Greed of Short Sale Investors
The first question is usually not about the investors’ greed, but about how they are screwing the home buyer. Real estate agents will defend that they have a right to get their client the best deal doable. I like that. That’s what they should do. The issue then becomes what is the best deal they can get on their own, not what is the best deal an investor, who either is, or has, experienced negotiators and integral knowledge of how the fleeting sale process works. So even though an investor provides the acceptable fleeting sale discount in a timely fashion (as most buyers are either relocating or moving out of a previous place of residency and likely have just a couple months of a window to find a new place to live), the buyer should be entitled to this discount.
WRONG! If it was up to a real estate agent, and I don’t blame them for not being any more proficient at negotiating fleeting sales, the negotiation process would take between 3 and 12 months and would result in a much higher fleeting sale payoff amount. Thus, the buyer would pay more. Of course this is not the agents fault, they are getting paid less than full commission and they have to do two jobs.
And I have never establish a buyer that wanted anything less than a excellent deal. A excellent deal, then, would involve getting a house for less than it’s worth, right? And therefore, they are trying to profit immediately when purchasing a home, no different than what an investor is trying to do. If they weren’t trying to make money on their buy/investment then they should be pleased at whatever price they feel is honest. Yet, this is not the case. Buyers = greedy.
The second fault of the greedy investor is that he is “screwing” the lender out of money. This is really only an issue because tax payer money is going to them. I can tell you this, if no investor made another dollar on a fleeting sale, these banks would still take all of the money that was offered to them. And in return they don’t lend it out, and rarely help homeowners stay in their property for more than a year. Remember that these are the same people who developed “subprime loans” and “predatory lending” in order to get more money in a seemingly flawless economy. Lender = Greedy.
The last complaint of the greedy fleeting sale investor is that they are taking advantage of the homeowner. When a homeowner has no other option they can only fleeting-sale their property and keep a foreclosure off of their property. The best chance of getting a completed fleeting sale is to use an experience professional person who understands the process and specializes in negotiating fleeting sales. This is not real estate agent. It could be an attorney, but if the homeowner can’t pay their finance where are they going to get their money to pay them? Even an attorney won’t negotiate a fleeting sale as effectively as an investor. Why? Why would they? They get their money up front, win or lose, they get paid. Not really a win-win situation.
The second part of this argument, then, is the investor exposing the homeowner to a larger deficiency discrimination? If the bank were to go after the debtor/homeowner for the payoff deficiency they would first of all have to have a reasonable belief that the debtor had the money to pay them. Otherwise they’d just be wasting money on court costs and attorneys (still not working for free). Even if the lender pursues the deficiency discrimination, the deficiency is always much, much less as a fleeting-sale than it is a foreclosure and REO sale later. And if you don’t have an experienced negotiator you may never find out if your property had the opportunity to be sold via fleeting sale. Not to mention, most fleeting sale investors will take out themselves from the transaction if there is not ample of a spread between what they negotiate and what a buyer will pay.
You really can’t lose if you’re the homeowner, unless you allocate an inexperienced fleeting sale negotiator, or an over-worked and under-paid real estate agent to soubriquet your fleeting sale negotiations and you don’t successfully fleeting sale your property before foreclosure.
Article provided by Shawn Hutchison.
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This is an fascinating article. Thank you for the read.
Shawn, fantastic article. The greed argument is a modest irritating. It’s not like any profit from a fleeting sale transaction doesn’t involve work. All the guru’s and fleeting sale books may make it signal like paydays are huge and work is minimal, but anyone who has really done some fleeting sale deals knows that the checks can be excellent, and they can be only O.K., but they still involve a lot of work, coordination, timeliness, and professionalism. That is always worth something. The investors provide a service, and on a macro level, help speed these underwater properties off the books of the finance co’s, freeing their reserves so they can write more positive-justice loans.
Fantastic post! And you are right, for the HO, it really doesn’t matter; underwater is underwater if it’s by 5000$ or $500,000. (Assuming there is no deficiency discrimination).