Cash For Keys investor program horribly unethical.

One of the latest trends in the investor world has investors cashing in at the sellers expense. Cash for keys is a phrase used in the foreclosure world for when a property has been sold at auction but the former owner or tenant still remains in the property. In order to avoid a lengthy and costly eviction, banks will often offer the homeowner ‘cash for keys’. Often its something like $500-$1000 to be out by a certain time.

Recently I was sent an email promoting a ‘new idea’ so amazing we all should kick ourselves for not thinking of it first. In fact the direct quote from Larry Goins is “Have you ever come across something so brilliant, yet so simple, that you ended up wanting to kick yourself saying, “Why didn’t I think of that?” Ill tell ya why I didn’t think of that…cause I have a heart and I actually care about doing the right thing by the people I help.

-So whats the idea you ask?

Why if you cant get the bank to agree to a short sale, simply negotiate the cash for keys play with the bank and keep the money for yourself.

Now I am a Libertarian at heart. I support free markets and innovation. I support self preservation, and there is even a part of me deep down that agrees with Gordon Gekko’s little speech on greed. However, I also believe in not causing harm. I also believe in serving the greatest good, and trying to help people facing foreclosure get into a stable situation. I’m perfectly ok with most aspects of foreclosure investing, as I see investors providing a very valuable service as long as the homeowner was presented with all options. But this I feel is slimy. It just feels gross.

This is the second such solicitation I have received for “Coach Pats” brilliant investing system. The first was from Tim Mai, who I really had enjoyed listening to and hearing his ideas. Obviously I don’t know any of these guys from Adam, and perhaps they would never use such a tactic in their own investing, but it sure seems like they are enthusiastic about the idea.

You see, my issue is this. An investor approaches a homeowner in foreclosure. If its like 99.9% of all investor meetings, they discuss doing a short sale. They rarely discuss all the options available either because they dont know them, or dont care to share them; Its the old ‘when you’re a hammer, everything looks like a nail’ scenario. But I digress, thats a topic for another day, so you have the homeowner working with you to do a short sale, and you are their only option as rarely do investors want others bidding on their short sales. They always put in their own offer at a very low amount, in an attempt to buy the for a substantial discount. Nothing wrong yet…but what if you cant get the bank low enough? What if you cant find an end buyer? Well, if you listen to Coach pat, Larry Goins and Tim Mai you sell your client up the river and keep the $500 for yourself. There really is no difference between this and equity skimming rent while a property goes under leaving the homeowner with a foreclosure that could have been prevented.

Not to sound like someones mother, but every one of you guys should be ashamed of your decision to employ this tactic. This business is one that requires the highest amount of integrity and ethics. We should serve the needs of the homeowners we seek to help. I guess this is my Jerry Maguire moment, but I stand by it. Its right and If any of you read this, once you think it through I think you will come to the same conclusion.

Bankruptcy vs Short sale…

So I found this video on youtube recently where this attorney is telling people that there are “two kinds of short sales”. He goes on to tell people that not only are short sales a pain but they could end up worse off for having done one. I really believe he over simplifies the question. I commented on his video that he is ‘talking his book’.

This is the concept that people always hype whatever it is they are selling like its the best possible answer. For people in foreclosure; Realtors hype selling, because its what they do. Attorneys hype filing BK because its what they do. Investors, mortgage people, loan modification/forbearance companies, all hype what they have to offer. And naturally so.

I get questions all the time about whether it makes sense to do a short sale if you have determined that you need to file a bankruptcy. The thought most homeowners have is “it can’t get worse” so they move on thinking that they have done all they can and with a bankruptcy a short sale would be akin to placing a band-aid on the titanic.

Compounding this problem is more often than not, bankruptcy attorneys think the same way. I have had countless clients tell me that their attorney told them that it wont matter on their credit because the mortgage that is foreclosing will be included in the bankruptcy. The worst scenario is when a homeowner hasn’t filed yet and is told that its better to just file and let it go than to try a short sale.

This could not be further from the truth. The bottom line is, you have to ask yourself this simple question; Does a foreclosure look better on your credit than a short sale. The answer is no.

Attorneys will answer with a myriad of reasons why its sometimes better and sometimes not. Always hedging their bet…I cant blame them, its the attorney way. They are taught to think this way, BUT Ill go as far as to say this: Its never not worth it to try a short sale first.

Honestly, I have yet to have anyone including attorneys show me a reason why to not try and short a mortgage whether they are already in a BK or not.

I have a bit more in depth thoughts on the matter on this article here.

Short sales without an agent involved is a bad idea

There is a reason Banks always use agents to sell homes they foreclose on; Liability.

Having an agent allows the bank to cover themselves in the event that there are ever any issues with the transaction. When a homeowner looks to do a short sale, the bank pays the agents fees out of the purchase price. That means that even though they are taking a loss, they are including real estate fee’s in that loss. Using an agent in a short sale is an absolute win-win-win for all parties involved…including the investors who buy them.

I just met with a really nice woman who has had some unfortunate changes in her life. In the last 4 years she has lost her Husband, a son and her home. She is also caring for her elderly mother who has developed dementia.

I dont want to focus in on the tragedies that she has endured as this isn’t really the forum for dealing with such losses, however, she did suffer one loss that is exactly what we deal with here at foreclosure rescue services. Issues that are relevant to Utah Homeowners facing foreclosure; She did a short sale directly with some investors and without an agent involved.

This woman’s home became delinquent in 2007 and she was approached by some investors with a plan. What that plan was, I can only guess based on the evidence left behind. But I’m sure they made her some wonderful sounding promises like “You can stay in the home and we will lease it back to you”.

The result? She lost her home.

Nothing ever happened with these so called investors and it went to foreclosure. Recently I wrote an article on why you should never do a short sale without an agent in Utah. There are a lot of investors and so called ‘gurus’ out there saying just the opposite. I spell out exactly why there is no reason that a homeowner who is facing foreclosure should ever do a short sale without an agent involved.

Oh one other note; Just as important as using an agent…is using the right agent. More on this in another post though.

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