Making Money
Helping Sellers:
The 6 Things You Need to
Know to Make Your
Fortune in TODAY’S
Foreclosure Market
The 6 Things You Need to Know
1. How today’s
foreclosure market is
different than it was 10
years ago
2. How the foreclosure
process works—and
where YOU can profit
3. How to find the deals
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
you’ve tied a deal up!
#1: Today’s 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
So when a home owner in 1993 got
behind on payments…
1. It was usually because of a financial or
personal crisis
2. He had enough equity to offer his
property at a below-market price for a
quick sale to avoid foreclosure!
#1: Today’s 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 pay‖—Consumeraffairs.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
Look at the Effects of Rising Rates
on Payments!
Payments on a $150,000 loan, 30 year loan
at:
Rates on a
5% interest=$801.89 typical arm
can go up
6% interest=$894.85 this much in
1 year
7% interest=$992.17
A 2% rate increase=a 24% payment hike!
#1: Today’s Foreclosure Market
Really is ―New‖
By 2005…
No Money Down Loans were the Rule
―aneye-popping 43% of first-time home
buyers purchased their homes with no-
money-down loans." —Forbes Magazine, 3/04
#1: Today’s 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 market‖—
USA 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 1999‖—Economist.com
The other factors…
Historically high homeownership rates=more
loans to go into default
Flat/falling house prices throughout the US
Higher interest rates+media-induced ―real estate
bubble panic‖=fewer buyers=longer 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
So when a borrower in 2008 gets
behind on payments…
1. It’s just as likely because of an
adjustment in his monthly payment as
that he had a financial crisis…
2. He must sell for full price (or full price+)
to cover his mortgage…
3. He can’t sell because there are fewer
buyers…
4. And so he goes into foreclosure and
loses the home
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
―REO‖s
Desperate sellers who believe that they
are out of options
…and it will get WORSE, not BETTER, in
the next 3-5 years!
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
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
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 ‘06—and 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
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…
Our Goal as Real Estate
Entrepreneurs…
Should be to grab this
opportunity (it won’t
last forever!) by
learning all the ways
to help these
desperate sellers,
while making a
fortune in the
process.
The Foreclosure Summit…
Everything You Need to Know to Profit
from Today’s 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)
Adam’s Mark Hotel, Indianapolis, In.
$1,695 per person, $1,995 per couple
#2: How a Property Makes its
Way Through the Foreclosure
Process, and How to Make
Deals at Each Stage of the
Game
3 Reasons to Know the Process
1. Because WHO’S INVOLVED
depends on where the property is in
the system
2. Because how you FINANCE the
deal depends on where the property
is in the system
3. Because there’s a way to make
money at every step—but HOW
depends on where the property is in
the system!
The Foreclosure Process
(as most investors see it)
Late
Payment
Sheriff’s
Sale
You Buy
Bank Buys
You Buy
The Foreclosure Process
(as it really is)
Late
Payment
Owner Sells Owner
Catches Up
Notice to
Owner Files
Borrower
Bankruptcy Forbearance
Agreement
Debt Property You buy
Reaffirmed Surrendered note
Payment ―deed
plan in lieu‖? Sheriff’s unsuccessful successful
Sale
successful unsuccessful
You Buy
Bank Buys
Bank lists with
agent Insurer
Bank sells from Bank gives to
sells
REO dept insurer
#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!
A Real-Life Example
Price Ave, Cincinnati
5 room, 3 bedroom 1 bath
Rental-type area
Called from a ―building order‖ mailing
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
By February 2005, the Property is
Here…
$45,000 ARV
$15,000 in Repairs
Needed
Vacant, vandalized,
order to board up
By February 2005, the Seller is
Here… 10 months behind on first
mortgage, balance
$49,652
Subprime
Loan 2 years in arrears in
taxes, balance: $2,000
Fixed
Illness Total Owed:
income
Late
Payment $51,652
Total arrearages:
Vandalism &
Declining $7,455
Deferred
area
Maintenance
#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 don’t know how to do them, you’ll have to walk
away from 99% of the deals out there
If you don’t know how to do them RIGHT, you’ll drive
yourself nuts!
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!
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!
But what if…
1. The owner wanted to keep the property,
but couldn’t pay the arrearages OR
2. The owner didn’t want to sell OR
3. You live in a state where it’s difficult or
impossible to do short sale?
Buy the Note!
Review:
First Mortgagor
Loan balance: $49, 652 You Pay: $8,000
Tax Assessor
Loan Balance: $2,000 You pay: $2,000
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
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
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
#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 deals…you’ll
NEED other people’s
money to close them
all!
Top 4 Ways to Buy Foreclosures
Using OPM
1. ―Subject to‖ the existing loan
2. Private Lenders, at 8-10%
Interest
3. Hard Money Lenders, at 14-16%
interest
4. Partners using retirement funds
to get the profits tax free
Back to Price…
Purchase Price: $10,000
ARV: $45,000
Repairs needed: $15,000
What Now?
#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?
What Now?
Fix and Sell Profit Potential:
?
Fix and Lease/Option Profit
Potential:
$25,000+$300/mo cash
flow over 1-2 years
Fix and Rent Profit Potential:
$20,000 equity+
appreciation+
$300/mo cash flow
Tax breaks
What Now?
Wholesale Profit
Potential:
$5,000
In 10 days or less!
What Really Happened!
Sold the contract
to Linda for
$5,000
Her Total purchase price:
$15,000
Her Total investment:
$30,000
Her profit:
$15,000+cash flow
TAX FREE!
The Foreclosure Summit…
Everything You Need to Know to Profit
from Today’s 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)
Adam’s Mark Hotel, Indianapolis
$1,695 per person, $1,995 per couple
You’ll 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
And the Details Your Competitors
Don’t!
How to Use Your IRA—or Someone
Else’s—to 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
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!
With These National Experts
Donna Bauer, ―The NoteBuyer‖—How 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
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
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 Thursday’s Detail-Packed All-Day
Workshop ―Successful Short Sales‖ with
Donna Bauer, just $399 more…
STILL Can’t Decide?
…Register now, and
We’ll Pay For Up to 4
Nights at the Adam’s
Mark!
(1st 175 Registrants Only)
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 Bauer‘s All-Day
Thursday Class, FREE!
Don’t need a hotel room?
Save $300 More…
Just $995 per person,
$1,295 Per Couple!
Our 100% Satisfaction
Guarantee…
The Foreclosure Market WILL
Boom, and We WILL Teach
You How to Make a Fortune
Helping Sellers…or You Can
Claim Your Entire Tuition for a
FULL 30 DAYS…
Extra Special Sign Up Tonight
Bonus
Register Today, and get
the Entire Foreclosure
Summit Audio Course in
MP3 Format for FREE!—
a $995 Value!
See You At The Summit!
www.ForeclosureSummit.com