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RPLS 2011 Presentation

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Short Sales and Foreclosures from the Investor’s Perspective


                        Presented by:
                   T....

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What are the Opportunities?

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What are the Opportunities?




  1.Buy Low
  2.Sell High

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RPLS 2011 Presentation

  1. 1. Short Sales and Foreclosures from the Investor’s Perspective Presented by: T. SCOTT GALLOWAY Galloway and Collens, PLLC 26075 Woodward Ave, Suite 200 Huntington Woods, Michigan 48070 248.545.2500 Scott@GallowayCollens.com OutFromUnderMyHouse.com GallowayCollens.com
  2. 2. What are the Opportunities?
  3. 3. What are the Opportunities? 1.Buy Low 2.Sell High
  4. 4. Finding Opportunities After the Crash… Possible Business Models: •Buy and Hold •Buy and Resell with Seller Financing •Buy Out of Redemption or at Sheriff Sale and Resell to Mortgagor •Flip the Property •Other?
  5. 5. What is a Short Sale? A “short sale” in the real estate context is a negotiated release of a mortgage (and/or other liens) for an amount that allows the transaction to close when the net proceeds from the sale are insufficient to fully satisfy all the liens against the property. Approval of a short sale is entirely discretionary with the mortgagee.
  6. 6. Purchasing a property “short” You may find yourself in a beautiful house . . . You may ask yourself, well, how did I get here?
  7. 7. The Process of Obtaining Short Sale Approval This process is long and frustrating… And can often seem like a Road to Nowhere.
  8. 8. Professional Assistance •Attorney •Realtor •Licensed Appraiser •Title Company •Short Term Financing •Long Term Financing •Home Inspector/Handyman
  9. 9. Questions?
  10. 10. The Process of Obtaining Short Sale Approval Evaluate your seller: Avoid the seller who says: “I can't seem to face up to the facts. I'm tense and nervous and I can't relax”
  11. 11. The Process of Obtaining Short Sale Approval Evaluate your seller: •Need to move (e.g. for a job, schools etc) •Can‟t afford / facing foreclosure •No longer appropriate for intended use •Part of a decedent‟s estate •Are owners divorced or divorcing? •Close to a break even or equity position •Working with an attorney or experienced realtor? •Working with a short sale “advisor” •Prior efforts to sell or modify loan •Documents ready / understanding of process
  12. 12. The Process of Obtaining Short Sale Approval Evaluate the property: Beware of the “house that„s out of the ordinary, that's right don't want to hurt nobody, some things sure can sweep me off my feet. Burning down the house”
  13. 13. The Process of Obtaining Short Sale Approval Evaluate the property: •Payment status. oStatus of foreclosure •Multiple mortgages oCurrent balances •Other liens •Delayed maintenance •Owner occupied or tenants or vacant •Listed for sale •Current servicer •Demand for rentals / rental rates
  14. 14. The Process of Obtaining Short Sale Approval Purchase Agreement •Price considerations oBPO – Financing Appraisal tension oHistorical data and Case Shiller Index •Contingencies oShort Sale oFlexibility for purchaser or seller oTime to obtain oInform seller of process
  15. 15. The Process of Obtaining Short Sale Approval Purchase Agreement •Price considerations oBPO – Financing Appraisal tension oHistorical data and Case Shiller •Contingencies oShort Sale oFinancing oWhen does period start? oApplication / Approval timelines
  16. 16. The Process of Obtaining Short Sale Approval Purchase Agreement •Price considerations oBPO – Financing Appraisal tension oHistorical data and Case Shiller •Contingencies oShort Sale oFinancing oInspection oWhen does period start oLimitations on right to cancel transaction
  17. 17. The Process of Obtaining Short Sale Approval Purchase Agreement •Price considerations oBPO – Financing Appraisal tension oHistorical data and Case Shiller •Contingencies oShort Sale oFinancing oInspection
  18. 18. The Process of Obtaining Short Sale Approval Follow Up, Follow Up, Follow Up! First - confirm that seller submission was timely made Next – confirm that seller submission is complete Next – confirm the file has been assigned to a negotiator Call whoever is processing the submission for updates.
  19. 19. The Process of Obtaining Short Sale Approval Prepare to Close… Even after careful submission and follow up something unexpected can happen, be prepared for anything! “Like sittin' on pins and needles Things fall apart, it's scientific”
  20. 20. Legal Concerns for the Investor Don‟t Worry About the Government? NO! There are lots of ways for your client to get into trouble by being too aggressive •Credit Services Protection Act •Michigan Consumer Protection Act •Unauthorized Practice of Law •Engaging in a Regulated Occupation (Real Estate Broker) Without the Proper License •Mortgage Assistance Relief Services Rule
  21. 21. Questions?
  22. 22. Purchase Out of the Redemption Period •A more direct approach when only one mortgage and no other liens •No submission of documents or waiting period as in a Short Sale •The transaction needs to be completed before the end of the redemption period as defined by statute MCL 600.3240
  23. 23. Mortgage Foreclosure One of two ways: By judicial action or By advertisement
  24. 24. Mortgage Foreclosure Do your homework. Pre-sale investigation is key as time will be limited on the day of sale. Check out local newspapers for properties listed for foreclosure or online services such as www.realtytrac.com Obtain a list of comparables from a local real estate agent Conduct a title search View property
  25. 25. Mortgage Foreclosure Foreclosure by Advertisement – Three Important Parts: 1. Notice 2. Sheriff Sale 3. Redemption
  26. 26. Mortgage Foreclosure Notice Once determined lender may and wishes to foreclose by advertisement, the following must be included in the notice: •The names of the mortgagor, the original mortgagee, and the foreclosing assignee, if any; •The date of the mortgage and the date the mortgage was recorded; •The amount claimed to be due on the mortgage on the date of the notice; •A description of the mortgaged premises that substantially conforms with the description contained in the mortgage; and •For a mortgage executed on or after January 1, 1965, the length of the redemption period
  27. 27. Mortgage Foreclosure Sheriff Sale The sale shall be a public sale, held between 9:00am – 4:00pm Initial /opening bid is set by foreclosing mortgagee and is typically set at the mortgagee‟s approximate fair market value amount or at the full amount of debt owed Bidding starts at $1.00 over the opening bid amount, bidding increments after initial bid are determined by county At the close of the sale, sheriff‟s deeds are issued and subsequently recorded.
  28. 28. Mortgage Foreclosure Redemption Purchaser NOT immediately the fee simple owner Redemption amount is set forth in sheriff‟s deed, includes the following: •The sum that was bid for the property with interest from the date of the sale at the interest rate provided for by the mortgage •The amount of the sheriff‟s fee paid by the purchaser under section 2558(2)(q) ($50.00) •A $5.00 fee for the care and custody of the redemption money, if the payment is made to the register of deeds
  29. 29. Questions?
  30. 30. Conclusion – The current real estate market could present a Once in a Lifetime opportunity for those willing to journey down what sometimes will feel like a Road to Nowhere. For those who approach the process with caution and an understanding of the pitfalls they can avoid Burning Down the House and perhaps lead a Wild Wild Life as an investor in distressed properties. Special thanks to the Talking Heads for the inspiration they provided for this presentation.
  31. 31. Thank you! T. Scott Galloway Galloway and Collens, PLLC 26075 Woodward Ave, Suite 200 Huntington Woods, Michigan 48070 248.545.2500 Scott@GallowayCollens.com OutFromUnderMyHouse.com GallowayCollens.com

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