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Real Estate - The Law Firm of Steven H. Salami

Steven H. Salami

Attorney at Law - Serving NY and NJ

Real Estate: Transaction Types


    I have prepared a thorough analysis of the customary timeline that a residential real estate transaction proceeds along for you to share with your first time home buyers.


    On short sale transactions I make it a point to order title immediately. This makes clear the potential hurdles we will face during the transaction. The following are items that I look for specifically:

    1. Open Mortgages (both current and prior) - Sometimes loans have been sold and consolidated but a satisfaction of mortgage from a previously satisfied mortage is not recorded. You will need to obtain a satisfaction of mortgage from all prior Mortgages if they are paid in full. If they’re not paid in full, then the first recorded mortgage will be paid first in line and then all subsequent Mortgages will be paid in line based upon their date of recording. All open mortgages must be negotiated in order to complete a short sale. You will need a satisfaction of mortgage or a payoff on an existing mortgage that is valid through a date certain to be paid in order to complete a short sale.
    2. Open water, sewer, real estate taxes – These figures must be included on a preliminary HUD that will be approved by the short sale lender. Most realtors/attorneys “guess” at these figures and that is a mistake. You need to run title to see exactly what is in arrears so you can accurately depict that on your preliminary HUD submitted to the short sale lender – you must make it a point to negotiate accurately with the short sale lender and know more about the property than they do – this is how you get them to pay liens, judmgments, utilities, etc.
    3. Tax redemption certificates – In New Jersey, every municipality must hold an annual sales of unpaid real estate taxes, thus generating revenue. The tax collector conducts the tax sale in which third parties as well as the municipality bid on the tax sale certificates or “TSC”. The highest bidder pays the outstanding taxes and then becomes the holder of the TSC which must be recorded with the County Clerk to become a lien against the property. However, the holder of a TSC does not own the property but only a lien against the property in the amount paid for the TSC plus interest which continues to accrue; if the holder of the TSC forecloses, he or she can become the owner of the property. In the event that a tax sale has taken place, you must obtain tax redemption certificates from the township in order to sell the property.
    4. All recorded judgments - there might be judgments against the homeowner from previously unpaid bills such as parking tickets, credit card bills, child support etc. - it could be anything that was not paid. People routinely get sued and throw court documents is in the garbage. Attorneys will proceed to a default judgment and record the judgment against the property owner. It is the job of the attorney to contact the judgment holder’s attorney and to obtain a payoff that is going through a date certain. This is essentially another mortgage that has to be paid.
    5. Home Inspection - another strategy is to have the home inspection done immediately following review. The reason for this is that once the short sale lender has issued approval, if an inspection is done it is less likely that the bank will work with us and reduce the price any further. If the whole inspection is done at the outset, we can make our case to the lender that they should take less than what is due to them based upon the condition of the property.

    Wholesaling is a great way to make a profit on properties that you can procure at a reduced price. The key is to find a property at a discount, enter into a contract which will give you an equitable right to market the property and then locate a cash buyer that you will either assign your rights to or proceed with that party to a “double closing”. In the real world, what this means is that an investor will purchase a property for a sharply reduced price for instance let’s say the property is worth $100,000 and you get it for $50,000. You enter into a contract for that $50,000 price and then market the property to an “end” buyer who, say, agrees to pay $80,000. The first deal where you are buying for $50,000 is considered the “A-B deal“. The deal where you are selling it for $80,000 is considered the “B-Cdeal“. Most often, wholesalers will enter into a simultaneous transaction where they will use the money from “C“ to pay off “A”. This is a basic synopsis but conveys the spirit of a wholesale transaction.


    There are instances where a homeowner will lose the property at a sheriff sale. They are given a 10 calendar day window within which to redeem the property. Often, an investor will be willing to purchase the property for the redemption amount plus a little extra to give the seller incentive to proceed with an expedited sale. In this instrance, the seller must move quickly to enter into a cash contract and sell within 10 calendar days. Often, the amount of the redemption figure will be paid to redeem the property and then the fine points of the transaction will be ironed out after the redemption has been paid to the sheriff. For example, if there are inspection issues and there is not enough time to work them out, the parties may agree to pay the redemption and hold escrow back from the seller if there is a profit to be made so that inspection issues can be properly addressed by the buyer’s contractors. As the real estate agent, you can make a very quick commission on such a deal since the property will typically go into contract on Monday and is sold by the following Tuesday at the latest.


    Real estate owned (REO) and Dept of Housing and Urban Development (HUD) properties are properties that are basically owned a bank. REO properties have been foreclosed upon and are owned by the lender that foreclosed. HUD homes have been foreclosed upon by FHA lenders. Your best bet is to work directly with an REO broker to find these properties. To secure these deals, there are 4 main tips I can convey:

    1. Be a cash buyer – cash offers are always accepted first;
    2. Be able to close timely – these properties sell between 24-72 hours;
    3. Highlight negative features of the house to the bank – this will reduce the sale price (if the bank will work with you, which is not always the case) to increase your profit margin;
    4. Make repairs as cheaply as possible to maximize your profit.

    I will typcially reach out to local matrimonial attorneys on behalf of my real estate agents in an effort to generate listings for them. Quite often, parties that are divorcing need to sell their house and if you develop a strong relationship with a number of matrimonial attorneys that are local, they will be able to provide you with listings for parties will need to sell their house pursuant to a divorce. The same goes for estates - developing a relationship with a local Estate lawyer can produce the same types of listings.


    I have conducted countless open houses and I use those as opportunities to develop one on one personal relationships with each person that walks in the door. In our business, any client that walks through the door is a prospective lead especially at an open house because they are looking for property and they are a captive audicen. If you are the listing agent and you are at an open house do not discount the fact that those buyers may become clients of yours for other reasons. I know that a lot of real estate agents focus mainly on listings but those buyers are looking for houses and even though they may not buy the house you are doing the open house on, they may be interested in something else down the street or in the area. I make it a specific point to personally get to know the people that come through the door and furthermore make it a point not to lose that lead – I specifically direct my attention to developing that lead. I strike while the iron is hot. Once a day or 2 goes by, the moment is lost. I do my best to engage the people, to get their phone numbers & email addresses and email and text them within 24 hours. I find out where they live currently and find out what communituies they are looking to move into; I take the time to get to know them individually & do not just let them walk around the house – I walk the house with them. If they show up with one of their own agents, of course let them be, but try to get to know the people that are coming to your home because they may ultimately become a client elsewhere for another reason – do not simply take for granted the fact that they are one of many looking at the house that you were showing that day. I take people around the house, room to room, and try to get them to envision themselves living in the house; I talk about their children and their families, the events they will have in the home and in the neighborhood, block parties, barbecues, birthdays, holiday gatherings, etc. As the broker, you need to bring that house to life - remember you are a SALESPERSON and YOU are selling that house.


    Hardmoney lenders are a great resource - I work with at least five or six of them and you may need them from time to time on certain transactions where a client cannot obtain conventional financing - certain builders may also want to use a hard money lender who is in the business of lending to builders – there are number of lenders I work with that will lend 90% or even 100% to a builder if the builder has a proven track record. Do not discount the fact that a hard money lender might be able to rescue a deal for you - of course conventional lending is the best way to go for a client but some people don’t fit into that category and you need to go outside the box and have a resource of hard money lenders at your disposal that are available to jump in when and if a deal goes sideways. Clients who take advantage of a hard money loan should be advised that a typical hard money lender will loan up to 65% LTV (loan to value) of the home and interest rate are typically 12% and up. However, if the buyer repairs their credit and is timely with their payments, they often can re-finance within 12 months into a more conventional loan.


    When a house is going into foreclosure, many investors will contact the homeowner directly to obtain authorization to work with foreclosing bank. The investor will seek to negotiate a loan modification or a forbearance agreement or a short sale on behalf of the seller at a greatly reduced rate if they can represent to the bank they can close quickly. Many homeowners have no idea how much they owe to the bank but investors who see a good opportunity and who can contact a lender directly on behalf of the seller can work with the lender pre-foreclosure since the bank is motivated to work with the homeowner before they have spend fees and costs on the foreclosure process. Furthermore, many of these banks do not want to take ownership of the physical property and maintain it because they then are responsible if something gets stolen or breaks etc. Therefore, jumping into a deal before foreclosure is underway sometimes will benefit an investor who can get a good deal, rehabilitate the home and either rent it out or sell it.


    For those interested, a great website is noteschool.com.

    Buying notes is often a better investment than owning property & collecting rent since, as the note holder, you are the bank. You do not have the “tenants and toilets” issue, per se. Many investors will look for performing (those that are being paid upon) and/or non-performing (those that are not being paid upon) notes and negotiate a reduced amount with the note holder to purchase them and then collect upon them. Often times, if you are the owner of a performing note you may think that the length of the note is the amount of time that you will be spending collecting but that is not the case - quite often, homeowners will sell the property or refinance it and a 15 year note maybe paid off in 5 years. Again, the beauty of beung a note holder is that you are not maintaining the property - you are just collecting upon the payments made by the homeowner. Of course there is work involved because if the homeowner stops paying and it becomes a non-performing note then you must foreclose but that is why you want to negotiate the best price and budget for that potential outcome.