I have often read,here on Active Rain and elsewhere, the ongoing debate and question are short sale flip transactions, aka back to back closings, legal or illegal?
This leads to the debate of Real Estate Investors vs Real Estate Agents. My experience as both an investor and realtor allows me to have a unique perspective and understanding of both sides of the equation, but that is a debate for another time.
As an owner of a real estate brokerage, title company and as a real estate investor in the Bucks County, PA and surrounding areas, this has been a subject I have paid very close attention to, especially over the last 12 months. It is no secret distressed real estate can be found anywhere and everywhere and it is not hard to find. As short sales and reo properties become more and more prevalent and are no doubt now a part of every day real estate life, I feel it is imperative to be "all over" this subject.
What I have learned, after spending lots of money and time, I am somewhat reluctant to share. You see, I consider most of you to be my competition and I am human, which means I am falible and greedy (let's be honest we all are!!) and the devil on my left shoulder says "keep this knowledge for yourself." Then I am reminded of the teachings of my coaches, mastermind groups and other angels on my right shoulder who say, "if you want to become the best possible person you can and you want the finer things in life you must practice the art of abundance and reciprocity regularly." For those of you who don't know what that means, It means in order to get you must give and do unto others as you would have others to do unto you. Plus, honestly, unless I had someone who was willing to share their knowledge with me, I would not know what I now know. So, brace yourself because I am going to spill the beans about one of the most important subjects facing real estate today and the foreseeable future. I am going to be blunt, so if you have a weak stomach or don't like constructive criticism then you should move on to the next blog.
By law, us real estate agents are supposed to have an in depth knowledge of the transactions we are involved in or we are, at the very least, misrepresenting. It has been appalling to me to see and read the comments of my 'real estate brethren' post comments or write blogs about this subject when they obviously have no idea what they are talking about and have not spent the time to actually research, read and learn about the subject they are writting about. It's no wonder why the general public has a bad view of real estate agents and love to diminish and devalue our profession. If you ask me, we do a pretty good job of doing that to ourselves. I hate to generalize but the 80/20 rule in real estate is accurate for a reason. 80% of us are floating in the breeze praying for the next "sale" to hit them over the head and may practice real estate but in no way treat it like the business it is or like they should. When it comes to short sale transactions I think it is more like a 95/5 rule. So, before I go into the meat of this blog do yourself and all of the distressed home owners out there a favor and either buy a clue and really commit yourself to learning and understanding short sales or do the right thing and refer them to someone who does. By the way, this includes you realtors out there who take a short sale listing only to pass on the negotiations with the lender (the most important part) to a third party. I must admit I was one of those at one time until I learned the error in my ways the hard way. Unless you are referring those negotiations out to an attorney who is local to you. And it is one who actually knows and understands short sales intimately themselves (few and far in between), this is one of the biggest mistakes you can make. But I digress as short sale negotiations in house vs referred out is a debate for another day.
Let's get on with the Flip or Back to Back Transactions are legal or illegal debate.
Are you ready??..............
They are legal, so legal that Wells Fargo and Freddie Mac have both recently released updated and specific guidelines that say so. Don't believe me??
See for yourself (this is the part where you actually have to take the time to research, learn, read and oh yeah comprehend what you are reading!!!!)
So legal that there are a bunch of lenders out there who will fund both the A-B and B-C transactions and title companies who will insure both transactions!
So legal that myself along with a host of top notch investors, attorneys, real estate agents and title companies have been and are doing hundreds, of these transactions and have been doing them for much longer than one year and on a national level!!
So legal that our contracts and addenda have been scrutinized by attorneys, lenders, title companies, TRENDMLS and the Pennsylvania Real Estate Commissions legal hotline attorneys and all have given the green light!
So legal that....well, I'm sure you get the idea.
How could this be, you ask? I've been at seminars where the speakers said they were illegal. Well, it's all about disclosure and transparency.
Are there illegal flips and back to back closings taking place?
Absolutely and unfortunately they are occurring everyday. Some do it unknowingly do to lack of knowledge and understanding while some do it purposely because they are scam artists. They all should pay and they should and probably will pay dearly for their actions.
Remember your real estate 101, not knowing is not an excuse. If you don't know then don't take on the client or the deal.
The question is, Do you want to be one of the 5% of agents out there who understand how to construct and navigate the short sale jungle and prosper because of it?
Do you want to continue to be one of the 95% who just don't "get it" and never will because you won't take the time or spend the money to learn even though that is the oath you took when you became a Realtor?
Disclaimer: While attempts have been made to verify information provided therein, the author does not assume any responsibility for errors, omissions, or contradictory information contained in this document. This document is not intended as legal, investment or accounting advice. The reader of this blog assumes all responsibility for the use of these materials and information.