Rosen Properties Blog » mortgage payments

Is Owner Financing Dead in Regards to the New SAFE ACT?

Dick Rosen — Sat, 27 Nov 2010 03:53:15 +0000

You may have been hearing news recently about the SAFE ACT that became effective October 1, 2010. Maybe you are a real estate investor who is using a “mortgage assignment” technique as a way to make money. Be very careful how you use this method of investing. The gist of the SAFE act is that if you sell a property with any kind of seller financing, you will be breaking the law if you aren’t licensed to do so.

Let’s first realize that “Seller financing” is alive and well. However, there are somethings you need to do to protect yourself. You must understand and know how to structure deals if you DON’T have a mortgage license.

Here is how I understand the new Federal S.A.F.E. Act in regards to “selling on terms”

Land contracts do not fall under the SAFE ACT requirements since legal title in a land contract does not pass until the end of the payments. With seller financing, the difference is legal title passes from seller to buyer at closing. If you want to sell a property under a land contract, there should be no legal issue.’

If title does not pass from seller to buyer, it is not subject to licensure. Similarly, a lease with an option to purchase or other agreement where title does not pass is not subject to licensure.

A seller will be exempt from this Act if:

1.) Owner is selling own residence vs. a rental property;

2.) If the seller never lived in the home (investor), seller is still exempt if the property is being sold on a land contract or lease with option;

3.) If title does not pass, owner is exempt.

In summary, what does that mean to you as an investor?

If you are taking over a mortgage “subject to” and then assigning it , you will get in trouble.

If however, you take out an option to sell the property on a Lease Option or a Land Contract, you will be okay. You should no longer sell a property “subject to” if you are not the owner residence of that property. So REMEMBER THIS …. Don’t sell “subject to”!!! You BUY “subject to” and then sell with a Land Contract or Lease Option.

I am not a lawyer and you should check with your own local board of Realtors to find out what they think.

Thanks Duncan Wierman for this opinion

It’s About People, then Houses, then Investment

Dick Rosen — Tue, 23 Nov 2010 07:40:12 +0000

Ever wonder why most real estate agents focus on consumer market rather than the investor market?

It’s all about their mistaken belief that the best and surest way to a big payday is by identifying a seller, listing his property and then finding someone to buy that property at a price that will generate the highest commission. Even better if the agent happens to represent both the buyer and seller and won’t have to split that commission with someone else (although such dual representation is not legal in all states).

The quicker the transaction happens the better, so the agent can identify another home for sale with a potential big commission, and the cycle repeats itself. Again and again.

What’s Wrong With This Picture?

First of all, it’s about selling homes first and serving people second, all the while trying to maximize commissions. It totally disregards the potentially bigger commissions that an agent can make by understanding and serving the investor-buyer.

Investors require a different degree and depth of attention from an agent than does an owner-occupier. The investor represents problems for many real estate agents who “don’t do (investor) math”. Many agents also assume that investors want deep discounts and take too much time to make up their minds. This due diligence is often mistaken for indecision, and it is something most real estate agents are not trained to support.

This is not to say, however, that there are no expert real estate professionals who serve investors effectively. They do exist; it is just that they are the exception.

Relationships or Transactions?

So where do the potentially bigger commissions come in? It’s all in the math. Most homebuyers buy or trade up homes once every five to seven years, which makes repeat business distant.

A relationship with a serious investor, on the other hand, can be recurring and generate three to four times the commission revenue that an agent recieves from that one homebuyer transaction over the time that the average owner-occupier holds one house. The active investor does 10 to 15 times the number of transactions in the same period.

Then the relationship gets more interesting because most successful investors are connected to a network of additional prospects and investor-friendly providers. For examples of how the homebuyer and investor markets differ, see the table below.

11 REASONS WHY REAL ESTATE INVESTORS ARE ALWAYS A GREAT HOME SALES MARKET FOR REAL ESTATE AGENTS*

Client Difference	Home Buyer	Investor Buyer
1. Client Universe	Local	National
2. Market Reach	Regional Homebuyer	National Investors
3. Typical Prospect Pool? (Est.)	5% of reg. population	100% of national investors
4. Market Requirement	Neighborhood home	Solid investment returns
5. Decision basis	Home – location	Return on investment – location
6. Due Diligence Process	Personal appeal	Investment/return/cash-on-cash
7. Purchase frequency by satisfied client	1x every 5 to 7 years	1 to 2.3 homes per year
8. Commission per transaction	3% – 6%	2% – 6%
9. Median ’09 price = $175k*	$5,250 x 1 houses/5 yrs	$3,500 @ 1 house/yr x 5 yrs
10. Gross commissions/yr x 5 yrs	$1,050	$3,500 +
11. Total commissions/client	$5,250 over 5 years	$17,500 + over 5 years
*(if you know how to serve them)**

Fundamentals & Technicals

These deals do not come from the traditional “Honey stop the car,” open house, curb-appeal sales pitch. Investors can make decisions far more rapidly than most homeowners, as they are looking at the numbers, the investment and the exit scenario.

Historic home sale trends are pretty clear. According to the National Association of Realtors 2009 Second Home and Investor Study, slightly more than 20 percent of the home sales in the United States are made to investors. Our 2008 The Invaluable Investor Study placed this number at 28 percent. The NAR held at 21 percent for that year by analyzing mortgages.

Total investor sales for 2009 is not record setting, but it is among historic lows. Going forward, sales are expected to be a constant percentage of the market. As the market grows, so will this transaction volume.

Real estate is on sale, and an investor can buy positive cash flow inexpensively. This has not been lost on sophisticated investors or investment managers.

Has Your Real Estate Agent Failed To Deliver?

Dick Rosen — Mon, 24 May 2010 23:14:20 +0000

When you told your real estate agent that you needed to sell your house, you probably heard great stories about how it would sell in no time, at a great price.

But, that’s NOT how it’s worked out. Instead of hearing great stories, now you’re hearing great excuses for why your realtor hasn’t sold your house: “It needs more bedrooms; you need to come down in price; the school district isn’t the best”, etc.

We Can Buy Your Home Fast, Your Realtor Can’t

At this point, what you really need is to sell your house now. That’s where we come in: We aren’t interested in listing your house again; we want to buy it! We are professional real estate investors – not real estate agents. We’ve built our reputation over the years for quick action and fair prices. We can often give you even more than one solution to your problem.

You just want an honest, fair way to sell your house, without realtor excuses. That’s exactly what we’ll provide.

Freddie Mac’s New Take On Short Sales

Dick Rosen — Fri, 07 May 2010 03:32:42 +0000

Short Sale Flip Fraud – The newest problem in real estate is not yet a law or an official policy, but it is definitely going to create issues in the market. The news from Freddie Mac on short sales could cause serious legal and practical issues for real estate investors.

The organization posted a new educational article on April 16, 2010 titled “Emerging Fraud Trends: Short Payoff Fraud.” Essentially, the article stated that a short payoff or a short sale can be considered fraudulent if the lender agrees to a short sale that already has a third-party buyer in place that is paying a higher amount than the agreed-upon loan payoff amount. This is a serious yellow flag for short sale investors who make their living negotiating good short sale deals with banks, then selling their new properties to other buyers for a profit.

The article described scenarios and red flags for short sale payoff fraud. The scenario revolved around a short sale facilitator who set up a deal with a lender to purchase a home worth 80K for 70K while the lender took a 30K loss. The facilitator does not let the bank know that he already has a buyer ready to pay 95,000 for the property. The second the facilitator puts his profits in his pocket, Freddie Mac considers him guilty of fraud because his negotiations caused Freddie Mac to ultimately take a “larger than necessary” loss on the sale of the property.

The article urges buyers, sellers and lenders to be on the lookout for short payoff fraud red flags. These flags include sudden borrower default, a borrower who is current on other obligations and the buyer of the property being an entity rather than a person. The article also tells readers to keep an eye out for resale options in their purchase agreement.

Everyone involved in a short payoff is encouraged by Freddie Mac to report potential short payoff fraud the second they become aware of a second purchase contract for a higher price. This may not yet be a law, but the signs are not good when Freddie Mac has posted such a direct attack on short sale investors.

Selling Your House Because Of Fire Damage?

Dick Rosen — Tue, 16 Mar 2010 15:35:54 +0000

One moment your property is fine, and the next it’s up in flames. Even if everyone got out OK, it’s still a tremendous shock. Your property is ruined, your possessions destroyed.

If that’s not enough, now you have to deal with city officials, insurance adjusters, contractors that never show up.

Help For Your Damaged Home

If you’re seriously considering selling your house, you need someone who can look beyond the fire damage, and see the value that you once had in the property.

We’re professional investors that can do just that. We know how to fix damaged properties for far less money than what contractors will tell you–and we buy houses for more than you thought possible.

CALL TO ACTION – HUD issues scary rules against owner financing

Dick Rosen — Sat, 13 Feb 2010 15:28:52 +0000

The following information is extremely important!

HUD Issues Problematic Rules Interpreting SAFE Mortgage Licensing ACT

HUD has proposed to eliminate ALL seller financing unless the seller lives in the home or becomes a licensed mortgage originator. The proposed HUD Rules interpreting the federal SAFE mortgage act can be viewed at www.regulations.gov Use the search parameter “HUD” and the keyword “safe mortgage”. Please review and comment regarding the impact of this broad interpretation of the law.

“In addition to establishing HUD’s responsibilities under the SAFE Act, through this rule, HUD proposes to clarify or interpret certain statutory provisions that pertain to the scope of the SAFE Act licensing requirements, and other requirements that pertain to the implementation, oversight, and enforcement responsibilities of the States. HUD solicits comment on the proposed clarifications and on the regulations proposed to be codified.”

History:
As you may recall, we lobbied hard in North Carolina last year to maintain the right for individuals to make up to five seller financed transactions per year before being subject to mortgage originator licensing, etc… However, that law was passed subject to the Department of Housing and Urban Development’s (HUD) approval of the law as “compliant” with the intention of the federal law. If any state does not have a compliant law, the SAFE act allows HUD to implement licensing for the state. HUD has since issued proposed rules. In a nutshell, seller financing would no longer be allowed for non-owner occupied homes.

How YOU can help:
We learned about the publishing of the rules very late in the process… and the deadline for comment is upon us on February 16. However, we desperately need for thousands of REIA members across the country to go on record with HUD on this issue. We will be working to try to affect this law in other legislative ways, but cannot hope to gain traction unless our members have clearly communicated that they are opposed to this portion of the rules. This is your chance to be counted on this issue.

PLEASE SUBMIT YOUR COMMENTS TO HUD! We have only four days left to flood this system with comments.

Follow these simple steps:

1. Logon to www.regulations.gov You will see two white boxes for searching

2. On the left box labeled “Document Type”, pull the menu down and select “proposed rules”

3. On the right box labeled “Enter keyword or ID”, enter “safe mortgage”. Then, press search

4. Locate the blue search result “FR-5271-P-01 Safe Mortgage Licensing Act: HUD Responsibilities…”

To read the rules: click on the blue title FR-5271-P-01 You will be taken to another page. You will see “views”. You can click on PDF file or another symbol which will show you the rule document online. If you want to submit a comment after reading the document, use your back button to return to the search results and then move on to #5 below.

5. To submit a comment: On the right of the screen, across from FR-5271-P-01, click on “submit a comment”

6. Complete the form providing required information with blue asterisks and your comments and then submit. (Note: you do not need to fill in the blanks for organization name, government agency type, or government agency)

What do you say?
Say what you feel, but say it politely! The message should include that you would like the definitions in the proposed rules to be changed so that private individuals can originate and service loans on properties they personally own. Some ideas from others:

The SAFE Mortgage Licensing Act was intended to regulate the mortgage industry, not private individuals. If I own my own properties and want to sell them to someone and let them pay me, I should have the right to do this without being a licensed mortgage broker
Many properties have special circumstances where full bank financing is not possible. Vacant rsidential lots, investment homes, homes in flood areas, etc. may not be eligible for traditional financing. Individuals who own their own properties have always been able to offer other private parties the option to pay them directly. These rules would prohibit that for all properties which are not owner occupied.
bank loans are not available on some types of properties
the tight lending climate has made bank financing “out of reach” for many
seller financing is an “age old” tradition based on private property rights
these rules would prohibit even partial seller financing – i.e. a “seller second”
according to HUD’s “Residential Finance Survey” in 2001, roughly 40% of all non-farm residential properties in the US are owned free and clear
an estimated 6 million Americans own a property other than their own primary residence
an estimated 4.5% of Americans own three or more properties, many purchased solely as investment properties
40% of non-owner occupied residences are mobile homes which are more difficult to sell with bank financing
approximately 5% of homes in US are for sale or for lease… seller financing may be key to liquidating this inventory

The continued success of our industry as we know it is threatened by these proposed regulatory changes. Please do not hesitate to follow the steps above and make your voice heard.

Has Your Real Estate Agent Failed To Deliver?

Dick Rosen — Thu, 04 Feb 2010 02:58:09 +0000

When you told your real estate agent that you needed to sell your house, you probably heard great stories about how it would sell in no time, at a great price.

We Can Buy Your Home Fast, Your Realtor Can’t

You just want an honest, fair way to sell your house, without realtor excuses. That’s exactly what we’ll provide.

Do You Have To Sell Your House Quickly Because Of A Job Transfer Or Relocation?

Dick Rosen — Tue, 24 Nov 2009 05:59:30 +0000

One minute things are settledâ€¦ and the next, your world turns inside out. You have to move, and soon!

Real estate agents can take months to sell a house and you donâ€™t have that kind of time.Â And, you canâ€™t afford to â€˜dumpâ€™ it for a ridiculously low price.Â How can you sell your house quickly, and still get a good price?

Specializing In Job Transfer & Relocation Situations

You’ve come to the right place! We specialize in job transfer and relocation situations to help sell your home.Â We can usually give you not just one, but several options for solving your problem.Â When you meet with us, we’ll listen carefully to your situation, and will quickly formulate choices that no one else probably told you about.Â You have enough on your mind with your relocation or job transfer; let us help you take one worry “off your plate”!

Worried About Your Vacant House?

Dick Rosen — Fri, 13 Nov 2009 15:02:22 +0000

Has your vacant house become a stone around your neck? With crime rates these days, no amount of care seems to deter vandals from noticing that a house is vacant. In a matter of minutes they can destroy years of careful maintenance.

What’s worse, many insurance companies have “fine print” that allows them to deny coverage to you for the vandalism, even if you’ve been paying the premiums all along! They might claim that if the

house has been vacant longer than 30 days, the property is no longer covered.

All this worry and expense gets to a point where it’s not worth keeping the vacant house. Even so, you want to get a fair price for it. That’s where we come in: We can see the value in even a “fixer upper” house; we act quickly; and we’ll give you a fair price for your valuable asset. We’re real estate problem solvers.

Click Here to Contact Us Now. Find out how we can give you a solid solution to your vacant house problemâ€¦fast!

Don’t let your home go to ruin…

Behind On Mortgage Payments? Need To Stop Foreclosure?

Dick Rosen — Wed, 28 Oct 2009 16:33:48 +0000

When you got your mortgage, you could handle your payments. But life has a way of turning things upside down. Divorce, health problems and job loss can leave you in a position where you fall behind on mortgage payments.

Unfortunately, the bank doesn’t allow partial payments. They want it all, and they want it now, despite circumstances beyond your control.

We Can Help Your Mortgage Payment Situation

When you’ve tried your hardest, but are still falling behind on mortgage payments, what you need is our experience. We’ve helped other families to get their finances back on track. That’s what we do.

If you’ve been staying up late at the kitchen table because youâ€™re falling behind on mortgage payments and wondering if there was another way out â€¦you’ve come to the right place. Let us give you some options that nobody ever told you about.

Need To Stop Foreclosure?

If you’ve been served with papers that threaten foreclosure, you don’t have much time. Even if your situation is due to health problems, a lost job, or other things out of your control, the sad truth is the lender doesn’t care.Â We can help you stop foreclosure on your home.

You haveÂ options other than foreclosure!Â Contact Us Now!Â It’s urgent that you act fast to prevent the sheriff from appearing at your door with a foreclosure eviction notice.

We Can Help Stop Foreclosure

We’re real estate problem solvers, and might be able to stop foreclosure. We aren’t just another real estate agency that wants to list your house and make you wait. Instead, we’re real estate investors that know how to act quickly AND provide clear, fair solutions to stop foreclosure.

You have absolutely nothing to lose, and everything to gain by contacting us. We’ll tell you what solutions we can offer to stop foreclosure on your house.