What Are the Most Important Clauses in a Short Sale Contract?

In recent months lenders have started focusing on doing more short sales than REOs. Their reasoning sounds logical enough; they want to get out of the toxic assets at a better price than going to the foreclosure sales.

We have a service that tracks the discount at which each short sale and foreclosure ultimately sells. The discounts are not always larger for REOs; sometimes the short sales are greater. The final figures fluctuate wildly and vary by bank and motivation of each lender.

The market has been stabilizing and depending on which statistics you believe, the real estate market is either falling, moving into a bubble or poised for the greatest run ever! Frankly, it doesn’t matter as long as you are wholesaling short sales. If you are holding long term, it doesn’t matter either. It matters the most when you are a rehabber and you have to sell when you complete rehabbing a property and you are unable to sell it.

Since we wholesale 99% of the time, the clauses in the short sale contracts are critical to our not losing money if we are unable to find a buyer before our inspection period is over. With REOs the lenders have their own addendums that stipulate the inspection period for each deal – usually 5, 7 or 10 days. So if you include any inspection period in your REO contract, it doesn’t matter because the lender’s addendum overrides it.

However, your short sale contract is not between you and the lender. It is between you and the homeowner. The lender is not on title until he forecloses, purchases the tax deed for the property or the homeowner gives the lender a deed in lieu of foreclosure. Until the lender is on title, he can only refuse to allow a principal reduction of the outstanding loan and stop the short sale.

Let’s assume your seller/homeowner is agreeable to a short sale and signs your contract. While you have a signed contract on the property, you can’t plan on selling it wholesale because you cannot be sure the lender will approve your short sale price.

Some wholesalers advertise the property for sale immediately. Technically they have an equitable interest in the property because they have a signed contract. If you sign a contract with an end- buyer, you have the legal obligation to sell him the property. But, if you don’t get it because the lender refuses to give you the price you need, you have “breached” your contract. The way to overcome this problem is to put a clause in your contract that simply says, “Contract is null and void if short sale is not approved at a price acceptable to investor.”

It is more advisable to wait until you get a written approval from the lender to start your marketing. However, if you wait then you need your inspection period to start after you get lender approval. The simplest way to handle this is to put the following clause in your purchase and sale contract with the homeowner/seller, “Inspection period to start after buyer receives written approval from seller’s lender.” The actual inspection period (we use 15 days) is located in the actual contract. I consider this the most important clause in the short sale contract.

This means that you have 15 days from lender’s approval to market and contract with an end-buyer. If you are unable to find a buyer, then you can cancel the contract and not risk losing your earnest money deposit (“EMD”). This is the way to wholesale properties without taking a market risk.

Real estate agents will try to make your inspection period start when you sign the contract (contract’s effective date) with the homeowner/seller. The way to explain this issue is that the short sale will take weeks or months and the condition of the property when the approval comes could be totally different than when you signed. If you sign the contract with your inspection starting immediately, you run the risk of losing your deposit if you can’t wholesale it before the closing.

The way to offset this potential loss of an EMD is to make the deposit as small as possible. We typically give a $250 to $1,000 EMD and are seldom asked for more. There will always be the rogue agent who wants a ridiculous amount – even as much as 10% of the purchase price. If you find one of these agents asking for a large EMD, explain that you do too many offers to have 10% on each one. If he is not motivated to help you, move on to the next deal.

In summary, real estate is a renewable resource and there will always be other opportunities. Do not allow yourself to be intimidated by agents or other investors who want you to do what protects them. The final decision is whether the deal is so good that you have to comply with unreasonable requirements – just make sure your EMD is safe and you are prepared to close or lose your EMD.

To your limitless success!

A Review of ‘Home Foreclosure Survival Tactics’

Home foreclosures in the United States are at unprecedented levels. As many as a third of all homeowners are thought to be falling behind with the mortgage repayments on their properties. As a direct result of this, a host of scamsters have suddenly sprung up claiming to offer help and advice.

Thankfully I have not fallen behind with my mortgage repayments, so I am not personally in danger of losing my home. However, I do have several friends who have gone through the foreclosure process and one of them fell victim to obtaining bad advice and ended up making matters worse for himself and his family.

A different friend of mine that was facing a home foreclosure told me about a valuable resource they had found that had really helped them a lot. They had done some serious research on the internet and they found an ebook by Anne James called ‘Home Foreclosure Survival Tactics’.

Having carried out some research on this topic myself, and knowing that it had helped my friends, I decided to get hold of a copy and see what it had to offer.

Here is my review of the ebook…

If you are already quite knowledgeable in terms of how the world of mortgages and finance work from the inside then this ebook may not be for you. However, if that’s not the case and you have fallen behind on your repayments and need some solid advice and help, then you are likely to find just that in ‘Home Foreclosure Survival Tactics’.

The thing that impressed me a lot about this ebook is that it tells you exactly what actions you can take, when you should take them and in what order. Who you should contact first and what to say was also revealed. This section discusses exactly what you should do before ever picking up the phone to make contact with anyone.

Another very useful piece of information was the one agency that could help you to catch up on your payments (and not have to pay them back).

The ebook helps you to carry out a full assessment of your current position, so that you will know exactly what you are capable of negotiating for and then goes on to show you the order of things that need to happen and who to contact first.

The ebook even reveals the fact that you may even have options at your disposal that could allow you to continue living in your home.

I have to say I was impressed with this ebook and I believe that the author has offered solid and actionable advice that will really assist anyone who is facing the fear and pain of a foreclosure on their property.

6 Key Questions to Ask Before You Hire a Forclosure Attorney

The 2008 financial crash put a lot of people out of work. It hurt business owners, emptied personal savings, destroyed American home values and lead to massive foreclosures.

What Many Homeowners Don’t Know

The crony network of big banks, financial institutions, government, politicians, the courts, and their corporately owned media have used propaganda, lies and spin doctors to convince Americans that naïve and greedy homeowners crashed the global credit markets in 2008.

They blamed the crash and current economic chaos on homeowners who bought too much house. Yes, some mortgagers made some people believe they could buy more home then they could afford. However, the blame here is often misleading.

Why? Obscene broker commissions were a big part of originating mortgages. Banks were on a tear to bundle, securitize, sell and re-sell mortgages. It lead to irregular mortgage practices.

The bigger truth has been revealed that there are no mortgages to back the mortgage-backed securities. Thus former treasury secretary Hank Paulson told taxpayers, “We must bail the banks out, or else everything will collapse.”

Iceland Let Their Banks Collapse

In fact, Iceland arrested the financial offenders and put in actual safeguards to restore the capital markets and consumer confidence. We in America got the toothless Dodd-Frank bill that makes it appear legislators are minding the store.

Banking and the financial industry needed major reforms. Instead, after the Wall Street financial crash our American banks actually got 38% BIGGER!

Too Big to Fail and Too Big to Jail

Today banks are bigger than before the economic crash and the Dodd-Frank bill does nothing significant to keep Wall Street from trashing the economy again.

Insanity is doing the same thing you’ve been doing but expecting a different result.

Fast forward and today, these quasi-patriotic cronies continue the lies and prop up the fraud on the taxpayer’s dime. They brazenly continue to cover up their partners’ crimes while still receiving a massive transfer of wealth from taxpayers without impunity.

Can You Name One Banker That Went to Jail?

By the way, in 2008 that 800 billion dollar bail out has turned into trillions out the back door of the Federal Reserve straight into bank coufers.

What few Americans realize is that crony capitalists who fleeced institutional investors out of $17+ Trillion, clouded the title on all the mortgages they originated and supposedly sold on the secondary market.

They stole our pension money, wiped out savings and now they’re still after your home. In fact, more than 4.9 million homeowners were foreclosed since the Wall Street crash and there’s more on the way.

American’s need help staying in their home. If the banks and servicers won’t deliver then where do homeowners turn for guidance through this financial maze of fraud and corruption?

Many are programmed to think, “Lawyer, that’s what I need to stand up for me, to sort out the fraud, to keep my family from being kicked into the streets.”

Are Lawyers Best Suited to Standup For Homeowners?

As Americans we’ve been conditioned to believe that the only people who can help us navigate, legal matters are lawmakers and attorneys. Fortunately, in the realm of foreclosure law, there are a few good ones.

However, when it comes to ferreting out truth or fraud in your foreclosure, few attorneys (Real Estate attorneys included) are equipped or have any desire to fight as hard as a regular educated homeowner.

It’s a fact that no one will ever care more about saving your home than you. If staying in your home is not all that important, then most attorneys will do. But buyers beware.

How Do You Choose the Right Lawyer in Foreclosure Matters?

I’ve personally talked with hundreds upon hundreds of homeowners all across America who routinely pay from $1,000 to $30,000+ in attorney’s fees plus monthly retainers and still loose their home. This is more common than you’d think.

I ask homeowners, “What was the attorneys strategy? Was it to help you buy time until you are evicted or actually stay in your home?”

Many homeowners had not thought the end game through. How often do we hire attorneys? There are no Consumer Reports on America’s best foreclosure strategies, fighting bank fraud or attorneys.

Most Americans are busy trying to make a living, caring for loved ones, keeping their heads above water and would rather avoid the legal realms. Who can blame them?

So, unless new information is introduced it makes perfect sense that many homeowners don’t know what to ask to hire an attorney or figure out what makes one effective over the next.

When it comes to defending your home, the following basic questions will get most homeowners started.

The following six questions came from an interview with Justin James. He is the founder of The Foreclosure Relief Network, a company dedicated to helping homeowners stand up for their legal rights.

The company with its network of private investigators, paralegals and law firm was developed to educate and arm the American consumer with the information necessary to protect families and property against the unlawful actions of banks.

Mr. James emphasizes that “Every homeowner who suspects mortgage fraud or are in foreclosure or about to be, needs to be educated.

They need to know upfront if an attorney will work on your behalf or instead see you as a tool to collect fees while they stall things off in court. By asking these basic but key questions, this is knowable.”

You want to interview an attorney just like you would choose a doctor, dentist, CPA or a contractor to work on your home. You want a good fit.

Write Your Questions Down

Mr. James suggests that before you phone or visit an attorney in person, have your questions written down and refer to them.

6 Key Questions to Ask Before You Hire an Attorney to Get a Modification or Defend Your Home Against Banks

  1. Do you feel that the banks and their servicers commit mortgage security and/or foreclosure fraud? (Yes) Correct answer.
  2. Do you believe that if a bank shows up with a piece of paper that alleges it’s the original Note-do you still believe there’s a chance of winning court? (Yes)
  3. Are you willing to challenge the banks claim of ownership of the note, mortgage, chain of title, etc.? (Yes)
  4. Are you willing to cross exam a witnesses? (Yes)
  5. Will you challenge and call a robo-signer as a witness? (Yes)
  6. Are you willing to be that attorney at the party that went up against the big bankers or challenged a court that seems to lean in favor of big banks? (Yes)

If you get so much as one “no” to the above questions then be aware, your situation may be at cross-purposes with this particular attorney.

To the few that are actually competent and not bluffing their way into your back pocket, these basic but telling questions are not difficult to answer.

Other than the details of your situation, each question does not require you as homeowner to expound any further. Either they know it or they don’t. Either they believe banks can do no wrong or believe in justice for homeowners.

When to Walk Away

Bottom line is that if the attorney interviewed is…

  • Not comfortable breaking down your chain of title if necessary
  • Does not believe the bank is ever wrong about a note or mortgage
  • Not willing to challenge the bank or the courts
  • Not willing to cross examine a witness…

Then why are you there? Why should they take your money? Don’t give them a dime Pack your bags and find another attorney or other expert to interview. Consider…

Who’s Paying Your Bill?

You are paying the attorney for a service. You wouldn’t go into a car dealership and say…

“I’ve got $400 a month to spend on a vehicle. Just give me whatever you got to drive.”

You’d be surprised how many people would accept poor treatment when it comes to attorneys. Why?

Because some homeowners are intimated and think, the lawyer knows more. That’s usually true about civil law matters. That’s when a good educated attorney makes sense.

But when it comes to foreclosure, commercial law and challenging the banks-think again. I would challenge you to think outside the box.

Defend Yourself? Really?

Others will say, “YES BUT you can’t defend yourself against fraud or a foreclosing bank. You must have an attorney.” Many homeowners felt that way in the beginning. However…

We now know plenty of average homeowners who’ve been educated and succeeded with the guidance of companies like The Foreclosure Relief Network.

But, what few homeowners at first realize is that attorneys are not traditionally schooled in banking and finance.

In fact, I’ve interviewed some well informed average homeowners who educate their attorneys.

You Deserve to Know What You are Getting for Your Time and Money

If your prospective attorney is the real deal, they will understand your need to interview. That’s why it’s important to know…

  • What does the attorney actually believe about banks and foreclosure?
  • Make them lay their cards on the table. Time is of essence.

You simply want to insure that you are investing your energy and money wisely into a winning strategy and NOT prolonging what many attorneys feel is an inevitable foreclosure.

It’s a little known fact that if you, as a homeowner are educated and have a complete and correct strategy then foreclosure is NOT always inevitable.

Follow The Money

If you hire an attorney that did not adequately answer these questions, then be advised you, your family and your home may be taken for a professional ride.

According to Mr. James extensive experience with homeowners, banks and courts across America, rare is the attorney who will answer your call, who will fight banks on behalf of your homeowner and constitutional rights.

Most attorneys will not intentionally do you harm because they genuinely believe what they believe. That banks can do no wrong is just part of their many years of education and training.

As important, attorneys take an oath to protect corporations. It’s what they do.

That said… put yourself in the attorney’s shoes for just a minute. They have a lot of competition. A title, though impressive is no guarantee of success. They are businessmen and women and for many economic times are tough like many homeowners.

Yes, attorneys enjoy a measure of prestige but that doesn’t pay the bills. Like you and I, they have to make a living or find a way to survive. Just make sure it’s not at your expense.

Who Has More Money? Influence?

A homeowner called Mr. James and was livid because he spent over $7,500 on an attorney who believed that his counsel had defected to the bank side.

Even with documented fraud (common today) as the centerpiece of his defense against the bank, this homeowner lost his home.

The homeowner asks, “Who’s got more money here? The Big American Bank or me as homeowner?”

Do you think you’ll ever see this homeowner’s story on the evening news? It’s not likely. Remember who owns and controls media, advertising and reporting.

Of course I don’t expect you to believe any of this. Check it out for yourself.

Bank Walks Away

Speaking of a good homeowner story, while working on this article one of Mr. James clients called about Quiet Title action which forces a bank to produce valid documents.

The banks have to prove they have ownership before they can foreclose. In today’s heavily securtized financial system that’s more and more difficult for banks to validate unless they manufacture documents from thin air. This is known as robo-signing and yes, it’s illegal.

Gary is out of the Midwest. He applied several times for a modification and then found himself in foreclosure. He suspected bank fraud. Gary began looking and found a young and hungry attorney out of law school.

The attorney had not yet adopted “a bank can do no wrong” attitude. However, the first hurdle was overcoming this attorney’s lack of knowledge on foreclosure fraud, banking and securitization, etc.

Remember few attorneys have this profound knowledge, seek it out or even believe it’s possible to help a homeowner to win. It’s not taught in law school.

To compensate, Gary began working with Mr. James to gain the education, knowledge, legal templates and strategies. This also saved him thousands of dollars in attorney’s research fees.

Gary reported that his homework paid off and the bank walked away. Finding a lawyer willing to listen was the exception in this case. However, keep in mind that…

The Courts Are Available to All Homeowners

Remember, you as an American citizen have constitutional rights.

An attorney is not the only way to stand your ground against bad behaving banks. In fact there are far more effective strategies homeowners can and do take every day.

The majority of homeowners do not realize that with the right kind of education they can in fact represent themselves in court. It’s referred to as Pro Se’, a petitioner or simply an American citizen. Often it’s an effective option. Here’s why.

The fact is that the courts cannot hold a regular homeowner to the same standard as they do lawyers. It turns out that with an effective strategy, presented properly, defending yourself against banks often leads to settlements.

Mr. James reports that he sees it everyday and as the courts become more educated, the tides are shifting in favor of homeowners.

Some homeowners combine the idea of Pro Se’ (without an attorney) along with private mortgage investigations to uncover irregularities that stop foreclosures.

Bottom Line-Trust Your Gut

Remind yourself that if your home is worth defending then no one will ever fight for your home like you can.

After interviewing the attorney, if you can’t say yes, then SAY NO FOR NOW.

Keep looking. If the attorney doesn’t feel right-move on. There are viable alternatives. Do your homework.

Finally, if you have a compelling enough why and are willing to do a little legwork, then there are resources that can help you to learn how to stay in your home and prevail even without an attorney.

How Soon Can You Be Evicted After The Foreclosure Sheriff Sale?

Homeowners in foreclosure are rightfully worried about not being able to save their homes and how quickly they will be evicted after the sheriff sale. Although the lender and various “experts” will threaten them with the sheriff showing up the next day to violently kick them out of the house, this is just not the case in foreclosure situation. The county sheriff and the eviction crew will not show up the next day after the sheriff sale, and homeowners should ignore the fear-mongering that threatens this possibility.

Owners should be aware of the implications of the foreclosure auction, though. The sheriff sale will transfer ownership of the property, and the foreclosure victims will not own the house after this point. But this does not mean that the eviction process will happen automatically right after the house is auctioned, as there are more steps that will need to be taken by the new owner.

The high bidder at the auction will most likely have to have the sheriff sale confirmed (this is not a specifically detailed step in every state). This can take from a few days to a couple of weeks after the auction, depending on how quickly the courts and new owner act. But this is generally just a simple step in the foreclosure process after the sale that involves the sheriff and judge confirming the auction was for a legal amount and that the deed has now been awarded to the new owner.

The new owner will most likely be the original foreclosing bank that the homeowners had been dealing with in the first place to stop foreclosure. About 95% of foreclosures end up being purchased by the lender, rather than a third party.

In order to evict former homeowners, the lender will have to request the court grant it possession of the property and order the county sheriff to evict any remaining people or personal items and change the locks. This is a legal process, though. Homeowners should not fear that a bunch of government thugs with badges and guns will show up at their house the day after the sheriff sale to kick them out. Of course, this is exactly what happens, but at a later date if the foreclosure victims do not move out in time.

But the entire eviction process can take up to a month after the sale; throwing people out of their homes is not a simple process before or after a county auction. The court will have no problem ordering the eviction (unless the former owners go and try to contest the sale, eviction order, etc.), but the sheriff’s department will have to give notice of the impending removal. This can be as little as posting a piece of paper on the property with three days notice to move. Thus, after the sheriff sale, former homeowners better be prepared to leave on their own or work out another solution.

People facing foreclosure should not be overly concerned about being kicked out of a house with little notice. The sheriff will not just show up the next day or a few hours after the sheriff sale, as there is still a legal process that must be followed for a bank to take back possession of a foreclosed property. Homeowners probably have at least two weeks to a month after the sheriff sale date to arrange for a new place to move into.

In any event, homeowners are always encouraged to call the sheriff’s department to ask them when then eviction will take place. Even more promising, they can also usually ask for a few extra days or a week in order to move everything out and give up the house peacefully. There is still a chance to negotiate with the local government for more time (courts and sheriff) so that the former owners are not taken by surprise by the eviction.

Thus, the banks and government officials will not evict foreclosure victims right away after the auction, but there is no time to spare, either. Having a couple of weeks to move out can give people a chance to find a place and move in at their own pace, but even a month-long eviction process will go by very quickly. If in doubt, homeowners should contact their local government officials and ask about the eviction — the courts or sheriff will be able to inform them of the date and try to work out the most reasonable solution. They want as little trouble after foreclosure as the former homeowners do.