OK, so I went kind of easy on the lawyer yesterday. Well, today that’s over with. (For those of you who don’t already know, I’ve been posting my point-by-point response to a letter received that was written by a lawyer advising her client, the homeowner, not to enter into a Short Sale agreement with an investor. You can go here to read the full letter if you haven’t already.)
Like I’ve said before, so many lawyers (and other real estate professionals) simply DON’T UNDERSTAND Short Sales, so their knee-jerk reaction is to advise against them, even when the Short Sale would save the homeowner from a disastrous foreclosure.
Here’s the eighth excerpt from the attorney’s letter, followed by my responses:
From reviewing the proposed documents, I do not believe that these requirements could be met.
That’s because as a lawyer it’s safer for you to advise against something you don’t understand than to seek to understand it… but in my opinion, you’re just wrong. The requirements that you set out (see yesterday’s post) are routinely followed by real estate investors and other Short Sale buyers – it’s the way the transaction should be set up and it’s the way closing agents (those who know what they’re doing at least) do it all day long.
So in yesterday’s blog post, I went over a section of the letter where the lawyer listed the ways such a Short Sale transaction “could possibly be insurable.” I know I already went over it briefly, but today I wanted to again revisit the points this lawyer made because her legal advice needs to be thoroughly shot down. (Can you tell I’m enjoying this?)
Here we go, line by line…
1. There are no violations of any restrictions listed in the short sale payoff letter or closing instructions.
Of course! It’s the same thing with any payoff letter in any closing – if you do not comply with the instructions in the letter, the lender can return the funds. They are in complete control of the transaction, so as a closing agent you have to read that letter and make sure you comply. Typically, there are provisions regarding where to send the money, how to send it, any additional paperwork to be signed at closing, specifics about what goes where on the HUD, what agents can make what commission, and the name of the buyer. Whatever is there, you MUST do what they say – just like any demand letter for any closing –Short Sale or otherwise.
2. There have been no misrepresentations as to the value or ownership of the property to the existing lender, the new lender, or the purchaser.
Of course! Nobody should make any misrepresentations to anybody in any transaction. And yet this is an area where untrained investors can get into trouble. Real estate investors are often trained to “show up at the BPO to influence the outcome.” No, I don’t agree that your job is to “influence the BPO,” but at Breakthrough we explain the importance of the BPO and how you can help the BPO agent do their job and get the accurate value consistent with the proposed transaction. Look, if you sent three honest appraisers all out to the house with a copy of the Bible, they would each come back with three different values (more on this at Breakthrough). But back to the lawyer letter… of course, there should be absolutely no misrepresentations of value or anything else for that matter!
3. All disbursements must be made exactly as stated on the HUD-1 settlement statement, and only to parties involved in this specific transaction.
Here again… Of course! But we’ve heard of investors doing all sorts of crazy stuff to find a way to get paid. Look, the purchase and sale from seller to buyer must be straight up from seller to buyer according to the HUD – with no funny business going on, nothing going on under the table, outside the closing or otherwise. But this doesn’t mean you can’t make a HUGE PROFIT – you just have to know how (which again, is what we get to spend our time on at Breakthrough).
4. Each half of the simultaneous closing must be kept separate and stand on its own. The sale from A to B must be fully funded and disburse with money coming from and going to all appropriate parties. The sale from B to C must also stand on its own. The money from C’s lender must not be used to fund any portion of the A to B transaction.
Yes, Yes, and Yes! Again – this is how we do it.
I’m having so much fun . . . I’m just gonna keep on going. Tomorrow I’m going rip up your statement about income taxes, because… let’s see, how do I say this politely… you just have no idea what the heck you’re talking about!
P.S. Come find out how we do it the right way – Breakthrough Orlando 09 is only a week away!
