or foreclosure... (including) a forbearance or repayment plan; an extension of time to cure default, reinstate a loan, or redeem a property; a waiver of an acceleration clause or balloon payment; and a short sale, deed-in-lieu of foreclosure, or any other disposition of the property except a sale to a third-party that is not the loan holder."

One question is obvious: If a company doesn't charge for mortgage relief services, does the MARS rule apply?

"Most of the local short sale specialists advertise this as a free service to our sellers and understand that the cost of the professional negotiations will be paid out of the hired Realtor's commission," said Julie Larsen Wyss, broker associate, Intero Real Estate Services, Los Gatos, CA.

Janik acknowledged to DSNews that real estate agents who do offer fee-based services must not take upfront fees, as the law requires, but she also voiced concern that other MARS rules could also apply to real estate agents helping with short sales, including rules that touch on disclosures, advertising, communicating with clients, negotiating a short sale or arranging for a short sale negotiation.

"NAR is discussing with the FTC some language in the second and third disclosures as well as some other requirements found in the MARS rule," Janik said, according to DSNews.

"The FTC is considering possible options to help make the rule more applicable to a real estate brokerage…when they are performing traditional real estate functions in a short sale transaction," she added.

A history of fraud

Too many foreclosure rescue and loan modification services became a festering outgrowth of the mortgage market meltdown that left many home owners underwater with a mortgage balance greater than the value of the home.

The operations often promised to be a go-between and negotiate with the lender to obtain a modification short sale  or some other relief from foreclosure. Some also duped home owners into believing they were affiliated with real government assistance programs.

Now, without up-front fees, many fly-by-night operations don't have the capital to resume operations.

MARS does allow licensed attorneys to charge advance fees, provided the fees are held in an escrow (trust) account and provided the attorney complies with state laws and regulations related to the federal rule.

MARS rules are disclosure heavy. The rules say mortgage assistance relief services must disclose:

• The proposed cost of the service.

• That consumers have a right to reject any offer from the service or the lender without charge and can stop doing business with the service company at any time.

• That the service is not affiliated or associated with nor approved by any government entity.

• That the lender can reject any change to the home owner's loan.

• That home owners could lose their home and damage their credit rating if they follow a service's advice to stop paying their mortgage.

If services are offered or negotiated in Chinese, Korean, Spanish, Tagalong or Vietnamese, the disclosures must also be provided in the same language.

Foreclosure rescue and loan modification services are also prohibited from making any false or misleading claims about their services, including claims about results, government affiliation; the consumer's financial obligations; refund and cancellation policies; legal representation and the amount of savings a consumer can expect, among others.

Home owners should also check with their state rules for the services. Some states have stronger regulations than the federal MARS rule.

by Broderick Perkins, Deadline News Group, May 18, 2011

Short Sale Transaction a Tall Order

A short sale could be a better deal than bankruptcy or foreclosure, but it can also sap your time, wither your credit score and well, cost you money.

To produce a down and dirty primer on short sales, we went to Intero Real Estate Services in Silicon Valley and checked in with other real estate and consumer professionals to get the experts to show us -- and you -- the ropes.

A short sale occurs when your lender agrees to accept a lower price on your home than the current mortgage balance, provided you meet the lender's requirements and have a qualified buyer.

"Search for a buyer, especially those who have expressed an interest in buying short sale properties. The buyer must be willing to deal with extended deadlines and additional demands made by your lender," said Julie Larsen Wyss, a RealtyU graduate and holder of its new Certified Short-Sale Professional (CSP) designation.

"Your lender is the key to a successful short sale transaction and it will need to feel confident in the new buyer," added Wyss, also a real estate broker associate with Intero Real Estate Services in San Jose, CA. She's also founder/broker of Vista Mortgage Solutions.

While recent cash incentives for you and your lender make short sales more enticing these days, incentives alone won't get the job done.
To go the distance on a short sale, you must document you are a hardship case -- but not because you falsified the original loan documents.

It can be a win-win scenario -- the bank reduces a portion of "bad debt," avoids foreclosure costs and keeps the home occupied, while you shed a housing payment you can't afford.

"If done right, the short sale is a winning proposition for all, including the lender because the costs involved are certainly lower than that of foreclosing," said Nancy Osborne, chief operating officer of Erate.com, a Santa Clara, CA-based financial information publisher and interest rate tracker.

Don't come up short, prove your case.

To prove your case, you'll need to spend some time on a cover letter explaining your hardship and provide full financial disclosure; the original purchase contract; a balance sheet of your income and expenses; asset statements, proof of income; bank statements; two years of tax returns; and a professional who knows the ropes.

"Simply stating, 'My house is worth less than the loan and I don't want to pay any more,' will not be acceptable. Lenders would rather foreclose than develop a reputation as an easy target," said Zdenka Mahan, a real estate agent with Intero in Saratoga, CA.

Along with the required documentation, you stand the best chance of getting through the two- to seven-month short sale ordeal if the home is marketable; the second mortgage holder (if there is one) gets a cut or otherwise goes along with the deal; the same lender holds all mortgages; and there is enough time before foreclosure (at least about 4 months).

"A major reason why a short sale fails is the length of time it takes to get the lender's approval. Long delays frequently cause the buyer to drop out of escrow and buy another home," said Mahan, a short-sale experienced "Downtown San Jose (CA) Specialist."

Buyers can also suffer lost opportunity

"Buyers risk the opportunity cost of losing out on another property if they are tied up in a long, protracted short sale negotiation which could potentially go on for months," said Osborne.

"The burden to make the deal work falls largely on the seller's shoulders and their ability to do their homework up front, making things as easy as possible for a potential buyer," Osborne added.

A short sale works in your favor if your mortgage debt is secured by your home and was used to acquire, construct or substantially improve your home.

Short sales that stop short

Wyss says don't count on a short sale if you can't prove hardship; you are current on your mortgage; are in bankruptcy; have recently completed a cash-out refinance or have a lien with a third party.
Because a short sale forgives a portion of the debt owed, that portion could be considered as taxable income and you should seek the advice of a tax attorney, certified public accountant, enrolled agent or other person fully schooled in the tax ramifications of a short sale.

According to FICO, the leading credit scoring system provider, there also may be some credit score implications.

While a short sale won't be as damaging as a foreclosure or bankruptcy, expect some negative impact. Variables include how the lender reports the deal and what's already on your credit report.

Negatives compound.

Consumer Reports' Money Advisor suggests that before you enter a mortgage modification or short sale, ask how the lender will report it so you can weigh your priorities.

If you need the break, take the deal sooner rather than later, even if it will hurt your credit score. Negatives on your credit file are removed after seven years. The sooner you get the clock ticking, the better.

Get a short sale team for the long haul

Wyss says the best approach to a short sale is by contracting with a real estate professional familiar with the transaction. As well as RealtyU's CSP designation the National Association of Realtors offers a Short Sales and Foreclosure Certification Program (SFR).

However, the designations aren't a guarantee you've found the most experienced short sale agent. Some agents without the designation are just as experienced, if not more so. Others are less experienced. Get referrals from friends, family members, co-workers and others you trust who have worked with an agent experienced in short sales or have a close friend with a satisfactory experience.

"A real estate agent needs to put together the most comprehensive short sale proposal possible to minimize the back-and-forth delays," said Mahan.

You may also need legal and tax counsel. A solid professional team is best for determining the viability of the sale, assembling the package and pricing and listing the property to find a buyer.

Wyss says determine your home's marketing position from comparative market analyses (CMA) used to price your home.

"If your home's value is significantly less than debt tied to the property, you are a candidate for a short sale. Position your home so that it sells quickly, but at a high enough price so the lender will agree to the terms," says Wyss.

Keep in mind, you don't control the final decision.

You aren't selling a home on the open market so much as you are selling your case to the lender.

"Lenders are under no obligation to accept a short sale and the terms will be examined closely by the lender," Wyss added.

Written by Broderick Perkins
February 18, 2010