Have you ever seen the signs posted on telephone poles in the Metrowest area that says something to the effect "We buy houses". The headline usually reads do you need to sell your home quick? Are you in financial trouble? Do you need cash fast?
These companies are almost always looking to buy your home at 50 cents on the dollar. They are not going to give you anywhere close to the fair market value of your home!
Well there is a new twist to this predatory business that you really need to be on the look out for. There is a group in the Metrowest area that has been preying on people who call them to sell their home.
The Real Estate market in Massachusetts has been on the down turn for the last three plus years. Most recently there have been more and more short sales coming on the market. A short sale occurs when the value of the property is less than the mortgage balance and the lender agrees to let the home close for less than the mortgage balance owed. (Click the link for a complete explanation).
So here is what I just ran into. A client of mine who lives in Milford Massachusetts had gotten herself into financial difficulty and was having trouble making her mortgage payments. I had actually spoken to her about doing a Short sale but she did not act on my advice. She ended up seeing one of those We Buy Houses signs and decided to call them. What a mistake!
These people had her sign an agreement that locks her into being involved with them for a year.
To make a long story short these people had her sign an option contract. They then proceeded to act on their OWN behalf to submit a short sale offer to the bank.
The value of this property is in the low 200's. These predators submitted an offer to the bank for $131,000!!!. You can probably already see this picture very clearly. God knows if they get the bank to accept an offer like that the home will be right back on the market and these people will have put some good money in their pocket.
The bank did not except their offer but this story continues to get worse. The owner never signed a listing agreement with these people but now her house is on the market and listed with an affiliate of this company!
The home was listed for $240,000 in the Greater Boston multiple listing service. The owner discovered the home was listed and questioned these people and they said - why do you care you need to sell the home anyway. The owner never authorized this company to sell the home. She did not sign a listing contract. Her expectation was they would be buying it.
A few weeks later the property was reduced to $225,000 with out the owners consent! No price reduction signed. Nothing...not even a verbal request for a reduction. It was just reduced period.
One of the terms of the agreement that the home owner signed says " I have agreed to sell the property to the buyer and am now bound by the terms and conditions described in this agreement. I further understand that can not continue to market the property to any other party, except as provided herein.
So as it stands this home owner is locked into an agreement whereby this entity does not care for what the home sells for and is working on their own behalf to get the home as cheap as possible for their own benefit. It makes me sick!!!
The listing company who is affiliated with these people has it in MLS has 2 pictures. The Real Estate company sure looks like they are going to be giving it their best effort (laughs).
Sounds like the attorney general would like to hear about this. I have told this woman to contact her attorney immediately.
This is the perfect example of why you should have an attorney look over important Real Estate documents. The fine print and terms of this agreement have completely locked the seller into a terrible situation.
Another short sale situation that has become quite common lately is short sale investor fraud. If you need to do a Massachusetts short sale I would encourage you to read this article. The last thing you want to have happen to you is be involved in a short sale scam where you end up in foreclosure. There are lots of people preying on others misfortune! Don't get caught with your pants down.
I would encourage you to read a few articles I have written about short sales. The 1st link is a complete overview of numerous short sale articles that cover everything you need to know about completing a successful short sale transaction.
Massachusetts short sales
Avoiding foreclosure through a short sale
Short sales and deed in lieu of foreclosure
If you are listing your home as a short sale in Metrowest Massachusetts make sure you hire a Realtor who has knowledge of short sales and has the experience to get the job done. I am doing successful short sale packages . I work with a local attorney who has success getting short sale approval. Call me at 508-435-5356 to find out more about Metrowest Massachusetts Short Sales. You will get honest advice from someone who cares.
I cover Real Estate Sales in the following towns: Hopkinton, Milford, Ashland, Holliston, Westboro, Southboro, Medway, Upton, Mendon, Bellingham,Northboro, Shrewsbury, Natick, Framingham, Grafton, Douglas, Northbridge, Hopedale, and Uxbridge.
Visit my website at Metrowest Massachusetts Short Sales.
36 comments:
Bill - This is some great info. You are clearly the go-to guy for Short Sales in Hopkinton.
Al - There are more and more short sales in my area. Not so much in Hopkinton but in some of the surrounding towns like Milford there are quite a few.
Hey I've been doing rehabs for years now and now I'm trying to get into Wholesaling, does anyone know a good course or class I can get into?
Bill,
The seller's goal was to get out of the payments they could not afford, correct? Did this company make the payments for them? I guess I just don't understand how this was hurtful to the seller; they may not have gotten top dollar for their house, but they were able to get out of their payments quickly which seems most important to a seller in financial trouble. Trying to do a short sale/traditional sale on their own would have left them with several more months of payments.
Thanks,
Mike
Mike the scammer did not make any payments for the seller and never took possession of the property. The person turned out to be involved with a Realtor and they duped the seller into signing an option contract with them with a price that would never ever get accepted by a bank. But hey they had a new listing! There were numerous clauses that locked the seller into them.
Isn't there an advantage to having the short sale negotiated in advance of the end buyer?
So buyers in your area want to wait months for a short sale to be approved?
I'm guessing selling agents would rather sell REO than a short sale, because there's nothing 'short' about a short sale.
Seller helps buyer - Of course there is an advantage of having the short sale negotiated before you have found a buyer. The problem is that most banks will not respond unless there is a valid offer on the table. This is one of the many frustrations Real Estate agents deal with when handling a short sale.
Bill, unbelievable story, It takes all kinds I guess. Home owners need to talk to a reputable Realtor and I guess an attorney to try to work their way through the process. We do short sales continuously in our office, we also try to get the credit reporting lighten up for the sellers where the banks will negotiate it. It all in good business practices by local Realtors.
Best
Richard
Rich it really was unbelievable what they did to this woman. It is terrible that there are people out there that prey on the folks that don't know any better.
Bill, I just ran into this post and may be a little late to voice my opinion but here it goes anyway. There are scammers everywhere and people have to be careful. However, based on your post, I agree with Mike. I haven't really heard anything bad that these people have done. They signed an option contract for a year because sometimes it can take up to a year for a short sale to complete. I am sure she can get out of the contract if she wanted to. They are listing the property on the MLS for the full price so they can prove to the lender that there is no interest and they can negotiate with the lender. That's the reason there isn't much effort put into the marketing. Even if it sold at full price the loan would have to be paid off so there would have to be equity in the house for them to make any money. How is the owner losing? Also, even though she didn't have a listing agreement, she must've given them control of the property so they can market it. That's how these people would eventually find an end buyer. If you are appalled that the offer was not for market value, why don't you make an offer and buy the property for full market value yourself? Do you have a list of potential buyers that would be interested in the property? These people are doing this to make money. Who would buy a house for full market value in a declining? Then what? resell it for full market value? Where's the margin? What about your holding costs? Taxes? Insurance? Repairs? RISK? Marketing? Commissions? Getting funds? Just because these people made a low offer to the bank it doesn't mean it will get accepted (which it didn't). It's just a starting point for the negotiation. The bank wants to get some of its money too or it will let it go to foreclosure. What's better? Letting it go to foreclosure or completing the short sale? Who wins? Who loses? Who's taking the risks? This lady owes more for the house than the house is worth. Would you have listed her property for full market value to try to sell it before it forecloses? Maybe wait 3 to 6 months for someone to make a reasonable offer? By then it went into foreclosure. How is this lady losing on this? If the bank accepts, she's off the hook for a foreclosure. No money out of her pocket. You are probably looking at this as a realtor and how these people are taking business away from you. But you have to look at what's best for the seller considering that the time is limited to sell and probably the only other option is foreclosure.Please show me where this hurts the seller in any way. As long as the loan is completely satisfied and the lender doesn't go after the seller for the difference. How is the seller losing? What would be better? A better offer for the house? The lender benefits in this case, the seller does not. The trick is to get the lender to accept an offer that can create a spread between the buying price and the end buyer's price. No spread no deal. If you do the short sale yourself, you have to find a buyer and the buyer has to be willing to wait until the short sale is completed. That could be 2 to 3 months. Some buyers don't want to wait that long. These people are offering to buy the property.
Dan
Anonymous - There is a very big difference between a disclosed and non disclosed option contract. In fact if you do a little research online you will see that Fannie Mae has begun investigations into those that do with federal prosecutors involved.
This is very serious business you are talking about. The instance described here was someone "preying" on the uninformed. The Real Estate company involved was a front for people doing option contracts. As a Realtor you have an obligation to the seller to get them the best terms and conditions period.
Getting an option for a low figure and then having a simultaneous closing with a 2nd buyer at a higher amount undisclosed is FRAUD!
The Realtor being involved as a party to this is also flat out wrong and needs to be disclosed - IT WAS NOT!
And yes the fact that the seller could be on the hook for the difference with what is owed to the bank is very real. These people were no way shape or form working for the seller - They were working for THEMSELVES PERIOD!!
There were so many mistakes involved with this deal it would make your head spin.
Bill,
This IS fraud simply because the property is being pushed at much less than market value.. This reeks of one of these late night Infomercial scams, and shame to the agent who's working with these guys. And they call US crooks!
Bill, you are right, that agent that listed that house is a scumbag. The sad part is that sometimes the public think We're the predators; we're not. I consider myself a public servant if I have a Massachusetts Real Estate License.
You know some people don't understand REAL estate investing. I don't think Bill has an issue with the wholesale side of the business but you should just be upfront about what you do. It is wrong to trick people but if there is a CLEAR understanding so be it. The idea is to create a win-win.
But...
We started hearing about mortgage fraud cases. There were so many cases of mortgage fraud over the past 10 years that there developed a presumption that “flips” were illegal. The rationale was that a property purchased on Day 1 for $100,000, for example, could not be “flipped” for $120,000 on Day 2, or Day 5 or even Day 90. The rationale was the property could not appreciate that quickly. Therefore, the final purchase price ($120,000 in our example) had to be fake, false and fabricated. There was no credit given to the investor for having negotiated a great purchase price and a better sales price. The presumption is that the second sales price had to be the product of a fraud on the mortgage company. Soon, title companies began refusing to hold “simultaneous closings” for fear of being accused of participating in mortgage fraud.
What if the ultimate buyer was not using mortgage loan funds to buy the property? What if the buyer were paying in cash? How could there be mortgage fraud on a flip, if there is no mortgage lender?
Get your facts correct it is NOT fraud people have been doublevclosing in commercial for years. Its not WHAT you do but HOW you do it.
This is a very interesting blog about short sale! I know of a certain website which promotes real estate business! This is a company where you can buy property at a very cheap price. 60-80% discount is allowed and people can buy property of their desired design here! Also people can sell their houses here.
Also foreclosure homes are available here!
Good thing I have a my cousin who is a lawyer who takes in charge of all our properties and has full knowledge on short sales and already has the experience of solving the problems easily.
Short sale has become very popular in Canada too.I checked the website m3reo, it looks great.
As a full-time wholesaler I'm very disappointed to read a post like this. Clearly this guy was not a wholesaler, but a scam artist.
Professional wholesalers disclose EXACTLY what they're doing upfront with the seller. In addition, they only put the property under contract if they know it can be sold quickly (a month or less). The whole point of wholesaling is finding sellers who WANT to get out quickly REGARDLESS of the price.
We work with sellers who have a ton of equity in their houses and for one reason or another (divorce, inheritance, fire damage, unable to pay mortgage) they have a BIG problem on their hands that they don't want to deal with. Good wholesalers can come in and explain the process, give them a number which gives enough room for profit for the wholesaler and their investors, and then, if and only if the seller is happy with the price, we put it under contract. Within a few weeks a cash only investor will come in and buy the property, taking the problem off of the sellers hands. Most investors I work with will then rehab the entire house, creating something beautiful which helps IMPROVE the surrounding neighborhood. They then sell it for a profit for their hard work and time. That's what a wholesaler is suppose to be. Shame on this jerk.
Sage it is good to hear that you run your business above board. There are plenty of people out there that will do anything to make money including lying and misrepresentation. A poor economy tends to bring out scam artists and a short sale gives them the opportunity with people who don't know what they are doing.
Those of you that accuse people that are assisting homeowners avoid foreclosure are being ridiculous. I believe that you are just pissed off that business is being taken away from you. There is ABSOLUTELY nothing wrong or illegal with what you described in your original post. The homeowner called the number for a reason and that reason is because they are in a home they can't afford and are GOING to foreclose if it wasn't for short sale investors.
70% of people that have the NOD filed on them are going to foreclose. I purchase short sales from homeowners and they thank me for it because now there credit is saved, at least to a point. The investor (if done correctly) is given permission by the homeowner to market the property. The homeowner is a bystander in the short sale process and the price the home sells for means nothing in the eyes of the homeowner. They just want out of the home. So quit making the homeowner out to be a victim here. Grow up and do some marketing yourself and stop hating.
Come on man...are you serious? It is amazing that you think a Real Estate company and an investor can be in bed together for the sole purpose of trying to buy a property well under market value and turn around and re-sell it.
In the circumstance mentioned in this post the Realtor did not disclose the relationship and submitted an offer to the lender that had ZERO chance of ever being accepted. Backing up a step the home was put on the market under value and was then marked under agreement in the MLS while this investor tried to negotiate with the bank. In the mean time the house was off the market for a while before the seller realized they were duped and the bank outright rejected the offer which was not even close to market value. This cost the seller months of time in a market where values were dropping. This is called taking advantage of someone! This does not SAVE a homeowner from credit issues.
In fact even if the bank did accept a ridiculous offer the seller could be stuck with a very large note they have to pay back. Stop kidding yourself! I know exactly what I am doing when it comes to short sales. In fact I have not had a single short sale rejected by the bank. 90% of the time the seller has not beeen required to sign a note either.
For those reading the comment from anonymous non disclosure of an interest in a property from an investor is ILLEGAL and is being cracked down upon heavily across the country as this kind of scam is running rampid.
Interesting post. Outrage at locking up a potential seller in a contract for a year? What does your listing agreement as a realtor do? Minimum of 6 months, with another back end 6 months if someone comes along to buy who looked at it during the listing period. Been a while since I had math, but that total looks familiar.
There are scammers in every business. I have never understood how any real estate agent can act as a dual agent of the seller and buyer, ESPECIALLY IN A SHORT SALE, and still be advancing their client's interest. Which client?
You repeatedly say "seller's expectation" and "undisclosed" in your post, yet there was significant paperwork in this kind of transaction that specifically defines what everyone is doing - otherwise, seller could walk at any time. I do not dispute some companies are much better about informing the seller than others, and our practice is to always be up front with the seller about all aspects of the transaction. However, in the end, it is up to the seller to understand what he/she signs, ask questions and have an attorney review.
If laws are broken (a real estate agent with an ownership interests in a property without disclosure; or fraud; a simultaneous close in a state that has laws against - which by the way, is not illegal per se in every state), then prosecute to the fullest extent of the law. But to cry outrage for someone looking to maximize profit, well, that would be like outrage against realtors who add short sale negotiation to their skills to drum up more business.
To refer to this as predatory simply preys on peoples' fears and drums up business for yourself. Of course, you do all this as a not for profit from the bottom of your heart? No? You charge a commission? Oh, I see. You do this to make a buck too.
One should really aware of these scammers . And read every point of agreement carefully. Bill, you have written an eye-opening article on these short sale scammers.
I absolutely agree with you there are a lot of scammer out there. That is why it’s important to do your own research about a certain “we buy Houses Company” you can start by Googling.
Why would a professional trying to make a profit offer fair market value for a property that an owner cannot sell? I have a we buy houses company and I am looking for properties that are completely run down, abandoned or owned by a landlord who is tired of renting. We provide a service; do you think we are going to do it for free? If someone trying to sell their house could get fair market value then they would sell it with a realtor. There is a reason why they need to sell their house fast and why they can't list it with a realtor; if they could wouldn't they?
There are definitely a lot of scammers out there so you do have to be careful, but a professional we buy houses company like mine is a perfect way to sell your house fast and for cash.
Gordon
http://www.yourhouseintocash.com
Gordan what you are talking about is completely different than what this article about short sales scammers discusses. I know there are plenty of legitimate companies that buy homes. This is not what the article talks about.
Wow! There are plenty of companies out there that help the sellers in foreclosure do a successful Short Sale without all the games it seems that happened in this case. When you do everything in your power to help the seller, help the bank get the property sold and find someone a new place everyone wins!
We help everyone in Florida and Georgia with a successful Short Sale!
www.411WeBuyHomes.com
Your reason doesn’t matter to us. We will find you a buyer that will offer you cash and the opportunity to unload that land that’s just sitting there doing nothing.
Wherever there is carcass vultures will swarm. This is so true for the state of the real estate market. I wish laws were very strict with such scammers.
Remember, you are in the wholesale real estate investment business. So you're not talking about selling at retail. The other guy will do the rehab and market the property at retail. So that means your all-cash offer to the Seller is going to be somewhat low.
Cash for houses - That isn't working for the seller doing the short sale. Lenders today are far less likely to accept a low ball offer.
Some of these "i buy houses" people are actually legitimate real estate investors looking for their next deal. Others are predators looking to capitalize on a homeowner's financial problems in any way they can.
Avoid the "I buy houses" group and find an experienced Realtor to assist you with the short sale maze.
Thanks Bill,I found your information very helpful
Yes, this is a predator in the name of a real estate investor. It is clear they do not have the best interests of the poor seller, but only interested in lining their pockets.
Like most legitimate businesses, real estate investing is an ethical business, but scavengers like this destroy its name.
This post is well written and informative. I don't comment often, but it doesn't cost me anything to say it when its true. Cheers.
Short Sale Florida
Hey Bill, great article. I recently encountered a similar issue in my real estate area, and I'm happy that I found your page. Always need to be careful about the short sale investors out there.
Thanks!
Jackie from Wellesley Real Estate
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