Hire A Short Sale Professional With Nicole Espinosa
Episode 517: Hire A Short Sale Professional With Nicole Espinosa
You’ve probably heard of short sales, but do you know exactly what they are? As a niche in real estate, not many people quite understand the process. And yes, short sales are very complicated! That is why many investors think it’s a waste of time and let it go. Today, Mitch Stephen brings on The Short Sale Queen, Nicole Espinosa. Nicole briefly explains what a short sale is and encourages the need to hire a short sale professional if you want to proliferate in the short sale arena. This might be the unique niche you are looking for, so tune in!
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I’m here with Nicole Espinosa and she’s The Queen of the Short Sale. There are a lot of ways to make money in this industry, more ways than you can probably count. The goal of this show, as I was explaining to Nicole, is I don’t care how you do it. You use my strategy, her strategy or 1 of the 500 people we have talked to but figure out how to get financially free so you can walk away from that boss in that job and you can free up 2,600 hours a year to become the person that you are supposed to be. We are going to be talking about how to proliferate in the short sale arena. How are you doing, Nicole?
I’m good. How are you?
I’m doing great. We are not too far apart. Maybe 4 or 4.5 hours. You are in Dallas and I’m in San Antonio, so I would understand your culture or your market a little bit. Let’s start by explaining who you are and where you came from so we can get a grasp on the person that we are talking to, and then we will go further.
I’m originally from Florida. I moved here a couple of years ago. My first start in the real estate industry was in REO, which was foreclosures. I was working directly with asset managers and evicting homeowners. It’s the complete opposite of what I do now. That was my first exposure to real estate. I did that for 2 or 3 years working with the banks, and it was a terrible job.
In the same breath where you said getting away from your job and replacing, I’ve got my license and I was like, “I don’t want to work for the banks. I don’t want to be there having to worry about their deadlines,” but I had all of this knowledge of how they worked and operated so I knew that there was something I could do with it.
When I’ve got licensed, the first exposure that I had to a listing was what ended up being a short sale. What was so interesting about this niche, specifically in real estate, was that no one understood the process. Everybody kept saying, “It’s a waste of time. Let it go.” I have always thought about how to create solutions. I was like, “This person needs help. I can figure this out.”
That was how everything evolved with the short sales. I developed my process. The process that we do now, I have been doing this for a few years and the consistency of sticking with this niche. We went all in. We developed our process, we started teaching it, and now, we are 100% referral. We are in fourteen different states across the country.
Let’s start with the very basics. What is a short sale?
A short sale is where a homeowner is in financial hardship. They lost their job, got a divorce or COVID, and can’t afford their payments because they owe more than the house is worth. If they were to sell the house, they would have to come to closing with money, which they don’t have because they were not even making their payments.
In that situation, instead of losing the house to foreclosure, we represent that homeowner and we get their bank to take the loss and take less than what is owed instead of that homeowner taking a financial loss. They are essentially getting represented for free because we charged the bank our fee and they were able to walk away from all of that debt-free and clear without having to worry about foreclosure or having to pay it back.
You mentioned that the bank would take the hit. They will sell the property for less than they owed. Does that cause a tax ramification for your homeowner or have you figured a way around that?
There are two things. One, the debt is being settled. We get in writing from the lender that they are agreeing to take the loss and they are not going to pursue them for that deficiency. The deficiency is the difference between how much we sell it for and how much they owe. As far as any tax implications of them being 1099s, the lender has the right to 1099 them for that deficiency but they are covered under the Mortgage Debt Relief Act, which means that it’s a wash. If they receive 1099 as income, they can file a form and are covered if they did a short sale.You can't be chasing a bunch of things. You want to be the expert in your niche. You've got to do one thing and stay laser-focused. Click To Tweet
I know some people worry about that because they don’t have the money to pay and they were going to get a tax hit if they don’t have someone smart looking out for them or telling them how they can avoid it. How long does that process usually take? Is it a long process for short sales? My thought was you have to stick with these things for a while because they are institutions. They have their meeting every third Thursday of the month or if you are lucky, they have a meeting once a week, so you can at least get in weekly. What’s the average time it takes for a short sale?
Every short seller is different because every homeowner’s situation is different. With that said, our average timeframe is 2 to 3 months from start to finish on getting the short sale completed. The industry standard is about a year if it gets completed. It has a lot to do with the person facilitating the short sale if you don’t know what you are submitting, I always say it’s like the blind leading the blind. The big sector is going to tell you what they need and you have no idea.
You see a lot of these agents or a lot of these people that are trying to process short sales and they were like, “The bank hasn’t told me what they need,” and the bank is like, “They haven’t sent it to me.” They are running around in circles. We have been doing this for so long and we do this at such a high volume that we know if it’s a Wells Fargo, FHA file is what they need for the process. We then know Chase needs this, and that’s super important because submitting everything at once and being proactive instead of being reactive after the fact is the reason why our processing time is so short compared to the standard.
How do you make money off of short sales? Tell me about a typical profitable short sale in your arena. Do you have a case study of one that you can think of off the top of your head?
We make money because we charge the bank our fee. We represent the homeowner and that’s how we get compensated. The bank will pay us because they are going to pay an agent if they foreclose anyway. To them, they require an agent to be involved in the process. For a real estate investor, the opportunity to make money is for the house to purchase at a discount.
The last short sale I can think of out of the top of my head is we had a deal that closed and the investor originally put in an offer with the homeowner at $150,000. The homeowner owed a little bit over $200,000, so in that situation, the numbers didn’t make sense. That’s the easiest way to identify for your audience if this is a deal. If the numbers have little to no equity, that’s a short sale because now the bank can take the loss instead of the homeowner. In this situation, his original offer was $150,000. The house had about $30,000 to $40,000 worth of work in it.
We ended up getting it approved at $140,000 because we were able to prove the foundation and plumbing and we work closely with the investors that are submitting the offers on any repair bids and anything that could help justify a discount. He ended up purchasing at $140,000 and the ARV was $210,000. In this situation, he only had to put about $20,000 to $30,000 in it, and then he ended up flipping it. It’s going to depend on the situation. Your strategy is going to be based on the house. Are you going to wholesale, flip or hold it? However you do your business as an investor, that doesn’t change. You are going to evaluate it based on the house and the price that we can get it at.
You are offering to help me when I recognize the short sale situation, is that right?
That’s right. It’s allowing you to now purchase this house and it’s a whole other pipeline of business instead of walking away. Ultimately, our goal is to represent that homeowner to make sure that we are helping them, representing them, and taking care of but we are also in the same breath trying to help the investor be able to purchase the property at a discount. At the end of the day, if the house is distressed and it needs work, an investor is going to purchase it anyway. Why not do it to the person that has a relationship with the seller? You will have the first regular easel because you are the one that referred it to us.
I’m getting it now. You are like a third-party vendor that I can use when I recognize a certain situation, and then I was also concluding that in November 2021, it’s a hot real estate market. The only reason a bank would short sale in the world is that the house has some deficits. It has been run-down, torn up or has a lot of work to be done, which the banks are completely scared of and they are not going to deal with at all.
I see where you could have a very valuable service. In fact, my company might run across some deals that we can bring to you ourselves because we usually don’t want to deal with short sales because of their intricacies but if you specialize in that, we are going to clear enough room to get you paid. I suppose that you are operating off of the 6% that the realtors usually get.
We charge our percentage to the bank. It’s already built-in so it doesn’t affect the net for the offer. That’s the best part.
They are paying that 6% out of whatever they receive. That makes sense. I bet the banks love you.
I don’t know about that because we are very tenacious. In the same breath, we are good at what we do. We have been doing this for a very long time, so when we submit a package, the negotiators will look at ours first because they know we have everything that they need. They are not going to go back and forth but we are relentless. They come back and say, “We want $200,000,” and we were like, “There’s no way we could sell this for more than $150,000 or $175,000.”
Not every house is going to be a deal. There are going to be pretty houses that you are going to refer over to us, and in those situations, we do pay the investor for the lead if they decide not to move forward to purchase it. Either way, you are going to get compensated but the ultimate goal is for you to be able to buy as many of these properties as possible and have that pipeline of business with your existing leads. Instead of going out and trying to get new leads, why don’t you utilize the ones that you already have to create as many solutions as possible so that your cost per lead can go down?
You are already paying to find some of these leads, and then you are just letting them go in the trashcan. What you are looking for are houses that don’t have much equity that the buyer is behind on payments, and quite possibly, the house needs a decent amount of work. Those are probably your best prospects. We should not try to sort it out. We should get it over to you and you try to figure out if there’s anything to do with it, right?
Exactly. Once you identify that, then you let them know, “I want to purchase this but I’m going to refer you to our partner. They will go over the next steps with you to see if you qualify.” We ask that you do that warm handoff because you have already built rapport. It’s super simple. You go to the website. It’s integrated with our system, which we use Infusionsoft, so it tags you as the person that sent it over and then we get with them within 10 to 15 minutes.
They will get a response from us, we will call and pre-qualify them. We will set the expectations, go over answering all their questions, and educate them on the best possible solution for their problem so that they feel like, “I understand what’s going on. I know that the short sale is the best thing for me,” and then we get them onboard.
We don’t take anything on what we can’t close. We have a 98% close rate, which is incredible for this niche because short sales are very complicated. The reason why is because we vet them, we make sure we do all the negotiations upfront, and we are pulling titles so we know what we are negotiating. We do all of our due diligence, so there are no surprises.
It never ceases to amaze me the number of niches in the creative real estate business. I just learned another one and I have been in this business for many years. Here you are, out there in Dallas, forging at another niche. I don’t know that anyone that does what you do.
I know of a couple of companies across the country but not at the volume that we do. We do over 100 a month. People will do maybe 1 or 2 here and there but this is all we do, and I truly believe that’s the reason why we are where we are at. I tell other entrepreneurs like, “You can’t be chasing a bunch of things. You want to be the expert in your niche. You’ve got to do one thing and stay laser-focused.” That’s what we have done for many years.
The hardest thing an entrepreneur will ever do is have one great idea and finish big because entrepreneurs see opportunity in all these different venues. They start chasing them, and then they feel effective at all of them and don’t finish any of them.
The way our brain works, we love creating and being in that space. I thrive on being able to create, and that has been a huge struggle too because once you feel like you have perfected it, you want to keep going and have new ideas but it’s so important to stay focused and really get back to the basics when you are growing and scaling of what got you there, to begin with.
If you are talking to Nicole, you have a possible short sale but at the end of the day, you are going to have to come up with some money to consummate the short sale. FYI, I finished a book called The Art of Private Lending and I’m teaching people how to lend their money and make 12%, 14%, 16% or 18% but I also throw my hat in the ring and say that takes a little bit of work. If you are going to make that return, you are going to go to work but if you want a passive income, then I will use all the principles that I talked about in this book to protect both you and me, and you can just loan your money to me and I will pay you 8%, 9% or 10%.Often, people speak on things they have no idea, and it puts the client in the worst situation. But when you give good information and build rapport, you're going to get better quality leads. Click To Tweet
It won’t be 12%, 14% or 16% but you won’t have to quit playing golf. You can keep on playing golf. I put this out and it’s at 1000Houses.com if you want to check it out. Funding these deals is always a major concern. The more money you have that you can use to fund deals, the bigger you can grow your business. I have a raising private money course called the Private Money Changes Everything where I make payments on the first of every month on $26 million with the private money that I have out in the field.
I know a little bit about how to do that. If you are interested in that so that you can take advantage of Nicole’s process, and then when someone says yes and they agree on the short sale number, you have ample funds and even more funds to buy them with, and hopefully, you can start a pipeline with Nicole in foraging niche. You are out there offering this service. Why do you teach it?
There’s no education in this space. When I’ve first got into short sales, it was what I said in the beginning. Everyone was like, “Don’t even worry about it. It’s too complicated.” Even to this day, even though it’s way more established, the process and people are now familiar, there’s nobody out there teaching how to build rapport with these homeowners, how to process it, and how to put good information out there. I’m passionate about space because I had to learn the hard way. The purpose of teaching with investors is I always believe it comes full circle.
On YouTube, I do so many free videos for the simple fact, as a real estate investor, are making better calls and you are giving good information. A lot of times, people speak on things they have no idea and it puts the client in the worst situation but if you are giving good information and building rapport, you are going to send better quality leads to us. Not only that, you are going to help more people so that they don’t get foreclosed on.
I can’t tell you how many homeowners have taken the wrong advice from realtors or real estate investors because they didn’t know any better. That’s the reason why we teach it. For people that are wanting to process their own short sales, we teach that as well because there’s plenty of business to go around for everyone. It’s really putting all that information out there to help as many people as possible.
Let’s talk about that one thing you mentioned. Getting rapport with the person that is behind on a mortgage and a house that can’t sell for what they owe, how do you go about gaining rapport with these people? Sometimes the fences are pretty high from these people. They know they are in a bad spot. They have had a lot of people say they can do something, and then when they find out the numbers, it doesn’t work. They don’t even call them back. They just leave them high and dry, so they probably have had some not-good experiences. How do you break through that barrier?
I always say lead with value, educate. Don’t sell. This is like Sales 101 where they like to regurgitate what’s important to them instead of listening to the consumer or to the lead and figuring out what’s important to that person. For example, there are a lot of real estate investors that will say things like, “I can close in seven days. I’ve got the cash.” For someone that’s in pre-foreclosure, that’s the worst thing you could say to them because they don’t want to sell, and don’t want to move in seven days. That will immediately turn someone off if you say that.
A lot of times if you just listen, they will tell you exactly what you need to say in that conversation. They will tell you things like they lost their job and are overwhelmed because the bank is telling them that they can do a loan modification and don’t know what to do. That’s where you can insert the advice. If you know the different options and the objections these homeowners are facing, it will be so easy for you to build rapport.
The thing is that everyone is pitching what they want. You’ve got bankruptcy attorneys that are pitching bankruptcy and not explaining the full repercussions of that. You’ve got the bank pushing a loan modification, and then you’ve got an investor saying, “Sell me your house,” but no one is sitting there saying, “If you do bankruptcy, this is what could happen. If you do this, this is what could happen.” Trying to explain and educate them on what the best situation is. The majority of the time, with homeowners in this situation in foreclosure, the real only option is to sell. That’s it.
They have to come to that conclusion in their own time and space, and you have to educate them up to that point. It’s like, “We are down to all these options that you say you can’t do or don’t want to do. The only one left is to sell the house.” I know the theory because I’m about to finish up a book called How to Stop Texas Property Tax Foreclosure in Less Than One Hour. I’m telling them like, “Let me help you keep your house.”
I know that 9 out of 10 of them won’t be able to but I need to be there to coach them up through the process for them to conclude like, “I really don’t have a way out of this. I’m going to have to sell,” because I’m the guy that took the time to talk to them about keeping their house. Maybe they will consider me first when they conclude that they need to sell a house. I have helped people save their houses. Some people might think, “Why did you do that if they are just going to save their house?” I say, “If you can help a person save their house and not lose their home, that’s a good thing.” It doesn’t happen as often as I wish it did but it happens, and it’s a good day then.
Honestly, you really hit the nail on the head. You are saying the same thing. You are sitting here and you are walking them through it so that way in their mind, that option is no longer there. It’s almost like they have to see it play through so that they can no longer use that as an objection and now they know, “I’m ready to sell my house.”
It’s like, “If you owe $15,000, let’s run some other tracks. Do you have a lot somewhere that you don’t need? Do you have a boat? Is there anything you can liquidate to pay for this? Even if you pay it, are you going to be able to keep up from now on or you are going to lose your boat or your land, and then going to be behind again next month? Let’s go through all this process.” I see exactly what you are saying in the short sale thing. How you win the rapport is by going there and trying to help them.
We genuinely care, and that translates. When we are talking to these people, we have no agenda. We are on it. We have leads that people have sent over a couple of months ago or years ago, and we will come back to that person that referred it and say, “We’ve got them onboard,” and they were like, “I forgot about that lead.” If we are here and we have our systems in place, and sometimes it might take a little bit to get them on board, we know that if we are a resource to them and we are leading with value, they are always going to come back. Sometimes it’s that same day that we will convert it, and then sometimes it will take a couple of weeks, months but we stay on it.
When you said you are doing 100 deals a month, is that what you said?
We process over 100 short sales a month. Now, in our inventory, we have about 110.
Are those the ones that you are following or that you are working on?
We are actively working on negotiating.
You have to be serious to turn out that numbers. I’m impressed that you have a real business you really probably thought about. You can’t be doing this stuff by yourself in a garage. You have a team and that’s good.
That’s correct. I have eleven people on staff. I have an Operations Manager, Stephanie Parks, and she oversees the negotiators and the negotiations. I’ve got Selena, who’s our intake specialist and acquisitions. She is the one that if you call in to refer something, she’s our first line of defense. I have three virtual assistants that work with the negotiators that will call the banks. They will have a list of all of our Wells Fargo files and say, “Did you get our email? Did you get our call?”
They are the ones that stay on the phone for so long to make sure that they are communicating with the bank so that we can get things moving along. I have a transaction coordinator and two assistants for the negotiators. I definitely would not be able to do it without our team. They are phenomenal. Everybody has the same passion and vision for working together to get the same goal on getting it closed and helping achieve the investor to be able to purchase and then the homeowner to be able to avoid foreclosure.
Even that, it’s a little bit more difficult because you hear a lot of heartbreaking stories that are grueling. If you are a creative real estate investor and you have been walking past deals that are upside down or otherwise owe more than you can afford to pay, this is your wake-up call. Don’t walk past them anymore. Get this file in the hands of Nicole. I want you to go to 1000Houses.com/shortsale.
I’m also interested in knowing from those of you that use the service and make a sale or an acquisition that you wouldn’t have normally made because you didn’t even know how to look in this direction, and now you do. Write this down in your little book. There is something to do with properties that owe more than you can afford to pay, and this is it. It’s 1000Houses.com/shortsale. Get ahold of Nicole and her team and we will see. Is there anything else we need to discuss maybe before we wrap it up? This is a niche I haven’t been in before. I hope I covered it well but if I didn’t, this is your chance to say I left out a few things.
We covered a lot of points. Your audience needs to understand that our job as real estate professionals is to provide a solution, so don’t turn away opportunities on leads. The way you need to be thinking as an entrepreneur is, “If I have someone ready, willing, and able to sell to me, how do I make this happen?” We are another tool in their tool belt to be able to give them another resource. We are happy to help. I appreciate you having me on the show.
What is your website? Do you have a website?Our job as real estate professionals is to provide a solution, so don't turn away opportunities on leads. Click To Tweet
We do. TheSSQueen.com
SS Queen stands for Short Sale Queen just so everyone knows. I appreciate you. I want to thank everybody for stopping in to get you some Nicole Espinosa and learn how you might be able to turn that short sale into a profitable transaction for yourself. I would also like to thank LiveComm.com for sponsoring this episode. LiveComm sells smartphone numbers for about $0.02 apiece. Anytime someone calls that number from their cell phone, the smartphone number will capture their cell phone number, put it in a text distribution list, and you can text people for $0.02 a text.
I can show you on the video, on the homepage how I used LiveComm to shorten my days on the market to four days. I was at nine days before COVID. I don’t know what happened but it’s down to four days now in my 200 transactions. See how it can work for you or any business that you own. It’s not just for real estate. There is a lot to do with this new technology. It’s simpler, cheaper, and way more effective than you might even imagine. We are out of here, Nicole. Thank you so much for your time. It was my pleasure to have you on the show. Maybe we will talk again someday.
We are out of here.
About Nicole Espinosa
Nicole Espinosa, realtor, best-selling author, and owner of The Short Sale Queen, has been processing short sales since 2011. Our operations manager, Stephanie, has been negotiating short sales since 2010. They joined forces in 2018 and expanded nationwide, allowing them to process short sales throughout the U.S.
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