Brian Meara share with us why it can pay off to be a bulldog when it comes to short sales.
Find out his strategy when it comes to an offer that’s too high for him to agree to and how drawing out the process can work in your favor.
Mike: Welcome back to the flipnerd.com REI Classroom, where experts from across the real estate investment industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Brian: Hey, guys. Brian Meara here with the Investor Entourage, today’s host of the REI Classroom. And today, we’re going to talk about why being a bulldog actually pays off.
Mike: This show was sponsored by passiverental.com.
Brian: Okay, guys, what is this topic? What exactly are you talking about? What does that mean, “be a bulldog,” and why does it by off? One of the things that I’ve encountered over the years is when dealing with short sales, once again, my specialty, people will say all the time, “Well, Brian, I found a property and it’s listed and they happen to say, or I spoke to the agent or it says right in their listing that the price has already been negotiated.”
Well, let me tell you something: more times than not, it’s not a good price. And you, as an investor, you probably don’t want to mess around with that deal. Unless, unless the listing agent is willing to trust your expertise and allow you to renegotiate that price. Because let me tell you something about agents, and I can say this freely because I am one, they just want to get the deal closed.
Think about it. You’re a real estate agent, when the deal goes to closing, you get your commission. It’s over. You did right by the homeowner. You kept the house out of foreclosure so nothing wrong there, but you’re not real motivated about price. Because think about it. If you negotiated a $30,000 more discount, let’s, say for the buyer, well, if anything, you’re going to lose around, let’s say 3%, you’re going to lose around $900 as the listing agent.
So it’s not really that big of a deal, but at the end of the day, you have to understand that they’re just trying to do their job. You want to push through and negotiate as an investor to get the best possible price that makes the most sense for you so that you have different options of what to do once you acquire the property.
Now, getting to the point for today when you are negotiating a deal, whether it was one that was listed already or one that you’re starting off from scratch, a lot of times, after the valuations, so after the bank sends out their BPO agent or appraiser, they’re going to come back with a value. You do your back and forth and they come to a bottom line number. And sometimes, surprise, the number doesn’t make sense.
As a matter of fact, guys, sometimes the number doesn’t even allow you to do what we’ve created, which is the step aside and be paid in the form of a release and termination of contract. Because you know that not only can’t you get paid, there is really no room for you, but they want too much money where you can’t even sell it on the open market retail. No retail buyer is going to pay what they want. So what you do?
Well, at that point, you want to let the file close and resubmit 30 days later. Let it completely close out, hold the offer back, re-sign your paperwork, re-date everything, wait 31 days and resubmit. Why? Because what’s going to happen is, nine times out of 10, you’re going to get a new negotiator assigned to that file. You’re going to get a brand-new person looking at that file, it’s going to take them around 30 days to get the ball up and running, you’re approaching that 90- day time frame where they can actually do another BPO, which is what they elect to do more times than not over the full-blown appraisal because it costs them less. And you can get a new valuation on the property.
You have to understand something, guys. The way that it works is, there is someone sitting in a cubicle looking at all this math. Literally, it’s all about mathematics. They’re looking at the numbers. They’re trying to mitigate, right. Loss mitigation, the loss for the lender, but it’s not really for the lender. It’s for the note holder. It’s for the person who owns the loan. And they work different parameters to say, “Listen, this loan is in default. Here’s how much we’re willing to take,” based upon what? Based upon perceived value. So if the value came in unrealistically high, you have to get a new valuation.
Now, I can tell you that if it was a BPO, after 90 days, they’ll do a new one. You want to make sure it’s an interior BPO. If it’s an FHA loan, for example, or a VA loan, they’re going to have guaranteed they have to do an appraisal. You’re going to have to wait six months. But you want to resubmit after that time so you can get a new valuation. “And so, Brian, what is the value comes in again too high after that?’ Resubmit. We have resubmitted three and four and five times on deals until we got the right number we were looking for and then we execute it and we got the deal done.
That’s what I mean by “be a bulldog.” You guys, there’s nothing short about a short sale. And if you want to play in this world, you have to be willing to be in it for the long haul. Because when we start a deal, we give our word. We commit to the owner, the owner of record, the distressed seller, we’re not going to back out of this deal. We are not going to pull out. We are going to stay in this until the end. We’re going to fight and fight and fight and fight and the bank is either going to have to foreclose on this property or you’re going to have to throw in the towel and say, “I’m tired of this,” because we’re not going to quit on you. You’re going to end up quitting on us.
And unfortunately, that happens sometimes. But it doesn’t happen often. So what I’m saying is tenacity, you have to be willing to be in it for the long haul and know that if you just resubmit, it’s like rolling dice. I mean, eventually, you’re going to crap out. You’ve got to know that the law of statistics is always in your favor. And if you’re willing to stick in for the long haul and be . . . like we say, be a bulldog. Don’t quit. Don’t quit. You bite on and you don’t let go.
Nobody does that, guys. At the first sign of failure or resistance, most people cut and run. If you’re willing to stick in there and actually do right by the homeowner, you’re going to gain their respect, you’re going to gain the respect of the realtor, the entire community. And when that deal closes, you’re going to get paid, which is what we’re all about. So I hope that helps. Go out there and try it. Remember, don’t ever quit, be a bulldog and we’ll talk again soon. Take care.
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