RPLS 2011 Presentation

Presented by:

T. SCOTT GALLOWAYGalloway and Collens, PLLC

26075 Woodward Ave, Suite 200Huntington Woods, Michigan

48070248.545.2500

[email protected]

GallowayCollens.com

Short Sales and Foreclosures from the Investor’s Perspective

What are the Opportunities?

What are the Opportunities?

1.Buy Low

2.Sell High

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?

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.

Purchasing a property “short”

You may find yourself in a beautiful house . . .You may ask yourself, well, how did I get here?

The Process of Obtaining Short Sale Approval

This process is long and frustrating…

And can often seem like a Road to Nowhere.

http://www.youtube.com/watch?v=AWtCittJyr0&feature=related

Professional Assistance

• Attorney

• Realtor

• Licensed Appraiser

• Title Company

• Short Term Financing

• Long Term Financing

• Home Inspector/Handyman

Questions?


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”


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


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”


Evaluate the property:

• Payment status.

o Status of foreclosure

• Multiple mortgages

o Current balances

• Other liens

• Delayed maintenance

• Owner occupied or tenants or vacant

• Listed for sale

• Current servicer

• Demand for rentals / rental rates


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

o Inform seller of process


Purchase Agreement


o BPO – Financing Appraisal tension

o Historical data and Case Shiller

• Contingencies

o Short Sale

o Financing

o When does period start?

o Application / Approval timelines


Purchase Agreement




• Contingencies

o Short Sale

o Financing

o Inspection

o When does period start

o Limitations on right to cancel transaction


Purchase Agreement




• Contingencies

o Short Sale

o Financing

o Inspection


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.


Prepare to Close…

Even after careful submission and follow up something unexpected can happen, be prepared for anything!

“Like sittin' on pins and needlesThings fall apart, it's scientific”

Legal Concerns for the Investor

Don’t Worry About the Government?

There are lots of ways for your client to get into trouble by being too aggressive

NO!

•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

Questions?

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

Mortgage Foreclosure

One of two ways:

By judicial action

or

By advertisement


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

http://www.realtytrac.com/


Foreclosure by Advertisement – Three Important Parts:

1. Notice

2. Sheriff Sale

3. Redemption


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


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.

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


Questions?

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.

Thank you!T. Scott Galloway

Galloway and Collens, PLLC26075 Woodward Ave, Suite 200

Huntington Woods, Michigan 48070248.545.2500

[email protected]

GallowayCollens.com

RPLS 2011 Presentation

Real Estate

Transcript of RPLS 2011 Presentation