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Title: Making Money Helping Sellers: The 6 Things You Need to Know


1
Making Money Helping Sellers
  • The 6 Things You Need to Know to Make Your
    Fortune in TODAYS Foreclosure Market

2
The 6 Things You Need to Know
  • How todays foreclosure market is different than
    it was 10 years ago
  • How the foreclosure process worksand where YOU
    can profit
  • How to find the deals

3
The 6 Things You Need to Know
  • 4. How to buy at a discount BEFORE the auction
  • 5. How to buy foreclosures without using YOUR
    money
  • 6. How to profit once youve tied a deal up!

4
1 Todays Foreclosure Market Really is New
  • The typical home loan, 1993
  • 30 year fixed rate
  • 5-20 down
  • secured by a first mortgage
  • made to a borrower with average to high credit,
    or government-insured

5
So when a home owner in 1993 got behind on
payments
  • It was usually because of a financial or personal
    crisis
  • He had enough equity to offer his property at a
    below-market price for a quick sale to avoid
    foreclosure!

6
1 Todays Foreclosure Market Really is New
  • By 2005
  • ARMs and interest-only loans were the largest
    part of the mortgage market
  • Today as many as two-thirds of home buyers are
    taking out variable rate mortgages, gambling that
    interest rates won't rise faster than their
    ability to payConsumeraffairs.com, 5/05
  • The dramatic increase in the prevalence of
    interest-only loans, as well as the introduction
    of other, more-exotic forms of adjustable-rate
    mortgages, are developments that bear close
    scrutiny. To be sure, these financing vehicles
    have their appropriate uses. But to the extent
    that some households may be employing these
    instruments to purchase a home that would
    otherwise be unaffordable, their use is adding to
    the pressures in the marketplace." --Alan
    Greenspan, 9/05

7
Look at the Effects of Rising Rates on Payments!
  • Payments on a 150,000 loan, 30 year loan at
  • 5 interest801.89
  • 6 interest894.85
  • 7 interest992.17
  • A 2 rate increasea 24 payment hike!

Rates on a typical arm can go up this much in 1
year
8
1 Todays Foreclosure Market Really is New
  • By 2005
  • No Money Down Loans were the Rule
  • an eye-popping 43 of first-time home buyers
    purchased their homes with no-money-down loans."
    Forbes Magazine, 3/04

9
1 Todays Foreclosure Market Really is New
  • By 2005
  • The Subprime loans market exploded (then
    imploded!)
  • A subprime loan is 10 times more likely to
    default than a conventional, prime-rate
    loan.The Cleveland Plain Dealer
  • the subprime sector has grown from 150 billion
    in 2000 to 650 billion today, about 20 of the
    overall marketUSA Today, Feb. 8, 2007
  • Thanks to home equity loans, easy 2nds, and 125
    cash-out loans, owners have MUCH less equity
  • Americans borrowed 705 billion against their
    home equity in 2006, vs. 266 billion in
    1999Economist.com

10
The other factors
  • Historically high homeownership ratesmore loans
    to go into default
  • Flat/falling house prices throughout the US
  • Higher interest ratesmedia-induced real estate
    bubble panicfewer buyerslonger time on market
  • Although the Texas real estate market is healthy,
    homes don't sell fast enough to allow most owners
    to avoid foreclosure. San Antonio Express News
    8/06

11
So when a borrower in 2008 gets behind on
payments
  • Its just as likely because of an adjustment in
    his monthly payment as that he had a financial
    crisis
  • He must sell for full price (or full price) to
    cover his mortgage
  • He cant sell because there are fewer buyers
  • And so he goes into foreclosure and loses the home

12
All of Which Brings Us To
  • The highest overall number of loan defaults years
  • A banking system that is straining to deal with
    huge numbers of bad loans and REOs
  • Desperate sellers who believe that they are out
    of options
  • and it will get WORSE, not BETTER, in the next
    3-5 years!

13
Nationally
  • We're all going to have to be more creative in
    the next 12 to 24 months" in selling foreclosed
    homes, says Chad Neel, president and chief
    operating officer of Fidelity National Asset
    Management Solutions, a unit of Fidelity National
    Information Services Inc., Jacksonville, Fla. Mr.
    Neel's company helps lenders manage and sell
    foreclosed homes. Wall Street Journal, Nov. 30,
    2007

14
More news
  • The number of U.S. homes that slipped into some
    stage of foreclosure in 2007 was 79 percent
    higher than in the previous year, a real estate
    tracking company said Tuesday. Many homeowners
    started to fall behind on mortgage payments in
    the last three months, setting the stage for more
    foreclosures this year. MSNBC.com 1/25/08

15
More news
  • A report released Monday by First American Core
    Logic rates foreclosure risk for 381 metropolitan
    areas, and found that the risk of foreclosure has
    jumped 22 percent from January 2007, and 9
    percent from three months ago.
  • The Core Logic report speculated that foreclosure
    risks may get a lot worse, and stay that way for
    a long time.
  • In the wake of recent speculation that the United
    States economy may be entering a recession - or
    is already in one - the report stressed that
    defaults continued rising for almost 2 years
    after the end of the last recession in 2001.
    Based on that history, Core Logic expects that
    foreclosure risk will continue to increase over
    the next 18 months, at least. --CNNMoney.com
    January 28th 2008

16
More news
  • New foreclosures increased 30 from the 2nd to
    3rd quarter of 2007
  • New foreclosures increased 51 from the 3rd
    quarter of 05 to the 3rd quarter of 06and 100
    from 3rd quarter 06 to 3rd quarter 07
  • In November 2007, 446,726 properties nationwide
    entered some stage of the foreclosure process
  • 1.3 million households received some kind of
    foreclosure notice in 2007
  • This represents 1 new foreclosure filing for
    every 99 households nationwide
  • Source RealtyTrak

17
And locally
  • Indiana ranks 10 among all states in number of
    foreclosures
  • More than 1 in 60 home owners in Indiana received
    some sort of foreclosure notice in 2007
  • There are over 16,000 bank-owned properties in
    Marion county alone

18
Illinois SB 2349 (full text at
www.ilga.gov/legislation)
  • AKA The Mortgage Rescue Fraud Act
  • Applies to people and companies offering
    forbearance or loan modification services
  • Creates requirements and disclosures for these
    services and provides for penalties if not
    followed
  • Applies to investors who buy foreclosures and
    lease back to the sellers
  • Creates disclosures, right of cancellation of the
    contract, and limits the price of resale to the
    seller to 125 of the purchase price. Also
    requires the investor to pay the seller at least
    82 of FMV if the seller cannot repurchase the
    property.

19
And locally
  • Cuyahoga County, Ohio, which includes Cleveland,
    has more than 16,800 homes that have been
    abandoned because of foreclosures. Infoshop
    news.com 1/27/08

20
Our Goal as Real Estate Entrepreneurs
  • Should be to grab this opportunity (it wont last
    forever!) by learning all the ways to help these
    desperate sellers, while making a fortune in the
    process.

21
The Foreclosure Summit
  • Everything You Need to Know to Profit from
    Todays Exploding Foreclosure Market
  • More than 20 National, Regional, and Local
    Experts in early-morning to late-night workshops
  • May 2-4, 2008 (Bonus Day May 1)
  • Adams Mark Hotel, Indianapolis, In.
  • 1,695 per person, 1,995 per couple

22
2 How a Property Makes its Way Through the
Foreclosure Process, and How to Make Deals at
Each Stage of the Game
23
3 Reasons to Know the Process
  • Because WHOS INVOLVED depends on where the
    property is in the system
  • Because how you FINANCE the deal depends on where
    the property is in the system
  • Because theres a way to make money at every
    stepbut HOW depends on where the property is in
    the system!

24
The Foreclosure Process(as most investors see it)
Late Payment
Sheriffs Sale
You Buy
Bank Buys
You Buy
25
The Foreclosure Process (as it really is)
Late Payment
Owner Sells
Owner Catches Up
Notice to Borrower
Owner Files Bankruptcy
Forbearance Agreement
Debt Reaffirmed
Property Surrendered
You buy note
deed in lieu?
Sheriffs Sale
Payment plan
successful
unsuccessful
successful
unsuccessful
Bank Buys
You Buy
Bank lists with agent
Insurer sells
Bank sells from REO dept
Bank gives to insurer
26
The Foreclosure Process
Deal with Owner Lender
Late Payment
Owner Sells
Owner Catches Up
Lender Gets Judgment
Deal with Trustee
Owner Files Bankruptcy
Forbearance Agreement
Debt Reaffirmed
Property Surrendered
Note Sold
Deal with Sheriff
deed in lieu?
Sheriff Sale
Payment plan
successful
unsuccessful
successful
unsuccessful
Deal with Bank
Deal with Agent
Deal with Agent
Bank Buys
3rd party buys
Insurer lists
Bank lists with agent
Bank gives to insurer
Bank sells from REO dept
27
3 How to Find Foreclosure Deals
  • The best time to find them BEFORE the suit is
    filed
  • The best place to find them foreclosure filings,
    probate, agents, attorneys
  • The best way to find them get them calling YOU!

28
Why Owners Get Behind
29
A Real-Life Example
Price Ave, Cincinnati 5 room, 3 bedroom 1
bath Rental-type area Called from a building
order mailing
30
A Real-Life Example
Purchased by Mr. Mrs. Clark in
1950ish Refinanced in 2002 for 42,000, subprime
12.5 interest loan Mrs. Clark developed
dementia, all proceeds went to living expenses
and her care
31
By February 2005, the Property is Here
45,000 ARV 15,000 in Repairs Needed Vacant,
vandalized, order to board up
32
By February 2005, the Seller is Here
10 months behind on first mortgage, balance
49,652 2 years in arrears in taxes, balance
2,000 Total Owed 51,652 Total
arrearages 7,455
33
And We are Here
Owner wants to sell How can we buy?
Late Payment
Owner Sells
Lender Gets Judgment
34
4 How to Create Equity in Pre-foreclosure
Properties
  • Since most pre-foreclosures have no significant
    equity, you MUST create it.
  • The rise in bad loans also is leading to a pick
    up in so-called short sales, in which a lender
    allows the property to be sold for less than the
    total amount due and often forgives the remaining
    debt. For the lender, the process can be shorter
    and less costly than foreclosing, especially in a
    declining market. AOL Money
  • There are 2 ways to do this short sales and
    buying notes
  • If you dont know how to do them, youll have to
    walk away from 99 of the deals out there
  • If you dont know how to do them RIGHT, youll
    drive yourself nuts!

35
Back to Price
ARV 45,000 Repairs 15,000 Balance owed on
mortgage back taxes 51,652 Profit Potential
arrearages are paid in full -21,652 EXCLUDING
holding costs!
36
After the Short Sale
  • First Mortgagor
  • Owed 49, 652 Accepted 8,000
  • County Treasurer
  • Owed 2,000 Accepted 2,000
  • Total purchase price 10,000
  • Plus Repairs 15,000
  • 25,000
  • Profit Potential 20,000!

37
But what if
  • The owner wanted to keep the property, but
    couldnt pay the arrearages OR
  • The owner didnt want to sell OR
  • You live in a state where its difficult or
    impossible to do short sale?
  • Buy the Note!

38
Review
  • First Mortgagor
  • Loan balance 49, 652 You Pay 8,000
  • Tax Assessor
  • Loan Balance 2,000 You pay 2,000

39
Now What?
  • Option 1 offer the owner the option of giving
    you a deed in lieu of foreclosure in return for
    total debt forgiveness
  • Result You buy the property for 10,000

40
Now What?
  • Option 2 offer the owner the chance to keep the
    property. Restructure the loan like this
  • 1st mortgage
  • Old New
  • balance 49,652 35,000
  • Interest rate 12.5 7
  • Payment 475.31 231.51
  • Balloon none 5 year

41
Option 2 results
  • If the owner makes the payments
  • You paid 10,000
  • You are owed 35,000
  • You get payments of 231/mo
  • For a return of 27.8 per year
  • PLUS 22,945 cash at yr 5
  • If the owner defaults
  • You get a deed in lieu of foreclosure and buy the
    property for 10,000

42
5 How to Buy Foreclosures No Money Down
  • TIME is always of the essence!
  • Being able to close FAST makes or breaks your
    deal
  • There are SOOOO many dealsyoull NEED other
    peoples money to close them all!

43
Top 4 Ways to Buy Foreclosures Using OPM
  • Subject to the existing loan
  • Private Lenders, at 8-10 Interest
  • Hard Money Lenders, at 14-16 interest
  • Partners using retirement funds to get the
    profits tax free

44
Back to Price
Purchase Price 10,000 ARV 45,000 Repairs
needed 15,000 What Now?
45
6 How to Get the Profit Out
  • You need to be able to evaluate EACH deal to see
    the best exit strategies!
  • Wholesale?
  • Retail?
  • Lease/Option?
  • Hold for Rental?

46
What Now?
Fix and Sell Profit Potential ? Fix and
Lease/Option Profit Potential 25,000300/mo
cash flow over 1-2 years Fix and Rent Profit
Potential 20,000 equity appreciation 300/mo
cash flow Tax breaks
47
What Now?
Wholesale Profit Potential 5,000 In 10 days or
less!
48
What Really Happened!
Sold the contract to Linda for 5,000 Her Total
purchase price 15,000 Her Total
investment 30,000 Her profit 15,000cash
flow TAX FREE!
49
The Foreclosure Summit
  • Everything You Need to Know to Profit from
    Todays Exploding Foreclosure Market
  • More than 20 National, Regional, and Local
    Experts in early-morning to late-night workshops
  • May 2-4 2008 (Bonus day May 1)
  • Adams Mark Hotel, Indianapolis
  • 1,695 per person, 1,995 per couple

50
Youll Learn The Basics
  • How to Find More Desperate Sellers than You Can
    Handle
  • How to Negotiate Big Discounts from Banks
  • How Buy and Sell Notes and Mortgages
  • How to Find the Money to Close Your Deals in Days

51
And the Details Your Competitors Dont!
  • How to Use Your IRAor Someone Elsesto Make
    Tax-Free Profits
  • How to Write Contracts on Foreclosure Properties
  • How to Buy Properties from Sellers in Bankruptcy
  • How to Invest in Tax Liens and deeds
  • How to Negotiate with Sellers and Lenders

52
And even more details
  • How to Assign Unassignable Bank-Owned Contracts
  • How to Write offers on REO properties (that will
    actually be accepted)
  • How to Take Over Unassumable Mortgages
  • How to Invest in Commercial Foreclosures
  • How to Select the Right Entities, Rehab
    Foreclosures, and MUCH MORE!

53
With These National Experts
  • Donna Bauer, The NoteBuyerHow to buy bad
    paper for pennies on the dollar
  • Don Derosa How to Buy Foreclosures No Money down
  • Lee Phillips, esq How to Protect Your Deals (and
    Your Assets)
  • Vena Jones-Cox and Missy McCall-Hammonds How to
    Run Your Foreclosure Business Like a Business

54
With These National Experts
  • Kathy Kennebrook How to Attract More Motivated
    Sellers than You Can Handle
  • Caryn McKinney and Mark Klee How to Buy
    Properties from Bankruptcy
  • Larry Goins How to Flip Foreclosures in Just
    Days

55
Your 1,695 Tuition Includes
  • 3 Full Days of Foreclosure Secrets PLUS
  • 2 Meals a Day, Plus the Networking Banquet on
    Saturday Night!
  • The Right to Bring a Spouse or Partner (sharing a
    room) for Just 300 More!
  • PLUS Thursdays Detail-Packed All-Day Workshop
    Successful Short Sales with Donna Bauer, just
    399 more

56
STILL Cant Decide?
  • Register now, and Well Pay For Up to 4 Nights
    at the Adams Mark!
  • (1st 175 Registrants Only)

57
Sign Up Now, and Save Even More!
  • Grab our ACT NOW DISCOUNT and Save 400!
  • Just 1,295 per person,
  • 1,595 Per Couple
  • PLUS Get Donna Bauers All-Day Thursday Class,
    FREE!

58
Dont need a hotel room?
  • Save 300 More
  • Just 995 per person,
  • 1,295 Per Couple!

59
Our 100 Satisfaction Guarantee
  • The Foreclosure Market WILL Boom, and We WILL
    Teach You How to Make a Fortune Helping
    Sellersor You Can Claim Your Entire Tuition for
    a FULL 30 DAYS

60
Extra Special Sign Up Tonight Bonus
  • Register Today, and get the Entire Foreclosure
    Summit Audio Course in MP3 Format for FREE!a
    995 Value!

61
See You At The Summit!
  • www.ForeclosureSummit.com
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