MLS Launches Attack Against Distressed Sellers

Hello! David J here again bringing you more of the steps on my journey toward financial independence.

As I write this, I'm listening to one of the many webinars that have come my way since I started looking into flipping short sales and REOs as a way of making money outside of the IT industry.

A key piece of information for short-salers just came my way by way of today's webinar. This is of importance to people who use an option contract to obtain equitable interest in a property and then get permission to re-list that property on the MLS.

Apparently, the MLS boards are taking action against this strategy and requiring that listings be placed ONLY on behalf of the owner of record. Some areas have already implemented this restriction. Other areas may be considering it.

If this restriction has already been emplaced in your area, you've probably already developed alternate methods of marketing your flips to potential sellers.

If your area has not yet emplaced this restriction, hook up with your local MLS board and find out if this is being contemplated. If you can, lobby against it. It is well intentioned, but misguided. It serves the interests of the agents and not necessarily the interests of the seller facing foreclosure and wishing to "save" their credit.

A better way to protect the interests of the agents is to partner with them on your short sale and REO deals. Remember to emphasize that the transaction represents an opportunity for them get TWO commissions: one on your purchase (the short sale), another when you sell (the flip).

As we have discussed elsewhere, having a mortgage loan settlement on one's credit record is much less "damaging" than a foreclosure. Contact your accountant and attorney for full information, as always. This blog is NOT intended to offer legal or financial advice.

In order to "save" a distressed seller's credit, "time is of the essence", as is written in many real estate purchase offer forms. Investors especially like and have the resources to move very quickly and get short sales approved by the lenders and get the property resold to an end buyer (the "B->C" closing, often the same day as the "A->B" closing).

Loss mitigation and short sale negotiation is a complicated and rather involved process. A segment of the investor community focuses in this area for that reason. Most end-buyers are not experts at negotiating with lenders and their loss mitigation people. Most of them don't want to be. Allowing short salers to intervene provides a service to both the sellers facing foreclosure and the end-buyers looking for quick and easy purchases.

Yes, short salers do take a profit in the "A->B->C" process. This is only fair so they get paid for the service they provide: clearing the short sale hurdles enabling the seller to move on with their life and "save" their credit, and enabling the end buyer to acquire the property with a minimum of paperwork, effort and fuss.

Allowing properties to be listed in the MLS by people holding an equitable interest protects not only the real estate agents but the "A" seller as well since it ensures a larger field of potential end buyers (the "C" people).

Let me also repeat something you may have read elsewhere: marketing your short sale business as "credit rescue", "foreclosure rescue" or anything like it is asking for trouble! This brings you squarely into the sights of the investigators and the enforcement people. Stick with the "quick sale", "quick/cash buyer", "cash for your home", and such on your websites and bandit signs.

Also: make sure you emphasize that you accept NO CASH UP FRONT FROM THE SELLER ("A")! This goes a long way toward keeping you clear of state laws and other regulations prohibiting up front fees for services that hold no guarantee of results (which is often considered fraud).

We'll talk again soon!

Take care - be well!

Much Success!