newbies and foreclosures (long) - Posted by MSchmidt (IL)

import · August 17, 2001, 10:10pm

Posted by MSchmidt (IL) on August 18, 2001 at 11:30:46:

Kristine,
Obviously since there are courses several hundred pages long on the subject of Subject To and L/O, you are correct that a course would be invaluable to you. I only have a few courses but the one that really cleared away the fog for me was Bill Bronchicks Alternate Real Estate Finance course. I would HIGHLY recommend it. It not only comes with the paper material, it also has 2 video tapes that mirror the paper course along with audio cassettes that also mirror the course. You will get just about every legal document you need to do just about any type of RE deal along with other goodies. Bill has a way of making thinks very understandable and clear

import · August 17, 2001, 10:10pm

Posted by MSchmidt (IL) on August 17, 2001 at 22:10:03:

First off my name is Mike and I am a newbie =)

I post this hoping it will help other beginners in this business. My background is sales and marketing and all through my career in this business I have seen these canned sales pitches and corny lines like the typical car salesman line…What will it take to get you into this car today?

For the most part I have always ignored these things and worked deals my own way, that to me at least, seemed more tailored or original. Why I do or did things this way I guess is because to me, they seemed more real. Like the other person didn?t hear them before so they would not feel like I was just another salesman.

I get a lot of calls from my ads from people facing foreclosure. My approach has always been the same, explaining in basic terms the ways I might be able to help them. For the most part they all seem some what interested. Some are ready to sign right now, but these folks also seem to think they will get $10K or so in cash as well.

Some of these deals DO have the room to pay this kind of money, but lets face it, we would rather pay little or nothing. Not to mention if we kept giving away more than we can take back in consideration money, we will be out of seed money quickly.

I don?t know why but two weeks ago it finally hit me. Just slap these folks right in the face with reality and if it sticks great, if not you have saved yourself a lot of time. My how things have changed!

I now start off like most of you might, by asking basic questions…why are you selling? What are your current payments? How much do you owe…etc. As soon as I get the “well we got a foreclosure notice, are XX months behind…blah blah blah” I stop and ask if they completely understand what is going to happen if they do not bring this loan current. Most say “yes, they are going to take my home”.

This is true but now is the time to see if it sticks. I now reply. " Yes, you are exactly right. Not only are they going to take your home, they are going to file a judgment against you for any loss they might have when this is all said and done with, then they are going to report this to the credit agencies and destroy your credit and on top of this YOU ARE GOING TO STILL END UP WALKING AWAY FROM YOUR HOME WITH NO MONEY!!!

That last line has had more impact on the calls I get than anything I have seen. All of a sudden that $10K they THOUGHT they might get seems like a bad dream. At this point I mention that I MIGHT be able to give them some walking money so they can at least secure an apartment until they get back on their feet and the best part is I will get their loan current. Also the way it works is they will get the benefits of having a solid payment history on their credit report since I will be making them ON TIME EVERY MONTH.

“Does that sound like something that might interest you?”

YES= When can we get together
NO= Ok, thank you for calling

In the last two weeks i have had 6 foreclosure calls and 4 set appointments with 3 signed agreements to purchase. Now these deals all seem to have their own little quirks and might not turn into much, but its a lot better ratio than I had prior to asking those boring, old canned questions. Bottom line is these canned lines work, don?t be afraid to use them!.

Hope this helps someone.

import · August 18, 2001, 1:10am

Re: newbies and foreclosures (long) - Posted by Kristine-CA

Posted by Kristine-CA on August 18, 2001 at 01:10:23:

Thanks for the post. I posted a question earlier today about the psychology of those owners in foreclosure and got lots of good feedback. You have gone one step further and figured out how to cut the deal with these owners.

My question is about bringing the loan current. Can you always just take over payments? There seems to be a lot of info on this board that says that it isn’t totally legit but that it is overlooked by a lot of mortgage companies because when they are being paid, they don’t ask questions and they don’t care who is paying. When you go to resell, what kind of ownership do you, as the seller, have? I am still confused about simultaneous closes because I don’t understand how you can sell something that you don’t own…

Just wondering. Thanks, Kristine

import · August 18, 2001, 10:48am

Re: newbies and foreclosures (long) - Posted by MSchmidt (IL)

Posted by MSchmidt (IL) on August 18, 2001 at 10:48:24:

Once I know the people want to work with me I ask them to relay back to me in DETAIL the conversations they have had with the bank. I want to know if they asked about having what?s past due added to the rear of the loan, if the lender mentioned any other costs involved with bringing the loan current etc.

I would say in most cases, yes I could take over the note, assuming I could also provide the needed funds to bring it current. Now I have only done one foreclosure, so keep that in mind. I have however worked many, I just take it slow and get set in my mind ahead of time that I really don?t care if I work a deal or not. Since I am very new to this I move very cautiously. The ones I might let get away I just chalk up to learning. Over the last few weeks however I have decided I am now ready to tackle this area head on. I basically waited to get aggressive until I felt 100% comfortable.

Once I have a deal with the current owners I have them sign the appropriate paper work and then I contact the lender. I tell them I am working with the homeowner and trying to help them bring the loan current. First question I ask is if there is any way we can have the amount past due added to the rear of the loan if we pay for filing fee?s etc. If they say yes, GREAT, I just saved a lot of out of pocket money. Problem with this is the lender will probably want to do a mini application on the current owners. Basically they want to see if they are working and that their pay checks can cover the loan. If you know this is not going to happen, then I would make up the payments AFTER the current owners move out. I don?t offer any money to anyone involved until I have a empty house. This would be a Subject To deal, so I would have the deed via a trust which I am the Trustee and have had the beneficial interest assigned to myself as well, or company. People in foreclosure don?t really care that they are giving you the deed. They are more concerned with how much if anything you are going to give them and the fact you are offering to keep a loan current and a foreclosure off their credit report.

When I go to sell in this case, I have 100% ownership, I have the deed in a trust and a assignment of beneficial interest. At closing the old lender gets paid off, I get the difference. Deal done. If you took the house via a L/O, then when you go to sell you are simply exercising your option to purchase and then at the same time, selling to the new buyer. Some banks, a lot from what I understand these days, don?t like or wont do a simultaneous close. This is why I ALWAYS try to get the deed, plus once I have it for 12 months, seasoning is not an issue.

Now I left out a lot of the details, but I assume you understand fully how a Subject To is done and the issues with DOS clause, assignment of beneficial interest etc.

Hope that helps.

import · August 18, 2001, 4:28am

One difference… - Posted by JT - IN

Posted by JT - IN on August 18, 2001 at 04:28:06:

Kristine:

One difference between the post that Mike made, regarding owners in FC, and the typical owner in FC, is the owners that Mike posted of, were calling him, vs. he calling them. These owners are “reaching out” for assistance vs. the typical owner in FC having their head buried so far in the sand, that even light can’t penetrate, let alone sound financial advice. All the techniques in the world won’t work, unless you have a slightly open ear to receive them.

You can only lead the foreclosed owner to the solution, you cannot make him accept a good and viable resolution. It would be nice, and a much easier business, if only these folks would have better sense, but then they may not be in the mess they are in, absent the irrational thinking.

Just the way that I view things…

JT - IN

import · August 18, 2001, 11:11am

Re: newbies and foreclosures (long) - Posted by Kristine-CA

Posted by Kristine-CA on August 18, 2001 at 11:11:04:

Thanks for the messages. I appreciate the assumption you have that I understand fully how a Subject To deal is done–but I don’t. I guess I have some homework to do and a course to buy!

Onwards and upwards. Sincerely, Kristine

import · August 18, 2001, 10:29am

Re: One difference… - Posted by MSchmidt (IL)

Posted by MSchmidt (IL) on August 18, 2001 at 10:29:15:

100% correct JT. My ad runs in our local paper, which covers a very large amount of ground, probably 20+ towns. In this area, I am guessing there are somewhere between 60 to 100 foreclosures posted monthly. I am sure some percentage of these get brought current by the owners. Out of all these foreclosures I get calls from MAYBE 10% of them. Out of the calls I get maybe 1 in 10 are in a panic and know they need to do something, the rest are waiting for the problem to just go away on its own it seems.

Using those numbers I found very quick it was not a great use of time targeting this sector. The ones that were motivated will most likely call me anyway, so why bother finding them. I don?t mean to run off anyone thinking of targeting this market. If you hit on one deal a month or even every few months, it pays for your efforts. These numbers would probably be even better if you develop a solid marketing plan and don?t just toss mud at walls to see what sticks. So by all means if you have the time and can put forth the efforts to target these people, go for it. From what I have seen in this area anyway, foreclosures with little equity are difficult deals. The money needed to get current through the deal off unless the interest rate is very low. The ones with $15K to $30K in equity I like a lot. More equity than that and it seems people feel they would rather let the bank take it back if I am not going to buy out 100% of their equity?no reason to let the big bad investor just have our money attitude. These are the ones I would come out of pocket on most often.

Another interesting idea is to work with a note buyer that will do a simultaneous close with you. I just started exploring this option and can think of several possible deals I walked away from because I didn?t have the funds needed to put a deal together.