MODULE 5 Deal flow. Who does what? When? In what order? Maximize profit and minimize risk! Drew Downs Rock Star Real Estate Agent and Wholesaler Nathan Jurewicz The Short Sale Kid
The Following Slides apply to a pre-listed short sale 2
Step 1: Realtor pre-qualifies seller Once they have determined it is a deal Nathan wants they email my assistant requesting her to prepare all paperwork. Realtor scans and emails all paperwork to seller and goes and meets with them the next day. Seasoned realtors DO NOT ask Nathan if it s ok present an offer to seller. They know what my criteria is. I don t want to know about little details such as making a 300k offer on a piece of dirt. It s not interesting to me at all. 3
Step 2: Realtor collect paperwork from seller Authorization to release Option Contract (or purchase and sale agreement with addendum) Notice of Option 3 Day Notice Affidavit of Understanding Commission Agreement (or non representation listing agreement) No Brokerage Relationship Disclosure Hardship Letter 2 Months Bank Statements 2 Months Pay Stubs 2 Years Tax Returns Mortgage Statement Freddie Mac Form Refer to Patton video at www.pattonvideo.com 4
Step 3: Realtor gets all paperwork back to my assistant and list the property for sale Realtor has Nathan sign option contract, notice of option contract and a listing agreement. Realtor gives complete package to my assistant. Assistant inputs deal in database and assigns a task to BPO agent to do bpo. Assistant prepares hud-1 and emails entire package to negotiator for offer of 50% of realtors list price. Realtor list house for whatever they think it will sell for in 60 days. 5
Step 4: BPO Agent does BPO and puts together an estimate of repairs BPO agent takes pictures and of any damages of the house, puts together repair estimate and a 30 day quick sale value bpo and emails to the negotiator and the realtor. BPO agent gives Realtor her opinion of a 60-90 value and realtor adjust list price accordingly. While this is happening the negotiator has already faxed in the authorization to release and is now authorized to speak to bank. Negotiator adds the bpo to the short sale pkg and submits to loss mitigation department. 6
Step 5: Negotiator is trying to get the BPO ordered and Realtor is showing the property It is VERY important that the house is listed for what we can REALLY sell the house for to a cash to 20% down buyer by the time the interior bpo is ordered. If house is not showing. LOWER LISTING! Realtor does not have to ask Nathan permission to lower listing.. I trust the realtor. Negotiator tells bank that they will be the contact for the bank. When banks agent or appraiser calls them to do the bpo negotiator tells them that Amanda (my bpo agent) will call them in a few for access. 7
Step 6: BPO is done by banks agent My bpo agent tells banks bpo agent My buyer has an offer for 100k, we are trying to sell it for more but we have it listed for 150k and are having difficulty getting the property sold. My bpo agent calls the banks bpo agent a few days later and says Hey we are trying to get a higher offer but I will have to lower the listing to do so. What did the bpo come in at so I can adjust accordingly?.. If I lower it to 135k is that too high? My BPO agent emails my realtor and my negotiator what she thinks it came in at (notice she doesn t tell me I don t want to know). 8
Step 7: Final Negotiations Bank tells negotiator Your offer of 100k is way to low and we are only paying 5% commissions and we are not paying the 1% negotiation fee. We need an offer of 135k to move forward Negotiator communicates with Realtor to see what they think it will sell for. Realtor adjust list price to 145k and put in Realtor Remarks SHORT SALE APPROVED, Listing agent has received verbal short sale acceptance and just needs full price offer to move forward with everything. Negotiator raises offer to 125k and reduces commission and throws out negotiation fee but keeps 6% concession on hud (net offer of around 113k). 9
Step 8: Acceptance Letter and Contract Once negotiator comes to final terms with bank negotiator tells bank we need 30 days to close. At the same time Realtor is negotiating buyer tells buyer they need to close in 21 calendar days from the date of written acceptance. At this point if we know we are pretty much getting the acceptance letter realtor will tell the buyer (or buyers agent) to go ahead and order appraisal and inspections even if we haven t gotten written acceptance. If anything falls apart on our end Nathan will reimburse buyer for appraisal and inspection (we will even put this in writing). Realtor has Nathan Sign Contract. 10
Step 8: Coordinating the closing Realtor gets on the phone with the buyers end mortgage banker and or mortgage banker and finds out if there are any seasoning issues. If bank has issues with it being a flip Realtor either explains situation to end buyer (or buyers realtor) that they have a mortgage broker that may be able to get this done or Realtor ask the end lender if it will be a problem flipping the property if the Investor closes early and holds on to it for a few weeks so that they are on title. Realtor explains to end buyer that if that happens their deposit must be raised to 3% and it goes hard and is not refundable so he encourages buyer to order his inspection now. Once Realtor/Investor figures out the game plan my assistant fills out transaction work sheet and sends to Aegis. 11
Step 10: Closing the A to B and the B to C. Negotiator emails the acceptance letter and preliminary hud that was sent to the bank (make sure the numbers match) to Title Company. Closing agent is communicating with buyer and their banker or broker to figure out what day they will close. Closing agent puts together final A to B hud and send to loss mitigation department for approval a few days before the anticipated closing. Hud gets approved for A to B package from lender gets sent to title company for B to C. Closing agent shows up at Nathans door with both closing packages (assuming it was a same day closing) and deed. Nathan signs all paperwork LIFE IS GOOD! 12
Step 11: Repeat Step 1 and do it again and again!! The only way you are going to be able to close 5-10 of these per month with a stress free life is if you are not a total control freak! My favorite line is Whatever you think we should do is what I think we should do I trust you Don t nickel and dime ANY of your staff ever. Let all of your staff members how much you appreciate them. If they don t like you they will not work with you again. If a deal is not coming together step aside and close it A to C. If word gets out that you were in the way of a deal that could effect your business. Details on Team Building will be covered in week 6. 13
What if the buyer makes an offer from the very beginning? If it s a lowball offer that is not realistic your realtor tells the buyer My Investor will not be able to make that number work. At the beginning of the process they must give a deposit and wait 120 days. The closer you get to the acceptance the less time that they must wait and the easier it is to sell. This contract is contingent upon seller receiving satisfactory written short sale acceptance within (30,60,90 or 120 days) from effective date. 14
The Following Slides apply to a Listed short sales and REO s to Wholesale 15
Step 1: Realtor/Investor Partner makes offer Realtor/Investor finds listings for target area that have a lot of activity and cash buyers. Once they find the subject target property he makes his offer at least $10,000 below what you can wholesale it for. Building rapport and having the right attitude and honest intent with listing agents. Short Sales and REO s differ slightly. REO s will get accepted right away. Short Sales will get accepted and signed by the seller right away but will not be ready to market in a few months (when the bank approves the short sale) 16
Step 2: Offer gets accepted or countered This is when you start to market the property when you know it s a deal (refer to module 4) Cash is always king. If you get a counter offer and your not sure you can sell it for more than that you can start marketing it early but disclose to the potential end buyer that your approval is only verbal. Always get at least a $2000 non refundable deposit (at least 3% for bigger deals) 17
Step 3: Final Negotiation and closing with A to B and B to C Once both contract are done and completely effective transaction worksheet is filled out and sent to Aegis. In most cases with listed property A to B Closing will be done at sellers title company and B to C closing will be done at your title company. You must get the A to B Title company email you the final HUD and wiring instructions and take them to your B to C Title company and have them wire the funds to the A to B (that way the b to c title company knows that the closing took place because the funds went through their escrow account) Because you are wholesaling these deals spreads will be smaller and most buyer will be cash and take place within a few days if not same day. 18
Homework Assignment Put at least 1 house under contract 19