Short Sales With a Reverse Mortgage, What Do You Do? With Nathaniel Arnold

0:01 Do you like Streamyard? I do. We'll talk about a little bit. One of the things I launched this podcast, Reverse Mortgage Podcast, because of the number of foreclosures I saw going on. Now, one of the challenges is what happens. There's not a lot of equity, can you do a short sale? As I've had my ears up and I was talking to a colleague of mine, Nathaniel Arnold, who's a fellow probate expert. He's based in the DMV area, the u district, Virginia, Maryland part near the state near United States capital in probate real estate, but he also does has a training class, but we talked about reverse mortgages going into foreclosure. They have a short sale. Nathaniel, thank you for joining us today. Talk to us a little bit about the case you had recently. There was a short sale on reverse mortgage.

0:46 Great. Great. And thank you first, Bill, for having me. This is a great opportunity to educate people about what's really going on. You mentioned that banks tend to foreclose a lot of times with reverse mortgages and that has been the case in the DMV especially in the District of Columbia itself. In fact they had to write legislation I understand to actually slow down that process. M

1:14 We because we do get a lot of these the first thing that we try to do is to educate the consumer

1:23 As to what their rights are. Now we know that the bank normally gives about a six-month window once the person dies before the actual mortgage becomes due and sometimes so the clock starts ticking immediately when the person dies. In our in our area the filing of the probate petition does not happen at the same time though,

1:50 Right? So you've got these two clocks going and a lot of times the PR's personal representatives which we call in our area are not really familiar with that process and so we kind have to kind of educate them because they're also getting in many cases dunning letters from the lender and the lender is putting pressure on them and so we do that part of the process. That's really a large part of it to let them know what their rights are. The cases that we've had recently, it's been more than one actually. We had a case of a condo in Northeast DC and the sellers had not actually petitioned the probate yet. And so we had three we had two brothers and a sister. One brother lived out of the area. The brother that we were working with directly, he actually had cancer, prostate cancer. So he is his mom was of course occupied with other issues and the sister who also was living in the property with the brother with cancer had some issues, some mental issues. So, we had a lot of moving parts, a lot of things going on. And so, we actually had to assist them with filing the probate bill and that took some time. So, while we were doing that, remember most of the times the banks will not really talk to anyone until the probate has been opened,

3:30 Right? And so we were in the process of getting the probate filed, you know, couldn't even really talk to the bank. But once we did get that done, the bank, of course, sent out a loss mitigation package. And one of those options was the short sale. So we explained to our client what the short sale was. And I'm assuming most people will know that it's basically a short sale is when a property is underwater. The mortgage is higher than what is owed on the property. And so we began to once the bank recognized us as working for the personal representative, we began to communicate with the bank and the process is pretty straightforward. Once they send out an appraiser in our in our case, I don't know what they do in California, but they normally send out an appraiser to evaluate the property itself. They do an interior inspection as well as look at comps from the date of death typically. All right. And then [clears throat] the bank will evaluate that and give you a number. Well, the appraisal is the number that they will reduce the amount by and is actually 95% of that. So, in this case, the property was I think as I recall it was a condo, three-bedroom condo, and I think the property was worth about 390.

5:06 They owed about 430 on it, though, so the bank had to do a short sale. When the appraiser came out, that was a good thing. When the appraiser came out, we actually met the appraiser. And I always do this, Bill. I always provide the appraiser the appraiser comparables. I myself was an appraiser for 22 and a2 years

5:29 And I know sometimes that appraisers they can call appraisers from different areas and they may not be familiar with an area. Right. So if you provide

5:38 The comps you want them to look at. Why would you not do that? [laughter] Right. Exactly. And so and I also tell them the number that I'm looking for.

5:47 I let them know specifically. At least it sticks in their ear. They may not do much with it, but they know they've heard it from me. And so subsequently the appraisal came in and we were surprised. It came in at like three I think it was 340. And so we were able to get a serious investor. And she actually owned I think two maybe 300 other condos in that area which is called Fort Lincoln. That's in DC and Northeast. And so the bank at that point, now this is the thing though, and this is something I've been in this business probably as long as you, Bill, and I've never really seen this kind of thing. I don't I'm not sure why [clears throat] they did it, but the bank also, and let me say this again, the bank put gave the family $47,000. And I would like to stand sit here and say, is this all because of my negotiation skills? But I think there were some other factors, too. And so that was the first time I'd ever now we've gotten money for clients before from the bank, but that's the first time I saw them relinquish that kind of money. And we had to go back and forth with the bank to make sure it was going to be on the HUD one, which is which is the altar now. And it was. And the family was elated.

7:17 They were elated. We did have some issues though because one of the family members wanted to take the bulk of the money. Now, how many times have you heard that in probate? [laughter]

7:29 Welcome to probate. Welcome to probate. And we were able to resolve that and everybody was happy with the services we provided.

7:40 Now, short sales typically there's no equity in the property. You're getting the loan balance reduced enough to cover all the closing costs and then usually a nominal amount they'll agree to the sellers on a non-HECM non FHA loan reverse mortgage type is reverse mortgage different like you said in this case they got $47,000 I know they'll I believe they'll let you list it for 95% of their appraised value

8:08 Right and then so are so if there's any equity that just goes to the estate is that how it works Well, not really. It doesn't go to the estate. In most cases, there is no nothing to be gained. In fact, they used to actually make you sign a document that said no money is going to any other party.

8:30 Got it. Okay. Now, I don't see that as much. I would say they stopped doing that probably maybe three or four years ago.

8:41 So you don't really see [snorts] that at least I haven't seen it the documents that require that. And they may still and some people may still do it. I'm not sure how the economy is going to fare next year, but we are definitely seeing we are in our area, Bill, we're seeing an uptick in people either letting the property just go back to the bank, right?

9:07 I'm I've got a case right now in Maryland. Beautiful home. Beautiful home. And the bank had them sign a resignation of their rights and so that the bank could assign their own PR. So I'm seeing quite a bit. I had another case where gentleman said he was going to stay in the house until they, you know, pretty much put him out. I told him he had options, but he never really got back with us. So, I think again people kind of put their head in the sand like ostriches and I just let it go. Now, we did have another case though I'd really like to talk about and share with your audience that was and it closed roughly I think probably a month after this closed in July of this year. The property is on in what is an area called Columbia Heights, DC. And it was a semi- detached home and it was four levels built. Okay. Had multiple entrances. It actually had the largest garage. It and it wasn't really a garage. It was like an outhouse. I was told by the owners who'd been in the house for like 70 years that it was actually a historic something historic in the neighborhood. It was actually and it was about 39 by 28 ft was huge.

10:36 Wow. And so the I'll make a long story short when we got the case the owners were two it was 73 siblings again this time two women and a and a brother and one of one of the oldest had some mental issues. The person that became the PR, they were trying to they felt that they could get a million dollars for the house. They almost owed a million dollars on it.

11:09 Okay. And so we kept telling them, "No, we've done the numbers. The numbers are going to be around 700." But again, how many times you have a client that will not listen to you? Okay. You provide them comparables all day long. No comment. [laughter]

11:31 And they come my wife not listening to me. No comment. [laughter] And she's in the other room. So we have to go. All right. Okay. And so we kept going back and forth, back and forth with [clears throat] the family. We finally talked to their attorney, told the attorney. The attorney talked to them as well. And we finally were able to list the property. And even while we were had the property listed ourselves, they were talking to investors and other agents till they finally confirmed what we told them. So we were able to put the property on the market and they finally accepted an offer. So once the offer was accepted, we could then take that offer to the bank. The bank sent out the bank had already sent out an appraiser and the appraiser came in at I think right over $700,000.

12:28 So we got we were able to sell the property for $680,000. We found an investor, a nice young lady with her family, Asian woman, and they were able to get a loan. Now, the they did an appraisal and on the property, you know, it was an acquisition renovation type loan. And the appraisal came in at, check this out. Now, we said the property was $680,000, right? The AR the appraisal came in at $1,450,000. They were borrowing a little over $300,000 to do the renovation. So that means they would walk into the property with over $400,000 worth of equity. All right. Not to mention that the that the unit in the back has the potential to become an ADU, which almost doubles the value of that property.

13:35 So they walked away with a tremendous deal. Some of one of my investors would have paid thought that the value was about 1.6 million

13:46 Not 1.45. So again that was a short sale. No one the no one walked away with at least the owners did not walk away with any money from that from that sale. The bank was so far upside down on it. So, I'm thinking of occasions why a family would do a short sale. One is maybe there's multiple properties and they're allowing the Realtor® to make some money on this one because you're not going to make as much on the other ones. You do other work for them for free or other services you might provide them.

14:22 Second of all, oftentimes they do allow a little bit of equity depends each case is different. And third, you know, closing down the probate. If you sell the property through a short sale, it closes out the line liquid, you know, liquidates all any risks and anything on the state.

14:40 The state may have other assets. You know, they might be getting out, of any liability on the mortgage, but they might have in the bank half million dollar, million dollars. And so if you let them forclose, that money becomes at risk. There's taxification versus

14:54 If you do a short sale an orderly way closes out the house now the other assets can be divided up without any liens or risks or potential. So it's not a compelling case but again each case is separate and you want to talk to your attorney and you want to talk to a Realtor® get idea what the property is worth and see where you can do this. Now so we've talked primarily today about cases that involve short sales. Done a couple and as you know you know a lot of our audience on this podcast are reverse mortgage originators and or real estate agents that work in the space. I know you have a training academy that helps professionals learn how to take advantage of the opportunities. Talk a little bit about your probate training, what you do to help professionals, you know, learn more so they can take advantage of these opportunities their customers.

15:39 Thank you. Thanks. It's a great question, Bill. I actually have to go back a little bit. I actually got into probate during the great recession.

15:48 That's when a lot of real estate agents were actually getting out of the business. And so when I learned about probate and began to do probate, I be began to understand firsthand the advantages of probate. And of course, I had to overcome my fear because I was one of those agents that traditional agents as well. And you know, you hear a lot of things about probate that can be negative and can kind of turn you aside from it. And so I really had a passion to let people know that it can be done in even very difficult economic circumstances which we were in the great recession. And so I wanted to also make it easier for people to understand the probate process. And so what we did is we broke it down and I have an ebook that they can get on my website at thatprobate do thatprobateguy.com. And I basically call it the four Rs. There you go. The four Rs of probate real estate investing. And this essentially breaks down the process so that people do not have to be afraid of the of the probate process both agents, investors and personal representatives. And those four Rs are very simple. We tell people the first phase is the research phase. That's where you're able to get the information which is mostly in the public domain to find out where probate cases are and who are the personal representatives or the attorneys involved in that. Then we tell them there's the reachout phase.

17:34 The reachout phase is when you actually begin to engage the personal representative or the attorney involved in the estate itself. You actually communicate with them either via phone email you know [snorts] slow mail and what have you. Then there's the resolution phase. Now this phase is the phase where you actually help the personal representative or the attorney and the family resolve the probate issue. They remember that most personal representatives or executives only do that once in their lifetime. And so they may be fearful. They may be intimidated by the process. They're getting all of these notices and don't know what to do. And so when we can step in and provide them solutions, they love us for that. And then there's the rewards phase. And that's simply when everything has been consummated and everybody can close out. And in our case, if you are an investor or if you are a u a Realtor®, you know get your check. So that probateguide.com is the website and you have a book and you have other programs, training classes and such, live Q&As's on demand training, all kinds of resources

19:02 Where you bring this to market. I appreciate it. And for those who want more information, Nathaniel's contact info is on the screen. His phone number [phone number] and his email address is his email. If we get right to him, Nathaniel Arnold, thank you so much for sharing with us today what you're doing in the probate space, how you're helping families and professionals in the DMV area and now across the across the country with educating ourselves and getting better on our probate practice. Thank you so much for your time today.

19:32 Thank you so much, Bill. It was great to be on. I want to say this is a great guy. Watch the show. Thank you. Thanks so much. And for those you this is Reverse Mortgage Podcast. We get together every week. Usually talk to reverse mortgage originators. Today I want to talk to a real estate agent on the other side of the deal and the servicing side. There are reverse mortgages that are done as short sales. Challenging. We got to follow the process. Find somebody who knows it. Either an originator or a real estate agent like myself or Nathaniel who can walk through the process. If I can help in any way. I'm at Bill Gross Probate on social media. As always, make today your best day ever. Thanks so much.