Archive for fec articles
Trustee Sales & Bid Tips
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How Soon Should The Bid Price Be Available?
Things are happening at the trustees’ sales these days. The most interesting change is the greater number of interested people who attend. It makes you wonder what attracts them now. Why are more and more people now bidding at the trustees’ sales–while the number of properties going to the foreclosing lender also is increasing? What attracts them? There is no question that the number of properties offered for sale is increasing almost weekly. It seems obvious then that more and more people are unable to keep their properties in spite of the effort by the government to alleviate the financial burdens that have plagued so many for so long. But yet, the sheer volume of available properties can’t be the magnet that draws those who attend the sales. Each buyer there is seeking available properties at a discount–that is a property available at a price significantly under the market price when the property is offered by the foreclosing lender at price at or near the amount due on the loan. As you know, the non-judicial foreclosure process in California starts with the recording of the Notice of Default which alerts the delinquent owner that the lender has not been paid as promised on the Promissory Note and will take action unless a specified amount is paid within a certain date, This is followed by the recording and publishing of the Notice of Trustee’s Sale which informs the defaulted owner that the property will be sold at a public auction on a specified date unless further action is taken by that owner to stop the foreclosure. The trustee, who handles the foreclosure for the foreclosing lender, follows a procedure outlined in California Civil Code 2924. This requires the trustee to record and publish the amount due the lender at the trustee’s sale. Those who bid successfully at the sale in cash or cashier’s checks must exceed the amount shown on the Notice of Trustee’s Sale and will ultimately received title to the property. So far, there is nothing different here than has not been happening at such sales for many years–but wait, there’s more! Unpaid lenders have to evaluate their options carefully when borrowers become unable or unwilling to continue making payments on the loan as agreed on the signed Promissory Note and Deed of Trust. First of all, let’s agree that the lender will take those steps that are in the best long-term interests of that lender. If the lender is convinced that initiating the non-judicial foreclosure process is the next logical step, the trustee will begin the steps outlined above. We know that the lender is permitted to foreclose on the amount due on the foreclosing loan–including unpaid principal, interest, late charges, penalties, and trustee’s fees and costs. The lender cannot require the delinquent owner to pay more than the amount due, however that lender has the option to offer the property at the trustee’s sale for less than the amount. Once again, the lender can be expected to do what is best in that lender’s interest. Most institutional lenders have concluded that simply foreclosing on the delinquent borrower can be a risky process for the lender even under the best of circumstances. As a matter of fact, such lenders usually have a “Loss Mitigator” in their REO department whose job it is to minimize the costs of foreclosure for the lender if and when such a step becomes necessary. I have heard that lending institutions estimate that the total costs of foreclosure to the lender approach $45,000 to $65,000 from the acquisition of the property when no third party bid is received at the trustee’s sale to the ultimate completed sale of the property to a qualified buyer. (Is this an urban legend?) If that is a true figure, it is easy to see why such lenders do not warmly welcome the addition of another foreclosed property to their swelling inventory of REO properties. One obvious way for the lender to sidestep such costs is to lower the amount due that lender to an amount that becomes attractive to the third party bidders who attend the trustees’ sales. When the local residential market of available properties escalates and more properties are dumped into that market, almost no one becomes the winner at a foreclosure. Yet, it is possible to see that getting the property off its books has to be a realistic goal for many lenders. It is obvious that some lenders have come to that decision and are deciding to take that catastrophic step with an unhappy shrug. Each bidder at the trustees’ sales will periodically check with the trustee of the foreclosing property to see what changes have been made in the interim that will affect the buyer’s interest in the purchase of the property. In order to minimize the volume of interrogations received by the trustee on any one sale, the final bid amount at which the property will be offered by the trustee on behalf of the lender normally is not given until 24 hours prior to the sale–and sometimes at a time even closer to the actual published or postponed sale date and time. It is obvious that a larger number of potential bidders will attend the sale of the property if the sales price is substantially lowered at as early a time before the sale as possible–and not just a day or an hour before the actual auction of the property. This being true, it makes good sense to conclude that the foreclosing lender (and therefore the defaulted owner) benefits from the early disclosure of a substantially discounted offering price at the trustee’s sale–thus giving time for the potential bidders to gather sufficient funds with which to bid most competitively. If the final opening bid chosen by the lender is to be substantially less than the amount due that lender, an early release of that bid amount will encourage more bidders to participate, and a higher property bid will be realized by the lender. Isn’t it time to require lenders to make that critical decision at least 24 hours or more before the actual sale–and to make that minimum bid amount available to the public as quickly as possible? By Warren Racine
Warren will be presenting at FEC
on March 25- come out to network,
meet Warren and learn more.
Trustee Sales Tips
Posted by: | CommentsExamining All Debt is Critical
Buying residential properties at the trustee’s sale continues to be the major goal of many successful foreclosure buyers today and in the recent past. Probably the most attractive reason for this continuing interest is the fact that properties can be sold by the lender through the trustee at the trustee’s sale solely for the amount of the unpaid debt due that lender with a minimum bid unrelated to the fair market value of the property. In addition, debt recorded after the date of recording of the foreclosing loan secured by the property is eliminated after the sale.
Any debt recorded between the date of recording of the grant deed and the date of recording of the foreclosing loan remains with the property when purchased at the trustee’s sale. Any debt recorded after the date of recording of the foreclosing loan is wiped out. The wipe-out of junior debt can add significant equity to the property purchased at the sale.
Our goal continues to be to purchase a property at the trustee’s sale with as much equity as possible. The equity we seek is defined by the current fair market value of the property minus the debt securing that property and costs of repair and resale of the property. Uncovering actual fair market value is not difficult to obtain through the tools available to us today. On the other hand, uncovering debt is a more complex process. This means that our chosen property must be examined carefully for the debt securing that property before purchase.
As discussed earlier, we already made a major step forward at this point because the deed for the property owned by the defaulted owner was identified at the county recorder’s office to be a full-valued grant deed. We found that the documentary transfer tax on the grant deed from the seller to the defaulted owner showed that the county had taxed on the “full value of the interest of the property conveyed”. That means any debt in the seller’s name securing the property before the date of recording of that grant deed is eliminated, and all debt from the recording date of that grant deed to today’s date must be in the name of the defaulted owner. Piece of cake! The county recorder’s office organizes all recorded documents chronologically under the name of the owner and indexes each document with a document number and recording date for easy access. Our next job, then, is to examine the images of those documents and report pertinent data sequentially for title changes and debt acquisition and release.
In some cases, the number of documents recorded under the defaulted owner’s name can appear overwhelming, so we are going to limit our search to those documents that only affect title and clearly define debt. Unless the property appears to have a huge amount of equity, we prefer to choose a property owned by a defaulted owner with an uncommon name (we want less confusion of title and debt among people with identical names) and a person without an unusual number of liens, loans, and judgments recorded against that owner (we want to minimize the number of documents to research). On that basis, we probably can research title and equity on one property at the county recorder’s office in less than thirty minutes.
There are literally hundreds of kinds of documents recorded in the names of owners of real estate in this state, but we are going to limit our examination and reporting to those documents affecting the transfer of properties between owners and those documents that tell us who can and cannot add debt as title holders on the chosen property. Of course, the primary goal is to examine all documents that affect debt securing that property.
It is probably best to group the documents to be examined. There are recorded documents that hold our immediate attention and are always examined carefully. Certainly documents affecting and changing ownership rights and obligations will be examined like grant deeds and inter-spousal transfers of title. We will examine all documents that apply debt to the property such as deeds of trust, mechanics liens, abstracts of judgment, state income tax liens, federal income tax liens, notices of assessment, etc., and documents affecting that debt like notices of default, notices of trustees’ sales, and rescissions of notices of default. Some documents which don’t directly add debt but affect how debt is handled like reconveyance deeds (which show evidence that trust deeds have been paid) and subordination agreements (which interchange priority of one loan and another loan) also must be carefully noted.
Each of the documents which affect the accumulation of debt is important. Some of these recorded documents, however, can introduce uncertainty to the actual amount of debt securing the property and therefore would not be acceptable if recorded against our chosen property. A good example would be the abstract of support judgment which does not show the amount due on that judgment. Another is the lis pendens. “In current practice, a lis pendens is a written notice that a lawsuit has been filed concerning real estate, involving either the title to the property or a claimed ownership interest in it. The notice is usually filed in the county land records office. Recording a lis pendens against a piece of property alerts a potential purchaser or lender that the property’s title is in question, which makes the property less attractive to a buyer or lender. After the notice is filed, anyone who nevertheless purchases the land or property described in the notice takes subject to the ultimate decision of the lawsuit.” (Wikipedia)
Happily, a number of other documents commonly found in the documentation under a property owner’s name are of little interest to us and do not have to be recorded. These include the assignment of a deed of trust, request for notice of default, and substitution of trustee. These ubiquitous documents do not affect the amount of the debt secured by the property, and therefore are not added to our accumulated reporting of title and debt on the chosen property.
Interestingly, not all debt information is accessible at the county recorder’s office. We must also check with the county tax collector to uncover real property taxes for the current and prior tax years and add such taxes to our accumulation of debt. Such unpaid taxes can have a heavy effect upon the equity anticipated in the purchase of properties at the trustee’s sale.
In order to facilitate the gathering and reporting of accumulated debt, we usually use a unique form that lists data easily obtainable from the Notice of Trustee’s Sale at the top and then add the available data line by line below from the county sources which emphasize a) the title of the document, b) the grantor, c) the grantee, d) the document number, e) the date of recording of the document, and f) the amount of debt unique to that document.
Our goal, of course, is to summarize all recorded debt which would accompany the property if bought at the trustee’s sale. From the previously uncovered fair market value of the property (with related costs of purchase and resale) and our accumulated estimate of debt, we are able to determine with some accuracy the residual equity prior to the purchase.
By Warren Racine
Warren will be at FEC on March 25th-
come out to ask questions, to network
and to have some fun.
Hey! That’s my property!
Posted by: | CommentsHave you ever heard of Property Fraud Alert?
I think this is a handy little service to have as part of your real estate tools because things happen- especially when we get really busy juggling multiple properties, we can miss something until we go to sell t he property.
Well, this handy little service can ward off a few un-welcome surprises.
It was designed to ward against mortgage fraud. It could be something as simple as someone recording a document to have it appear that they own your property-without your knowledge.
Property Fraud Alert is offered in certain counties. Should you decide to check out the site, it’ll ask you for the name(s) you’d like for them to monitor and the email address where you’d like to receive document alert notification.
If ever something is recorded in your name, you are immediately notified via an email alert with the following information:
- County Location
- Document Number
- Document Type
- Recorded Date
- Party Name(s)
The only downside that I see to this service right now is that it’s not offered everywhere.
If this sounds like something that would help you- Head on over to Property Fraud Alert and enter your zip code to determine if yours is a county that they serve.
Property Fraud Alert might be just what you need to help you protect your valuable property investment.
Karen
First-Time Homebuyer Tax Credit Extended & Expanded
Posted by: | CommentsChuck Isola has shared this Morgage News with us. Read this interesting announcement by President Obama.
On November 6, 2009, President Obama signed a bill into law that immediately extended the popular tax credit program offering up to $8,000 for qualified first-time homebuyers (FTHBs) into the first half of 2010.
The bill also instantly expanded the program, offering up to $6,500 in tax credits for qualified repeat home buyers, swinging open the door for even more qualified homebuyers to take advantage of this valuable opportunity at a time when mortgage rates are still near historical lows.
First-Time Buyers
For FTHBs (defined as someone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title), the basic rules remain the same, with one important exception – higher income limits are now in place, increasing the pool of potential buyers eligible for the tax credit of up to 10% of the purchase price or up to $8,000. This is money that does not have to be repaid as long you stay in your new home for at least 36 months.
Single tax filers who earn up to $125,000 are now eligible for the total credit amount. Those who earn more than this cap (but less than $145,000) can receive a partial credit. Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap (but less than $245,000) can receive a partial credit.
Repeat Buyers
The new homebuyer program offers an exciting new opportunity missing from the previous incentives — a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years. This gives those who already own a qualifying residence some additional reasons to take advantage of lower home prices and interest rates and finally move up to the home of their dreams.
Important Deadlines
Purchase agreements must be signed by April 30, 2010, and closings must be final by June 30, 2010.
Get the Facts
There are other important rules and guidelines you must meet to qualify for this great opportunity. So, if you or someone you know has missed out on the first two home buyer tax credit programs in the last two years, don’t wait. Give us a call today. We’ll gladly review your situation and see if you can benefit from this new and improved program.
By Chuck Isola, Mortgage Banker, Benchmark
(707) 775-3300
Issues Within The Real Estate World and Financial Literacy
Posted by: | CommentsThis article has been shared by Forest Jinks.
Only two topics of discussion are included in the month’s update but only two topics doesn’t translate into a shorter Update.
Lets get right into it.
More Real Estate Mess to Come?
The relative strength of the real estate market over the past several months has been a beacon of hope for the Bulls expecting a great recovery from our economic woes. This is especially true of California where prices have risen considerably from their lows. National sales indicate a bumpier ride with December sales falling 17% from the year prior (California sales increased 17% over that same period). But even calling for a bumpy ride probably doesn’t do justice to how ugly the picture really could turn out to be. There are three main factors that point to more pain, lots more pain, within the real estate market.
The first pertains to the foreclosure world, of which indicators are commonly reported in the press.
Foreclosureradar.com, a foreclosure tracking website that should know better, trumpeted a decrease in foreclosures towards the end of last year. What they didn’t mention is that foreclosures are down not because loans are strengthening but because lenders aren’t foreclosing. Every day partners and I are tracking foreclosures, hitting the streets to do our research, and standing at the trustee sales hoping a bank will drop an opening bid low enough to create the financial incentive to deal with the property problems for the bank. It is not uncommon for us to come across evidence of properties being in the foreclosure process 10 – 12 months, having had their appearance at the auction postponed again and again and again. This holds true even to vacant properties, many with open access and already completely trashed. Why would the bank not foreclose on that property? The foreclosure picture probably won’t get better for some time yet to come. The majority of loans now entering default were originated in 2006 leaving
2007 loans still to cycle through before seemingly clearing out the high priced loans. But then we have to deal with the crisis of the highly leveraged cheap credit created by pushing FHA loans since 2008. Already over 20% of the FHA loans made in 2008 and 2009 are in default.
This speaks nothing to the impact rising interest rates could have on mortgage resets, and rising interest rates are almost assuredly coming within the next few months. During the credit boom the many buyers for loans were buying the packages of debt, slicing off different layers of it, and then selling it for huge profits. When the real estate market crashed so did the desire to buy loans. At the present, only Fannie Mae is a dependable buyer of loans and she is fast running out of money. Did anyone notice that the home finance world has been nationalized? Fannie Mae is fully a government agency and is basically the only supplier of home finance. The government has already extended the borrowing/lending limits of Fannie Mae but again F.M. is fast approaching its limits.
What happens this time?
Will the government again extend the limits (probably) but will the government be able to find the money to extend the limits? The money to buy the loans is created largely by the sale of government bonds. How long will investors have an appetite for this government debt backed by loans that are racking up increasing rates of default? Because the federal government determines the interest rates at which Fannie Mae will buy loans, it has created an artificially low run of mortgage rates. Should Fannie Mae stop lending no private buyers are going to step in unless the yields are much higher, necessitating an increase in interest rates charged to borrowers to create the higher yields. Increased interest rates directly cause a decrease in affordability, limiting the buyer pool and reducing the price that the remaining buyers are able to pay for a property.
The third factor is commercial real estate. Some are saying that because everyone is expecting commercial real estate to collapse that it won’t, since no one ever expects what happens to happen. But maybe what is unexpected is how big the problem may end up being.
The FDIC greatly loosened bank guidelines in regards to the bank’s ability to rewrite existing loans and to real estate on their books. Not only are these changes artificially propping up the value of the remaining real estate (since the distressed transactions aren’t occurring), but also decreasing the amount of cash banks are willing to loan as they hoard money as defacto reserves for when the FDIC does an about face and changes their policy.
There is nothing pretty about any of the above from a market perspective, but with change comes opportunity and any or all of the above may create great opportunity within the markets.
What can I do about it?
As I promised last month, a majority of this month’s Update will be spent responding to email responses I received regarding the November Update (click here to view). One particular email received from David Campbell (a well respected real estate entrepreneur) got me thinking. His email rhetorically asked, “I agree with you, but what can we do about it?” The question itself can be taken at two different levels, both of which need answering. The first is the personal level, that is to say, how do I individually invest or run my business so I can deal with the current (and future) economic political climate. The second is in the broader sense pertaining to each of our personal impacts on the national or international decisions being made.
Let’s start with the personal level. In November I alluded to the lack of national financial literacy as it pertains to what I opine as poor policy decisions being made. This was shown to be especially true among the populace of Oregon State this past week as they voted to change business tax from being taxed on income to instead be taxed on revenue. With a tax rate of just under 9% this is a massive change in the income statement of businesses operating within the state. There are many businesses that do not have net margins large enough to cover the increase (supermarkets for instance) so to stay in the black they will necessarily have to increase their price to the consumer, the same consumer who voted for the change in taxation. Even at the lowest levels of financial literacy the damage done to the consumer (voter) can easily be understood, and yet over 50% of the voting population didn’t have the financial literacy to vote no on the measure.
The importance of financial literacy cannot be emphasized enough, especially in unsettled times. Those that can understand the effects of decisions being made and react to them will be able to benefit, rather than be hindered by changes in any market. That isn’t to say the most informed will never lose because all of us, even Mr. Buffett, are sometimes taken by surprise. However, having the financial literacy allows us to hedge against those surprises and win the war even if we lose an individual battle. An especially poignant example of this is Germany after World War 1. Having been defeated in the War, Germany (and their allies) was forced to pay retributions to the victors as part of the peace settlement. While this and their war debts reduced fiscal policy choices, it was ultimately choosing a horribly short sighted direction that led to annual inflation rates that reached as high as 182 billion percent (yes billion). According to calculations by historian Niall Ferguson, prices at the end of 1923 were 1.26 trillion times higher than they had been in 1913. This is mentioned not to bring comparison to the potentials of the US economic future but rather to give context to the following quote from Ferguson’s writings on the effect of the inflation, “This (the inflation) amounted to a great leveling, since it affected primarily the upper middle classes: rentiers (those that owned bonds or lent money), senior civil servants, professionals. Only entrepreneurs were in position to insulate themselves by adjusting prices upwards,…investing in real assets such as houses and factories and paying off debts in depreciating banknotes.”
Not everyone is in the position to be an entrepreneur, but by being entrepreneurial in our thinking, by increasing our financial literacy, and being willing to partner/invest with those entrepreneurs that are on the streets, those that aren’t or can’t be entrepreneurs in deed can still benefit from being entrepreneurs in thinking and investing. And I am defining entrepreneurial investing as both real estate investing (assuming it is real estate entrepreneurialism not speculation) and investing active or new businesses. As with any type of investing, not all real estate or real estate entrepreneurs are good places to place money, and not all businesses are a good place to put money.
On a more macro level financial literacy also is important. As has been said by ones much wiser than I, if we wish to find a trait in another we first must have it in ourselves. Although one could hope, it is not surprising our politicians do not have strong financial/economic backgrounds when the population voting them into power is so poorly educated in those same disciplines (as shown by the Oregon vote already mentioned). If, by being educated myself I am able to educate another who in turn could educate another, maybe our society could become financially educated enough to make better societal decisions, or at least put enough pressure on the politicians that bad policy could be averted. In the natural sciences it is commonly understood that all of natural sciences, boiled down to their smallest and most basic increment, are governed by physics. While not as commonly believed, especially by those most heavily involved in the study of each independent social science, economics is truly the base of all things societal. Without a strong economic base progress isn’t made, innovation goes unfunded, art isn’t created, and society eventually reverts back to the governing that democracy is supposed to overcome – that is rule by the few strong, rich, or powerful. While a much more comprehensive study and argument can be made showing this to be true throughout history, one needs only to look at the economic systems and social states of the world’s poorest countries. One needs only to look at societies who are most rapidly increasing their standard of living. Or one needs only to look at those countries, that despite the societal and natural inputs needed, are falling behind. Hopefully by increasing our countries financial literacy we may be able to start repairing the economic base of the country and with the benefits achieved be able to tackle and solve some of societies other issues. As a starving man does not care of the benefits of art, neither can a weak economic base support fixing the problems of a society.
To give a more developed answer the question “what can I do?” we must also contemplate the choices our government has in dealing with the issues before it. Cliff notes of some of the issues: #1. By 2019 the current administration expects interest on the national debt to increase to $700 billion per year from the current $200 billion (this does not take into account the probability of interest rates increasing during that time period). That $500 billion increase is more than the 2009 federal budget for education. That increase is more that the 2009 federal budget for energy, or homeland security, or Iraq, or Afghanistan. In fact, that $500 billion is more than the 2009 for all those things I just mentioned combined. That interest has to be paid some how, but how? #2. Social Security – All of our personal social security accounts are currently unfunded. Long ago the money in the Social Security fund was pulled out for other uses and instead S.S. depends on the deposits of current tax payers to fund current obligations, even though those current taxpayers are supposedly building their own sum of pension distribution. This becomes especially worrisome as life expectancy increases and the massive baby boomer generation inches ever closer to retirement and social security receipt. Stay tuned, by 2015 (or possibly before) this topic could dwarf our current economic issues. #3. The government payroll, paid for with tax payer money, continues to grow in terms of absolute dollars through both increased headcount and increased per head compensation. In Oregon for example (I don’t mean to pick on Oregon), despite mandatory furloughs due to budget shortfalls, average compensation of state employees increased from the previous year. Additionally, the state increased its headcount by 1700 workers. I view this utter lack of financial responsibility as fiscal fraud against the tax payers of state. As another example of bloated government, consider California and its mandatory furlough days. Much to the surprise of no one the state has continued to operate without much of a hiccup. Since the furloughs roughly equate to 1 day every two working weeks this should allow for a minimum of a 10% reduction to the state workforce without a reduction in services offered. Government bureaucracy is the ever strengthening monster that feeds upon the hand that feeds it. When does the momentum of growth and the power of the government become so great that it is impossible to change its path?
How is a government to deal with such massive problems (if it even admits that they exist)? In truth, though not in preference, it may require a social unrest event, with the result of the unrest being true structural change. But we hope this isn’t so and hope instead that our politicians decide to make difficult choices now to avert large future consequences. In the book Talent is Overrated the authors discovered through their studies that to become great at anything, whether it is chess, music, sports or business, a person must put in roughly 20,000 of focused practice, with focused practice being the key. Most of us never learn how to do focused practice because it is a difficult and stretching event done repeatedly. The result, however, is excellence. For the US (although this also applies to Western Europe and Japan) to stay strong (or regain strength depending on your point of view), our politicians must put in the painful “practice”. That is to say right now is the practice time that will result in the country either being great or diminishing.
One particular solution to the Social Security issue is to follow the footsteps of Chile, who is a true success story of the past couple decades. In the early 70s Chilean leaders’ efforts to run the country as a pure socialist society had imploded and the country was a mess. Over the next decade under the leader of a brutal (although ultimately successful) dictator, the country floundered, trying to deal with extremely high inflation and a social care system that was bankrupting the country. Along with other successful policy changes, the true beacon of growth was unleashed in the early ’80s when the labor minister managed to covert a majority of the population from a state run pension fund to a personally managed fund. Since that time Chile has soared to the front of the South American class with the private pension funds averaging 10% annual returns, having a poverty rate at 15% (compared to 40% in the rest of S.A) and having 15 consecutive years of economic growth at over 3% year after the conversion (vs. 0.17% in the preceding 15 years). Just this month, and despite the world recession, the Chilean stock market hit its record highs. Additionally the government is currently a stable democracy and the country safe for its citizens and travelers. In the Chilean example (developed and preached by 1976 Nobel prize winner in economics Milton Friedman) it was the return of a country from a social net styled political and economic system to one where individuals held their own responsibility. Not only did this policy change greatly affect the economic path of the country, but I am sure, as more individuals understood that their decisions were directly affecting their personal future, financial literacy increased. The policy change encouraging individual change and individual change strengthening policy change. I view this as something also needed in the US.
As always, please feel free to email with comments or questions and also check out twitter.com/forrestjinks for short economic thoughts throughout the month.
For those in the North Bay area looking for something to do on the evening of Thursday February 25th, I will be giving a brief presentation on real estate investment opportunities within a distressed market.
Forrest Jinks
Forrest can be reached by calling 707/536-1711 or visit www.altusequity.com for more info. ?
Network Your Way To Millions
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by Preston Ely
Let’s cut to the chase.
The goal is a few hundred leads per month. You want billboards, commercials, and mass mailers going out in the tens of thousands.
There is only one small problem…
You currently have $327 a month available for marketing.
What do you do?
You have champagne taste and a malt liquor budget.
Simply put, you must start where you are and work your way up. And where you are is broke, by the way. Let that both embarrass you and motivate you at the same time. Don’t like it? Oh yes, you do. If you really didn’t like it, you’d change it. It’s comfortable to you, and you’re scared of anything else. You don’t want the responsibility.
Isn’t that true?
How does that make you feel?
You need to become a networking machine. You need to start networking so consistently and constantly that you literally hand out 95 business cards to imaginary people in your dreams at night.
Doesn’t sound fun, does it? Well how much fun is being broke? Which one is less funner to you?
The answer to that question will determine whether or not you get off your lazy arse and DO something about your life.
You gotta get in the mix, man. Mix it up. Stir it up. Put it in the oven and bake it till a cash cake appears out of nowhere.
Then eat it.
Eating the cash cake is so fun, let me tell you. Oh how glorious when cash cakes just come to you every day. What a life.
But you gotta pay your dues.
No dues? No cake. No cake for you!
Your entire community needs to know that you buy houses and close fast. That you’re the “go to” guy or gal when someone needs their house sold quickly.
How do you plan on accomplishing this?
If you have lots of money then this is easy. If you don’t, then it takes work and high levels of creativity.
Are you willing to work? How willing are you to put in some 15 hour days to really get this thing off the ground? Are you all talk by any chance? Or are you one of those rare souls who actually make something happen in this world? Who are you really?
Get out there and make some friends. Hand your card out to every single person who comes within a 3 foot radius of you. The exact card to use and the unbelievably easy conversation you need to have with these people are in my digital book that you should already have by now.
I was just having lunch with a friend of mine who has been in the real estate investing game for years already. He still hands his business card out to people in an effort to get new leads. As a matter of fact he just recently did a deal that he made over $20,000 on, and he got it from handing his business card out to a stranger at my office – Starbucks!
It is more comfortable to do nothing. It feels better to stay home and watch tv. But does it feel better really? How do you feel about yourself? About your life? On a scale of 1 to 10, how much do you think your spouse respects you and what you have accomplished in life? How does that feel? Do your kids respect you or pity you? How does that feel?
Are you really safer doing nothing?
Me personally, I would rather die doing something than live doing nothing.
Get out there and mix it up. Shake it. Flip it. Bake a cash cake. Eat it. Smash it in your boss’ face. Whatever.
Until you have the funds for the big time marketing…network your way to millions.
Why Maintaining Good Credit Matters
Posted by: | CommentsWhat is Credit Restoration?
Hannah Fliegel
Hannah Fliegel is a credit restoration expert, and her company, assists clients in navigating the credit repair process efficiently. Credit Restoration begins with the dispute process in an effort to remove negative trade lines on a consumer’s credit report by challenging, inaccurate, obsolete or unverifiable information. Once the dispute process is complete, clients are provided with strategies to boost their credit score and teach them how to maintain a good credit rating moving forward.
Hannah is also a real estate investor who maintains a credit score of 819 and services well over $1.2 million of mortgages. Home loans and lines of credit are drying up for investors who have less-than-perfect credit. By maintaining stellar credit, investors have more options for investment opportunities. Hannah has assisted hundreds of real estate investors in removing their short sales, foreclosures, deed in lieu and bankruptcies from their credit reports. She also uses credit repair for all her lease-option tenants. She has earned the nickname the “foreclosure fixer” because her high success rate of removing foreclosures from the record.
Why Credit Repair after Short Sales, Foreclosures or Deed in Lieu?
The damage to the credit score itself is caused by the late payments leading up to the short sale, foreclosure or deed in lieu. Typically, it’s an 80 point hit. From a credit stand point, there is little difference between a short sale, a foreclosure or deed in lieu of the loan is a non-recourse loan and the lender forecloses by deed of trust.
Why Credit Repair after bankruptcy?
Typically, a consumer loses 120 points to their credit score when they file for bankruptcy. Once the bankruptcy is discharged, a client should sign up for credit repair. If clients were to pull their credit report, they would see the bankruptcy as well as the other negative trade lines that were included in the bankruptcy. By signing up for credit repair, all the negative trade lines that were included in the bankruptcy would be removed causing an immediate 60-point recover to their score and a huge improvement to their credit rating. Ironically, 50% of the time the bankruptcy itself will be removed from the consumer’s credit reports.
Hannah Fliegel began investing in real estate in 2004. After having a pre-construction deal in south Florida go south and compromise her credit, Hannah discovered the world of credit restoration. Hannah is living proof that lemons make great lemonade! A true entrepreneur, Hannah is the mother of two and she is married to a litigation attorney, who is partner at an international law firm.
You can learn more about Hannah and her work at Hammered Credit
How to Wholesale a Hot Smoking Deal for 5 Figure Profits
Posted by: | Comments5 Figure Assignment Fees may be hard for some people to believe in today’s Real Estate Market. Believe it or not, they are still out there for the active, persistent and methodical real estate investors, even the first-timers!
Wholesaling
Wholesaling is the art of finding and assigning properties. It can be so appealing to new investors because there is very little cash required to support these types of deals and credit is not an issue. A new investor requires only a small amount of cash to cover earnest money deposits, advertising, etc.things like this.
Discover your mission, vision, or purpose in life.
Spend some time envisioning the type of lifestyle that fits your family and personality traits. Then begin to realistically set your goals based upon the vision.
Remember the basics about goals – they should be SMART GOALS.
S-pecific
M-easurable
A-ttainable
R- ealistic
T-imely
Aim for what really matters to you. Discover your mission/vision/purpose. and teach yourself how to set and persist to achieve your goals. To manage time effectively track your tasks consistently, so that you don’t waste time on non income producing activities. Visualize and focus on your goals daily to ensure that your actions reflect that which pertains to your goals.
What tools do you need?
The basic tools that you will need as a new wholesale investor are these:
- Cell phone - (preferably a PDA) with unlimited minutes, you’ll need them! This will help you to organize your tasks, records, phone numbers and synchronize with your computer.
- Computer - researching data comps and for marketing your wholesale deals
- Printer - print out contracts, contracts and any documents
- Camera - this is an absolute must have for creating your e-flyers to mail our to your database to sell your deal
- Contracts / Agreements
- Fax Machine
- Filing Cabinet – you’ll need this too.
As your business evolves, you’ll reach a point where you will find other tools and gadgets that increase your productivity and your profits.
How to find deals:
There are many places to you can locate deals and here is a list a few of them:
- Vacant Houses
- Title Companies
- Home Inspectors
- REIA Clubs
- FSBO’s
- Bankruptcy Attorneys
- Homeowners Associations
- Burned out Landlords
- Bail Bondsmen
- Code Enforcers
- Hard Money Lenders
- Meter Readers
- Waste Management
- Divorce Attorneys
- Probate/Trustees
- Tax Offices
- Garage Sales
- Estate Sales
** Every time you go for a ride, take a different route to get to know your neighborhood, the properties, comps, vacants and utility workers.
Once you’ve made contact with a truly motivated seller- you’ll make them an offer on that property based on the comps, repairs and your desired profit.
Quick Calculation of the Maximum Acceptable Offer: (MAO)
MAO = (ARV x .65) – RC – CC – AF
ARV = After Repair Value
RC = Repair Cost
CC = Carrying Costs
AF = Assignment Fee
Assigning The Contract
The most important thing to do here….in the money step is to be very clear that you’ve contracted to purchase the property as “your name….and/or assigns”: By placing and/or assigns after your name, you’ve ensured your ability to assign the deal to an end buyer. Although a contract is usually assignable unless otherwise stated, I would hate for you to fall down on the money step by leaving it to happenstance. Once you have an executed purchase agreement with the motivated seller that contacted you and you’ve negotiated a hot, smoking deal with your and/or assigns on that top line…you are ready to find your buyer.
Note: In my contracts, “and / or assigns” is a part of the agreement along with the following clause.
Buyer shall receive a key within 48 hours and be granted access to the property to allow partners and contractors to evaluate it as needed. If the seller is still living in the house, I request access on pre-arranged days and times. When they won’t be there and this allows me to get my investors in to see the property.
How to help your buyers see the value in your deal
I try to make it as easy as possible for my buyers to access, evaluate and purchase my wholesale deal by doing the following. By having my contractor to come out and submit an estimate on the needed repairs (on his professional letterhead) can save my buyer/investor a great deal of time and guesswork and I also ask my real estate agent for some accurate comps on the subject property. Even though I encourage every buyer/investor to pull their own comps, perform their own due diligence, I’ve found that by doing these things, they are steps that aid in the process of assigning the deal.
So at this point, you’re so close to that meeting with your bank teller right? …hang on!
At this stage, you have the property under contract, you’ve got your estimate(s) for the repairs, comparables, photos, and you’ve got access to the property and your blank assignment of contact in your hot little hands. You’ve done a lot and you’re close.
How to Find a Buyer for your Deal
During this point, time is certainly of the essence and you’ve got to get your e-flyer made and sent out to your database, your craigslist ads, your for-sale-by-owner posts, directional arrows and a hard copy to bring to your local real estate investor club.
In my experience, they are many, many “wanna-be” investors that read book after book, attend seminars and invest within the confines of their minds. My advice to my students is to weed out the tire kickers from the decision makers, early on before they have a deal. Create a performing database. It doesn’t have to include many, many names…. just the ones that know a hot, smoking deal when they see one and that will perform when the times comes to do so.
What day is it? Now it’s payday!
Your end buyer / investor will be exchanging a signed assignment of contract with you for a fee. They are paying for the right to step into your place and fulfill the obligations that you and the seller have set forth.
Collect a deposit from your buyer as you hand over the purchase agreement and obtain a signed assignment of contract . This will help you to separate the decisive, action taking investors from those that have a case of paralysis of analysis. If your buyer is serious about moving forward, they will have the wherewithal to hand over a deposit in good faith thereof.
Since it’s your deal, you would be using your title company who is most knowledgeable and skilled in the art of wholesaling properties and the manner in which you operate your business. You will provide your title agent with instructions about the remaining funds that will be released to you upon settlement. If your title company is not able to release those funds to you at that time, it’ll be necessary to execute an addendum with your buyer.
An addendum attesting to the fact that you will be both be at the closing and the buyer ( your assignor) must pay you in the lobby immediately following the closing, along with a Notarized Memorandum of Agreement would help to protect your interest.
Assignment fees can be very lucrative in certain markets. On my very first wholesale deal- the assignment fee was $7,000 and I had never done it before….so not bad right? My third wholesale deal allowed for a $40,000 fee because it was a hot, smoking deal. The buyer, a contractor was thrilled to get that property so that he could rehab it and make his profit.
Hot, Smoking deals are out there….if you’re not paying attention, you’ll bump right in to one of them!
So, with that- see your vision, steady yourself, prepare with vigor and head in that direction with renewed energy, confidence and persistence…and remember to enjoy the journey.
Karen Roberts
Proposed House and Senate Bill to CRUSH Seller Financing
Posted by: | CommentsHR Bill 1728
Proposed House and Senate Bill to CRUSH Seller Financing
Have you heard about HR 1728, it’s a heinous infringement on private property rights that is likely to shut down the creative selling and financing of properties market.
IT HAS ALREADY PASSED THE HOUSE AND IS UNDER CONSIDERATION BY THE SENATE NOW.
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The U.S. Senate is considering a bill that would severely limit the way you do business as a creative investor and, more importantly, is an inexcusable infringement of the property rights of all Americans.
HR 1728, which you can view in its entirety here:
http://m1e.net/c?40134443-w82.v5BbOQpik%404322480-njpRVarb4R7As“>http://m1e.net/c?40134443-w82.v5BbOQpik%404322480-njpRVarb4R7As
Deals with a plethora of mortgage-related issues, mostly around limited terms and fees on residential loans. But the heinous piece of the legislation is in section 101(3)(e), which defines the affected principals as:
(E) does not include, with respect to a residential mortgage loan, a person, estate, or trust that provides mortgage financing for the sale of 1 property in any 36-month period, provided that such loan-
(i) is fully amortizing;
(ii) is with respect to a sale for which the seller determines in good faith and documents that the buyer has a reasonable ability to repay the loan;
(iii) has a fixed rate or an adjustable rate that is adjustable after 5 or more years, subject to reasonable annual and lifetime limitations on interest rate increases; and
iv) meets any other criteria the Federal banking agencies may prescribe; and…..
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Yeah, I know, confusing. But here’s what it says: you are NOT subject to the law as long as you DON’T sell more than 1 property with owner financing terms every 3 years! Or, to put it another way, you ARE subject to the limitations of the law if you DO sell more than one property every 3 years via a land contract, owner-held mortgage or wrap-around mortgage-and who knows if they’ll define lease/options as owner financing, too?
So what does it mean to be “subject to the law”? Well, at the very least, it means that you will have to comply with a long, confusing, and penalty-filled piece of national legislation. Here are the types of transactions that you would be restricted from doing more than once every 36 months:
o Selling YOUR OWN HOME using a land contract or owner-held mortgage or Trust Deed so that you can get a quicker sale, higher sale price, or better rate of interest than is available in other investments
oCarrying back owner-held second mortgages on investment properties that you sell
oDoing any kind of installment sale on residential properties including homes, condos, mobile homes, and even raw land that is zoned residential
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Yes, there will undoubtedly by ways to “get around it”-some have suggested that getting a mortgage broker’s license and then learning and following the vast new set of regulations would circumvent the “problem”. But bottom line is, this law has to be stopped and it has to be stopped NOW. Here’s why:
1.Congress is trying to regulate the wrong thing. The deals where seller financing is involved and we make are not “loans”-they don’t involve the transfer of money, or points or closing costs or adjustable rates or any of the other things that caused the mortgage crisis to begin with. They are INSTALLMENT SALES. We don’t give money to the “borrower” and wait for it to be paid back: we give a property to the borrower and wait for it to be paid off. Regulating this will have no effect on the foreclosure crisis
2.It is a completely unacceptable infringement on private property rights. When you own a piece of property and find a ready, willing, and able purchaser, you should be able to control the sale of that property within the existing laws of my state, which already regulate the interest rate that you can charge and some of the terms of the sale. The government does not have the right to tell us that we need special licensing to sell our own properties; nor do they have the right to further regulate the terms under which we can sell or burden small investors with a new set of rules that we can’t comply with.
Not only will this new law, if passed as written, effectively choke off owner financing as an exit strategy for you, it will also take away housing choices for your buyers. The millions of Americans who’ve been through foreclosure in the last 3 years can’t buy a house in any way OTHER THAN to negotiate owner financing with a seller-and HR 1728 would greatly reduce the number of properties available in this way. Millions of potential home owners who would otherwise be able to re-start the process of paying off a home, and get the tax advantages of ownership, will be reduced to renting until they are able to qualify for traditional bank financing.
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What to Do Right Now
This bill has already passed the house and is waiting for Senate approval. Please contact your senator via email and snail mail to let him know that this law MUST NOT PASS in its current form.
You can get your senator’s contact information here:
http://m1e.net/c?40134443-bY0zPa.ZtWFhs%404322481-CJlir6IvDB1OQ“>http://m1e.net/c?40134443-bY0zPa.ZtWFhs%404322481-CJlir6IvDB1OQ
As always in cases like this, you have an automatic handicap to overcome-the fact that you are a real estate investor and are therefore viewed as part of the problem. So when you write, don’t emphasize the nature of your business, just that you and your buyers would be greatly aversely affected by the new law.
We need THOUSANDS of these communications to go out in the next few days to have a CHANCE of stopping this in its tracks. So whether you’re a new or experienced investor, PLEASE take the time right now to write your elected representative!
Get Your First Flip Faster with a Mentor
Posted by: | CommentsFlipping properties, as described by the experts, can truly sound simple and easy. However, those who tried the late-night infomercial coaching systems found out that this was not the case. Unless you’ve mastered the entire process of locating, analyzing, number crunching and determining an accurate after repaired value for your flip, you could have some serious challenges in this market. Having a great and reliable team for the project is as crucial as all of the other elements.
If you’ve had major challenges in your investing business, it can lead to doubts and fears. You may question your ability to translate theory, to put into practice the knowledge you’ve gained in seminars, boot camps and home study courses. Worse yet, as a result I’ve seen some investors decide that flipping properties is not for them.
Actually, a good mentor can be instrumental in helping to restore your lost confidence. With the right motivation and experience, a great coach can suggest systems to funnel leads, direct you to a flipping course, help to minimize mistakes, provide vital tips and build a supportive team to help you succeed and get your first flip deal much faster than you could do before.
First, you should look for a mentor who has a good track record in the business you are in – in this case, flipping properties and who has made some true mistakes of their own, that they’ve learned from.
Sometimes, we forget to learn from past mistakes and previous challenges.
If you’re able to learn important growth lessons from those mistakes, you will benefit by strengthening your investing muscles. If your chosen mentor has overcome struggles in the business and persisted through them to invest another day, another year, in another market cycle – this could be the ideal trainer for you. Apart from accountability, motivation and direction, a good mentor should be able to share with you all the basic knowledge, tips and tricks in the process of flipping properties. Some of the flipping tips have been mentioned below:
#1 Building the right flipping team
Review your tools and resources with your mentor. Be as open and honest as you can. Discuss the members of your team such as: appraisers, contractors, carpenter, plumbers, etc. and note what else will be needed to round out your resources. Interviewing other individuals that are team players- such as your real estate agent and loan broker might end up being fantastic candidates to add to your team. Check in with your mentor about these possible players.
Get on board with your mentor and ask about how to acquire retail buyers and how to build a reliable database of investors.
#2 Assessing the right property
Assessing the right property by locating, analyzing and negotiating. This is so very important to whether you create a deal or not. It you are not comfortable with your methods, increasing your knowledge can be enhanced by having a mentor. Whether you gain profit or lose money in flipping- this is dependent upon how well you assess the property before obligating yourself to the seller. A mentor can also help you to verify the accuracy of the information provided by the motivated seller before you call it a deal.
#3. Buying and fixing the property
- What is the best way to structure this deal?
- Which contract should I use?
- How much will I need to place into escrow?
- Should I buy the property with my own cash, with a partner or through financing?
- How will I pay for the repairs? How much should I calculate for holding costs?
- What about permits?
The above questions are very stressful for the inexperienced flipper and may even discourage certain new investors from going forward. A mentor’s guidance can make all the difference in this arena.
#4. The right flipping strategy
There are variations in flipping – such as wholesaling and the buy-fix-sell method -sometimes it’s difficult to decide which way to go and why. Exit strategy is imperative. Should you wholesale/ assign the contract and allow another investor to close the deal? Should you position yourself as the end buyer, the wholesaler, or should you let a real estate investor close the deal for you in exchange for a fee? Would it be an even more feasible option for you to close on it yourself, fix it and then retail it to an end buyer?
Your mentor can help you to choose the best option for your situation because you’ve had that honest conversation about your resources and current needs.
#5. Contracts
Certain issues can be avoided if the proper agreements are executed prior to any exchange of goods, services or money. Do you have an assignment of contract? If you need one grab it from the fec knowledge section. A mentor can guide you in choosing and preparing suitable contracts for each specific deal. It’s also a benefit to determine which reasonable and otherwise unreasonable terms and clauses are relevant for you in your agreements.
#6. Marketing
As the real estate market changes, marketing that might have worked wonders before may not be viable at the moment. Ask your mentor what marketing strategy and plan should be implemented.
It’s possible and proven that by working with a mentor, your skills can be greatly enhanced and get you well on your way to your first deal. Have your mentor help you to choose a successful real estate investment and show you why and how they made that choice.
The training and the supportive relationship that you receive from a mentor will build your confidence as you proceed by yourself to your next flipping project.
Right now is a fantastic time to invest in real estate because it’s on sale! Strengthen your investing muscles today and build a secure future doing what you love.
Karen Roberts
