Comet Settlement Real Estate

One of the quickest ways to real estate profits is through preforeclosures. What is a preforeclosure, exactly? A preforeclosure takes place from the time the bank gives notice of default to the time the house sells at auction. Typically, this is around the time of 90 days into default, depending on state law.

The key to preforeclosure investing is equity – the difference between what a house will sell for and what is owed on the house. Preforeclosures allow you to buy a house for less than fair market value, creating immediate equity for yourself.

Preforeclosures are your opportunity to buy low and sell high, maximizing your profit quickly. How can you cash in on preforeclosures and exit with the maximum profit?

Here’s how to do it.

Step 1. Find and Secure the Preforeclosure

You must submit a written contract directly to the owners in order to buy a preforeclosure, since the property still belongs to them during this stage. Ads in newspapers and subscriptions to preforeclosure listings will help you locate the properties. (See more about this in article 1.) Once you’ve located a property, you’ll need to do the following to screen them and prequalify your homeowners:

Tags: buy foreclosure, how to real estate invest, real estate calculate, real estate seminar, short sale, zick

Buying foreclosures can be extremely profitable for real estate investors. However, most of these homeowners are mortgaged to the hilt. They have no equity, and big loan payments. In fact, many actually owe more than the property is worth!

Most investors will walk away from these deals because they see no obvious profit. However, you can “create” your own equity by negotiating a “Short Sale” with the bank or lender.

What is a Short Sale?

The concept behind the short sale is simple: your goal as a real estate investor is to convince the bank to sell for less that is owed as payment in full. Of course, this concept is easy – buy the foreclosure from the bank at a big discount, sell the real estate, and make money!

How to Negotiate the Short Sale with the Mortgage Holder

Once you have your secured a contract with the homeowner and have your paperwork in order, you’ll be ready to deal with the loss mitigation department of the bank. Short Sales success relies on dealing with the loss mitigation department at the bank. Although most lenders look at short sales as a necessary evil within the lending industry, that doesn’t mean that the bank will just roll over and do your bidding.

Understand the Bank’s Perspective

With foreclosures at a 52-year high, the loss mitigation department at the bank is busy, if not highly overworked. Turn this disadvantage into an advantage – sell them the benefits of your short sale.

Short sales contracts help lenders unload unwanted property and spare many expenses associated with the foreclosure process. These expenses include, but are not limited to, court costs, bankruptcies, repairs and marketing. This is in addition to the $300,000 to $800,000 (or more!) normally held in reserve by lenders. Federal regulations require this reserve, which is usually many times over the actual price of the bad debt.

As the investor, keep these benefits at the top of your mind. After all, it’s up to you to convince the lender that cutting their losses short is the best option.

It’s time to hone your negotiating skills. Here are 3 Steps to help you out.

Step 1: Have Your Paperwork Ready

There is paperwork that all lenders will require in order for you to submit your offer for the short sale. Second, many of the larger institutional lenders have their own short sale package (their own forms to be filled out and signed).

Since many of these forms have to be signed by the homeowner(s), it’s best to have them with you when you meet with the homeowner to work out a deal. At a minimum you should have the homeowner fill out and/or sign:

Tags: buy foreclosure, how to real estate invest, real estate calculate, real estate seminar, short sale, zick

Anyone who has ever profited from doing a short sale has also without a doubt had one or two rejected at some point. Guess what? It is just the nature of the beastAs with all types of sales; you’re playing a numbers game.

There are very few investors who truly know how to successfully negotiate a Short Sale. We find that most investors have the perception that all that is necessary is to submit an offer and wait for the bank to give you an answer. If all goes well the offer will be accepted but in many cases it’s not that simple.

That’s why a strategic plan is necessary. “What do you mean?” You ask. A strategic plan means making the deal go your way by persuading the lender to agree with your offer.

There are several steps that will ensure your success when negotiating with lenders.

First of all, you must be able to determine if you indeed have a short sale opportunity on your hands. Many investors are under the misconception that every homeowner facing foreclosure is a good short sale candidate. This could not be any further from the truth. One of the most common mistakes made by investors is attempting to fit a square peg into a round hole. Not all deals are good short sale opportunities. You must know the difference between a good and a bad deal. Period! You’ll have to analyze the deal and develop an excellent plan of attack if you want to truly master the art of the Short Sale.

Second, you must not take no for an answer. No can never be the final chapter to your negotiation. If the lender says no you must ask yourself why. There must be a reason. Why did they say no? Is there anyone else I can speak with? Was my offer to low? How does the lender determine their bottom dollar? What else can I do? What was the BPO amount? These are just a few of the questions that need to be addressed each time you are met with some resistance from the lender.

We’d like to share an awesome deal that one of our students closed recently. His name is Thomas Stockman.

Thomas got a call off of one of his signs from a gentleman that had two properties in foreclosure. The two properties were on the same street and were bought as rental homes within the last year. Consequently, they were also financed by the same mortgage company. One property had a mortgage balance of approximately $150,000 and was in need of several thousand dollars worth of repairs. The other had a mortgage balance of $156,000 and was currently being rented for $1,100 per month. Both properties had very little equity but the neighborhood had been very active over the last 9 months. After qualifying the two potential deals he decided to attempt short sales.

He contacted the bank and began the process. His offer on the first house was $89,900 and $95,800 on the second house. The bank rejected both and asked for higher offers. After several conversations and some additional documentation to justify his offer, Thomas was able to get both properties for a total of $60,000 below market value. Thomas rehabbed the first property for $3,500 and put it on the market for sale. Since the second property was already occupied by a tenant he decided to keep it. His mortgage is roughly $400 per month (interest only loan/taxes paid at year end) he makes $700 in monthly positive cash flow. Not bad for a beginner (wink).

This would have never happened if Thomas accepted NO from the bank. If he would have not known what pressure points to touch and how to counter without increasing the offer amount we would not be talking about these deals.

This type of outcome is customary when you are equipped with the necessary tools and know how to turn a “No” into a “Yes” just by slightly adjusting your approach. Thomas got two great properties with lots of equity and a constant cash flow, the homeowner avoided TWO foreclosures, and the bank was satisfied.

Remember, the next time you are putting together a short sale offer, be prepared and take control of the deal. Never take NO for an answer. Be proactive not reactive. Don’t just submit offers without having a game plan. Do yourself a favor and take advantage of the opportunity to make lots of money in an industry where great deals are hard to come by. We hope that you have learned something and are on your way to much success.

Best Regards,

D.C. Fowler, Real Estate Investor/Educator
http://www.shortsaledeals.com

Mr. Fowler has been a real estate investor for over 15 years specializing in the area of pre-foreclosure/short sale investing. He has bought and sold over 200 homes in Georgia, Florida, Louisiana, and Tennessee using the same short sale techniques that he teaches in his course, Making Money with Short Sales: The Complete Guide to Acquiring Property Pre-Foreclosure. Mr. Fowler currently resides in Atlanta Georgia. He also spends many hours per month teaching his creative real estate investing techniques to other aspiring investors across the country.

Tags: foreclosures, no money down, pre-foreclosures, real estate investing, short sale, short sales

Buying foreclosures can be extremely profitable for real estate investors. However, most of these homeowners are mortgaged to the hilt. They have no equity, and big loan payments. In fact, many actually owe more than the property is worth!

Most investors will walk away from these deals because they see no obvious profit. However, you can “create” your own equity by negotiating a “Short Sale” with the bank or lender.

Why Short Sales Don’t Work

However, even experienced investors fail to create successful short sales, because they do not know the most important secret of all when doing short sales. Without this secret, an investor with the greatest negotiating skill will fail. Without this secret an investor armed will all the right paperwork with fail. And without this secret, even an investor with an air-tight case of low value including repair estimates, etc. will fail.

It’s not that negotiating, paperwork, and a convincing case are not important. It’s just that you’ve overlooked, the most important element that lenders use to determine what they will take for a property in default. It is therefore

The Ultimate Short Sale Secret

Ok, I won’t keep you in suspense. Here’s the secret: In order to get big discounts from a lender on a property facing foreclosure, you must control the Broker’s Price Opinion. (BPO).

What is a BPO? In short, it is a value appraisal. When a short sale package is submitted to the bank, they send out a real estate agent or Broker to the property to judge its value.
The broker or agent handling the BPO is working with the bank. Their job is to simply visit the property and give their opinion on its value “as is”.

And here’s the key: it’s a broker’s price OPINION! And since opinions are subject, you have the ability to Influence that opinion. Learn how to do that and you can create $10,000’s in your bank account with little effort.

Step 1: Do Your Own Research

Before you’re ready to influence the BPO, you’ll have to start out with doing your own research and preparing your short sale package effectively. What should you include?

By this time, you should have already done a walk-through of the property. If you have not done so already, inspect the property (preferably with a home inspector or real estate broker of your own) and gather the following:

Tags: buy foreclosure, how to real estate invest, real estate calculate, real estate seminar, short sale, zick