The new law going into effect October 3, 2015, TILA RESPA Integrated Disclosure (T.R.I.D.), has the real estate industry panicking because many fear that it could delay closings for a month or more. In fact, the government website that illustrates the timeline of how long a typical T.R.I.D. real estate transaction that is done correctly will take shows over 2 months! See the Consumer Finance Protection Bureau Timeline for yourself. What's most alarming to agents, mortgage professionals and title agents is that this simulated timeline assumes that everything will go as planned. While the rest of the industry is bracing for problems, could all this concern have a silver lining for creative real estate investors?
The silver lining for real estate investors to this "Know Before You Owe" rule is that sellers who need to sell their house quickly may be more apt to work with an investor who can close fast with cash rather than wait out the traditional selling approach involving a real estate agent and a buyer obtaining a mortgage. The very thing that the industry is so worried about...delays...is the very detail that could help us creative real estate investors!
Silver Lining of TRID for Investors
- TILA / RESPA Integrated Disclosure
- TILA / RESPA Integrated Disclosure,
- or acronym TRID
Real quickly, what's happening is this, among other changes the main change to investors, agents, buyers, sellers, that they will see is the old school settlement statement that you've seen and you've probably dealt with. That is now going to change, especially is there is a loan involved and then it's not an all cash transaction, there's going to be a closing disclosure. In fact, this is several more pages. This ends up being on two, three, this is a sample of four or five. This is a five-page document whereas this is usually two.
Where this came from was they wanted to make it a little bit more clear what people were signing up for when they got a loan.
The layman's phrase for TRID is Know Before You Owe.
Believe it or not, I know I'm kind of shoving this in the camera here, this layout and design, they actually did a lot of testing with just random people to figure out, the government did, to figure out which one was most user friendly. Why this is so significant is that no longer is it the title company that creates this, but it's actually going to come from lender. If you've ever done any transactions with banks before, you know that there are delays.
Starting October 3rd, this new document must be used,. As I reported in a previous video, one of the fall outs of this new rule is delays. Big delays. In fact, it's real interesting because on the actual government website that tries to explain TRID and the changes that may occur, it gives a closing timeline, get this, of two months. That's the government website. That's painting a positive picture, a rosy picture, so just think of what could possibly happen is everything doesn't work out the way it's supposed to, it could even be longer.
What is Our Silver Lining?
When you're talking to a potentially motivated seller and they're trying to decide do they sell it to an investor like you, or do they work with a real estate agent and go sell it the retail way, the normal way, you can now give them, not only the evidence from the government side, and you can Google the TILA / RESPA Integrated Disclosure, and you can show them the government timeline of two months, but also you can just explain to them that the entire real estate industry is still in a bit of panic right now as to what exactly is going to happen as a result of all this and he delays it could create.
The silver lining is:
There are going to be delays for any seller, which means you might be able to get a better deal. When you explain to them, "You're right, my offer is less than you could get if you potentially sold it with a real estate agent, but I can close a lot faster than that agent can because I'm going to be dealing with all cash."
Again, in certain cases that might change slightly, but if you are buying it at a good enough discount, you can certainly get funding for that. You could also flip it to another investor, that sort of thing. The silver lining is the delays are going to hit those sellers hard and there are some people that they get into a jam and they procrastinate, they procrastinate, they procrastinate, now they need to sell fast, and if there's one thing that's difficult to sell fast it's a house. That can open up opportunities for you. For the next couple of months anyways, while the rest of the industry is getting used to TRID, this could be a great opportunity for us as investors to pick up more deals. We can swoop in there and pick some more up, because this latest law is making everything a whole lot slower to close.