Short Sales and Foreclosures from the Investor's Perspective

1. Short Sales and Foreclosures from the Investor’s Perspective
Presented by:
T. SCOTT GALLOWAY
Galloway and Collens, PLLC
26075 Woodward Ave, Suite 200
Huntington Woods, Michigan 48070
248.545.2500
Scott@GallowayCollens.com
OutFromUnderMyHouse.com
GallowayCollens.com

2. What are the Opportunities?

3. What are the Opportunities?
1.Buy Low
2.Sell High

4. 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?

5. 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.

6. Purchasing a property “short”
You may find yourself in a beautiful house . . .
You may ask yourself, well, how did I get here?

7. The Process of Obtaining Short Sale Approval
This process is long and frustrating…
And can often seem like a Road to Nowhere.

8. Professional Assistance
•Attorney
•Realtor
•Licensed Appraiser
•Title Company
•Short Term Financing
•Long Term Financing
•Home Inspector/Handyman

9. Questions?

10. The Process of Obtaining Short Sale Approval
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”

11. The Process of Obtaining Short Sale Approval
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

12. The Process of Obtaining Short Sale Approval
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”

13. The Process of Obtaining Short Sale Approval
Evaluate the property:
•Payment status.
oStatus of foreclosure
•Multiple mortgages
oCurrent balances
•Other liens
•Delayed maintenance
•Owner occupied or tenants or vacant
•Listed for sale
•Current servicer
•Demand for rentals / rental rates

14. The Process of Obtaining Short Sale Approval
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
oInform seller of process

15. The Process of Obtaining Short Sale Approval
Purchase Agreement
•Price considerations
oBPO – Financing Appraisal tension
oHistorical data and Case Shiller
•Contingencies
oShort Sale
oFinancing
oWhen does period start?
oApplication / Approval timelines

16. The Process of Obtaining Short Sale Approval
Purchase Agreement
•Price considerations
oBPO – Financing Appraisal tension
oHistorical data and Case Shiller
•Contingencies
oShort Sale
oFinancing
oInspection
oWhen does period start
oLimitations on right to cancel transaction

17. The Process of Obtaining Short Sale Approval
Purchase Agreement
•Price considerations
oBPO – Financing Appraisal tension
oHistorical data and Case Shiller
•Contingencies
oShort Sale
oFinancing
oInspection

18. The Process of Obtaining Short Sale Approval
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.

19. The Process of Obtaining Short Sale Approval
Prepare to Close…
Even after careful submission and follow up something
unexpected can happen, be prepared for anything!
“Like sittin' on pins and needles
Things fall apart, it's scientific”

20. Legal Concerns for the Investor
Don‟t Worry About the Government?
NO!
There are lots of ways for your client to get into trouble by being too aggressive
•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

21. Questions?

22. 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

23. Mortgage Foreclosure
One of two ways:
By judicial action
or
By advertisement

24. Mortgage Foreclosure
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

25. Mortgage Foreclosure
Foreclosure by Advertisement – Three
Important Parts:
1. Notice
2. Sheriff Sale
3. Redemption

26. Mortgage Foreclosure
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

27. Mortgage Foreclosure
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.

28. Mortgage Foreclosure
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

29. Questions?

30. 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.

31. Thank you!
T. Scott Galloway
Galloway and Collens, PLLC
26075 Woodward Ave, Suite 200
Huntington Woods, Michigan 48070
248.545.2500
Scott@GallowayCollens.com
OutFromUnderMyHouse.com
GallowayCollens.com