‘Short Sale Kid’ tries to outsmart mortgage firms
TAMPA, Fla. (AP) – Nathan Jurewicz calls himself The Short Sale Kid.
At 27, the brash real estate agent drives a Lamborghini, sports neon hair and boasts of hauling in $100,000 a month in a market where others are fighting to survive.
His YouTube videos dazzle. They show him signing closing documents in his luxury condo, getting his hair colored in a swanky salon and talking about how he doesn’t have to work hard in a Bay area housing market others say is at rock bottom.
His secret?
He buys properties in foreclosure at low-ball prices from banks, then flips them the same day for big profit – as many as 10 a month. Jurewicz says he, and the followers of his system, fill a need in a down market, but others in the industry question his booming business. They say:
– Banks are losing out on thousands of dollars on each sale at a time when the industry is receiving billions in taxpayer bailouts.
– Many distressed homeowners are unaware lenders could someday require them to pay the difference between the original mortgage and the selling price. The low-ball offer could leave them on the hook later to pay the lender the higher difference.
– A large segment of the home-buying market could be excluded. Under Jurewicz’s system, cash is preferred and potential buyers with FHA loans are avoided.
Jurewicz’s system is a national brand called Short Sales Riches. In June, he teamed up with real estate broker Chris McLaughlin, a lawyer and owner of four Keller Williams’ realty offices in the Tampa Bay region. They developed a program that includes DVDs, a book and mentoring program that’s enticing agents and investors nationwide to cash in on the housing bust.
The team’s Webinars and testimonial videos are becoming an Internet sensation.
“Every time I see something on the news about the sky falling … my partner and I think, ‘Yes,'” Jurewicz says in a YouTube video after closing a deal for a $15,000 profit.
Though YouTube is full of positive testimonials, the program is attracting the critical eye of real estate professionals and lenders.
Dozens of experts who looked at the system question whether all parties are getting full disclosure. Of particular concern is whether lenders would allow the short sales if they knew the properties were reselling for tens of thousands of dollars more on the same day.
Jurewicz says lenders should know because they get a copy of the contract that prohibits the owner from selling to anyone but him.
Besides, he says his system helps lenders get rid of distressed properties faster. His contracts have been reviewed by lawyers and are disclosed to everyone involved. Critics, he says, just don’t understand.
“We get deals done,” he told the Tribune last week. “People like to jump to conclusions, but I feel good about the work I do. If the banks didn’t make it so hard to get short sales closed, there wouldn’t be a need for me.”
Here’s how the system works:
Realtors representing real estate investors, or the investors themselves, identify homeowners in trouble and persuade them to sign the system’s hallmark option-contract. The contract, which is filed at the courthouse, gives an investor an exclusive right to buy the home for a year at a specific price.
– The offer is then submitted to the lender as a short sale, which allows owners to avoid foreclosure because the lender agrees to sell the home for less than the mortgage.
– When the lender sends a professional to estimate the property’s market value, the investor uses what Jurewicz calls “Jedi mind tricks” to persuade the lender’s estimator to accept a lower value. He also provides a hardship letter, indicating the homeowner’s desperation.
– A real estate agent then looks for a buyer willing to pay a higher price. Once they have a deal, the real estate investor settles with the lender for the low price and sells it on the same day for the higher price, collecting the difference.
Many title companies refuse to handle the closing, which is why Jurewicz and others in the program mainly use lawyers, which Florida law allows. Jurewicz has a team of more than a dozen real estate professionals and pays them bonuses and part of the profit.
Short sales are common as more troubled homeowners try to avoid foreclosure, but they often take months to complete. Jurewicz says he’s able to find buyers to close quickly because he negotiates a short sale approval from the lender ahead of time.
Dozens of real estate professionals who have looked at the program, however, say participants could run into serious problems.
Some say, and Jurewicz acknowledges, lenders are not told a higher offer is available. That makes critics wonder whether lenders, who are supported by taxpayer bailouts, are getting the best deal.
Then there are worries that homeowners who are less savvy about real estate matters may not fully understand the deal. Others point to first-time buyers and others, such as those with FHA loans, who can be locked out because their lenders won’t fund loans with option contracts.
“This is cutting out 75 percent of the market because so many buyers are using these kinds of FHA loans,” said Jane Land, a real estate agent with Century 21 in Tampa.
She also worries sellers may mistakenly assume the agent approaching them also represents them.
But Jurewicz and McLaughlin say they make homeowners sign a form that discloses that.
The system is attractive to investors because lenders may never know the house was flipped the same day, said Jennifer Butts, director of operations for Reston, Va.-based Mortgage Asset Research Institute, which tracks problem mortgages for lenders.
“This raises the question as to how much transparency there should be in the short sale process,” Butts said.
The program’s free Webinars routinely fill up with wannabe real estate investors.
The official Short Sales Riches system retails for $497. However, customers are encouraged to also purchase “inner-circle” coaching. It ranges from $197 a month to $997 a month. Jurewicz and his partner declined to disclose the number of programs they have sold.
Jurewicz got his start as a real estate agent in St. Petersburg.
He says he came up with a system to streamline the cumbersome short sale process. He started working with agents in the Keller Williams Tampa Central office.
That’s how he met the office’s broker, McLaughlin, who is known for selling SmartPortfolio.com, an online stock newsletter, to TheStreet.com for $7 million in 2000.
McLaughlin said he heard stories about Jurewicz and wanted to make sure his methods were legal. He says he combed through Jurewicz’s contracts and disclosures, added to them and had other lawyers review them. He says he’s aware of the system’s controversies but that it is legal.
“Anyone critical of this process hasn’t been in the trenches and doesn’t understand how frustrating short sales are or how many people we help,” McLaughlin said.
McLaughlin says his Short Sales Riches blog has 35,000 subscribers, and a “small” percentage have bought the system.
YouTube videos and promotional literature tout testimonials from customers who say they are making $5,000 to $50,000 on each flip.
Short Sales Riches is creating buzz, and questions about option contracts are coming up regularly, said Alex Charfen of the Distressed Property Institute, a training company for real estate professionals.
He tells agents to walk away.
“Trying to have a windfall in this market is exactly what we don’t want in this market,” he said.
One of the sharper criticisms of the program is whether the lender knows about the flip. Lenders who agree to allow short sales are trying to get back some of the money owed them.
So when Jurewicz flips a home on the same day for more money, lenders are left in the dark, says critic Ralph Roberts, a consultant who works with lenders to investigate problem mortgages.
“Everything has to be 100 percent transparent to everyone involved,” Roberts said. “Sending the option contract to the lender is not good enough.”
But Jurewicz said lenders should figure it out.
Nancy Morris, spokeswoman for JPMorgan Chase & Co., said her company avoids these deals.
“Chase does not work with real estate agents who engage in this activity,” she said. “We do our own internal investigations to make sure this isn’t happening.”
Kathy James, spokeswoman for SunTrust Bank, said the bank found in a recent survey that its staff wasn’t familiar with option contracts in short sales.
Jurewicz and McLaughlin say everything is spelled out in the disclosures given to the homeowner, including an option for the owner to cancel at any time.
Despite signing the option contract and disclosures, Patrick Carrus said he had no idea that Jurewicz bought his New Port Richey investment property.
Jurewicz bought Carrus’ home for $140,000 and sold it the same day for $159,000. Carrus told the Tribune he had no clue Jurewicz made that much money on his home, but is thankful he avoided foreclosure.
“I signed so much paperwork,” Carrus said. “I couldn’t possibly read and understand it all.”
Jurewicz has nearly 150 options out there waiting for buyers.
And when he finds them, he says it will be his best year yet.
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Information from: The Tampa Tribune, www.tampatrib.com