| Buying Pre-Foreclosures. A Short Sale Overview. |
Pre-Foreclosure Marketing and Lead Generation
Lead Automation If you read our other hub about automating your real estate investment business, you know we direct ALL our marketing to either our website or our phone number that will forward motivated sellers or pre-foreclosure callers to our live ops if they hit zero. We use Voice Connect for our live ops and Freedom Voice for our phone system. On our phone system is a recorded message concerning foreclosure and some of the
things we can do to help. All potential customers go to our website or our phone number where their information ends up in the back office software we created and sell. Newspaper Ads Our ads are usually always the same now unless we are doing market tests. We run them in the local paper, which goes right in the mailbox. That is why we chose it. People get this paper in their mailbox without doing anything, no subscription, no paying for it, like it or not. It comes in the mail, it is free, more people are likely to read it, and it has been real good for us. We make the ad stand out so that when you open the paper, even standing back it is the first thing that catches your eye. All we did was hand circle it, and have the publisher run that every time. It costs a couple lines, but well worth it. We tested 3 papers. We tested the larger papers in our area, the Philly Inquirer, The Daily News and our more local Community Courier. The Daily News and Philly Inquirer have much larger distributions, BUT, people have to pay for those papers, and the classifieds sections are huge. The local paper has a fairly large distribution covering 2 counties and several smaller newspapers. The classifieds are much less crowded, much less expensive, and we get a better response rate. Not only is the response rate better, but they are all close and in the area we really want to work (within 45 to 60 minutes of home). However, we are expanding into other counties through a kind of bird dog program, so we will be running multiple market tests. Our ads say something like - "Behind On Payments? Owe Too Much?
Most investor ads say about the same thing. We have tried a lot of them over the time. William Tingle gave us this one. "House a wreck, get a check! Need to sell now, well here’s how" and then we would list our motivated seller website. Actually, I think those used to be 2 separate ads. Oh well. A good idea does not care where it comes from. This is at the bottom of all my e-mails: Behind on payments? Owe too much? Need repairs? Facing foreclosure? Little or no equity? We can help!
www.HouseMatchLLC.com
House a wreck? Get a check. Too ugly to list? Here's the gist. ANY HOUSE! ANY CONDITION! ANY SITUATION! We Buy Houses! Pretty ones too! www.sellfastpa.com
Search Engine Optimization We also combine this with SEO optimization of our real estate investor websites. We get around 1/2 our leads from the internet and directly through our real estate investor website. That is FREE marketing. Just for the time we put into it, and getting educated about it. We have spent considerabel amount of time learning SEO, and what works for the Real Estate Investor Market, and especially our websites. It has paid off in spades!!! Whatever that means.... I just know it is good. These 2 items alone are very powerfull.
Direct Mail Marketing For Pre-Foreclosure Leads Direct Mail works well for a lot of real estate investors, especially in the short foreclosure period states. We did direct mailers here in PA to pre-foreclosures, but only for a very short time. We got 30-60-90 day pre-foreclosure lists, and we were able to get a pre-foreclosure list from our county every month for $52.00 The foreclosure process here can take up to 9 months or longer, so mailing pre-foreclosures have a much much lower success rate. The pre-foreclosures generally know they have time, or when they call, we of course tell them they have some time before foreclosure, but it is best to plan now! Many of them don’t really take action until close to the sale. We considered keeping the list and mailing them closer to when they might be looking for other help as they had exhausted other options, but the amount of pre-foreclosures that actually go to sales is smaller then the list, so many of our mailings would go to people who have satisfied the default and/or worked something out, sold the house, whatever. We though it was a waste of money. We get 10-20 leads a week with our ads and website alone so we don’t need to do that extra work, and unless you outsource it or have a good sequential mailer program it can be time consuming. Pre-Screening Leads Now that you are getting leads, you need to pre-screen them. If you have read the other hub we published, you will know that our leads are pretty well pre-screened by our real estate investor system. Or rather, we have all the info we need to pre-screen them ourselves and determine where to focus our time. So we review the information. In the case of pre-foreclosures we are looking for: · Owners who owe slightly less, as much or more then the house is worth. · Are behind on payment 2 months or more · If we have a lot in the pipeline, we will only focus on pre-foreclosures that have second, third and fourth mortgages.
After we have determined our best candidates, those we are likely to get a short on, we call them back. We verify the information in the system with them, and attempt to build some rapport along the way. I love short sales and pre-foreclosure buying. It is the easiest way to buy in a sense. Sure, there is a lot of paperwork, and unless you have some sense of equity positions a lot of them might get denied, but the sellers are very motivated AND appreciative of what you are trying to do for them. They are very willing to work with us. Those that are not we just cannot put time into. If they are difficult now, they probably don’t really understand the situation they are in, will be difficult along the way, and will not be accepting of the type of help we can offer. Generally, it does not matter if it is a pre-foreclosure or a motivated seller. If I am on the phone with them and they are not willing to tell me how much they owe, what they bought it for, or what they need to get out of the house, they are not motivated enough for me and I am not likely to put much energy into it. Yes, I can look up what they owe and/or figure it out. What they bought the house for is public info. That does not matter, I am looking for motivation and you can’t make unmotivated motivated.. During our conversation, we determine if the caller is ready to just get out, or is trying to save their home. Many just want to get out. For those that are trying to find options to save, we help them by telling them what their options are. Often, and unfortunately for the homeowner, these options usually involve paying any amount that is in arrears, and the homeowner can't do that. If we can, and it is rare that we can do this due to the homeowners circumstances but, we will loan them money or try and find private money if their hardship was temporary, they have a good debt to income ratio now that their hardship is over, and they have a clear ability to get back on track. We walk them through all their option if they are interested in saving their house and we try and explore and probe each one of them and try to help them keep it. If they exhaust those options and can’t keep it, we are there to buy it or do the short sale. I really would rather people keep their house. I mean really, who wouldn’t? I think the greedy investor who just wants your house through a short sale is few and far between, but maybe I am wrong. In that respect, this business is somewhat conflicting. I mean, part of the reason we go through all that with them is not only to help them understand their options, but then if they do need to try and short sell it or sell it outright, they are going to remember us because we helped them and give us a chance to buy their house. We want you to keep your house, but if you can’t we will be there to buy, and then sell it for a profit. See? It could be painted into an icky picture pretty easily. It is usually hard for a home owner, but it really isn’t icky, and almost everyone we work with is very appreciative and grateful that someone is going to buy their house when no one else would, and that they will be able to look people in the eye and say “we sold itâ€, not “the bank took itâ€.
What are the usual home owner options? I won't go into detail on each one here. But here is a short list:
Do they have a hardship? The homeowner generally must have some kind of hardship to qualify for a short sale. Are they behind? I have heard of some people getting shirt sales approved when people are only 30 days behind or less, but I imagine this is rare. Or maybe not right now in this market, but we are finding lenders are stalling, seeing if the government is going to bail anyone out. Occwan has even saiod if they are in 1st position, don't even bother, they are not doing a short sale with you. Of course in the second, they will be wanting to get whatever they can. Generally, the owner must be behind by at least a couple payments. Can the loan balance solve the problem? If the 100K is owed on a house with an 80K or less balance, the bank would be more interested in foreclosure then say a 100K house where 100K was owed. In that case they would be less interested in foreclosing. It is important to understand that and to know the equity positions of the first, second and other lien holders or lenders. Many people do not get a lot of short sales approved, but that is because they are going after 200K houses with 160K balances. Or on a first and second, they don’t understand the equity position. You will be more successful if you understand equity positions in short sales and what to go after and what to leave alone. Generally, a lender would expect to get 80% of fair market value at auction without looking. But what is FMV for the lender? It is whatever the Broker Price Opinion (BPO) comes back as. A BPO is not an appraisal, it is a real estate agent who goes out and estimates what the house could be worth or rather sell for. Actually, they fill out a whole bunch of information, offer their opinion as to what it might sell for, but it is still up to lender. So you have the opportunity to be there for the BPO, and point out all the repairs and what it might cost. Just a note - I believe with the VA loans they send out their own REAL appraisers. We are just finishing a VA loan short, and they had an actual appraiser go out once. He priced it at more then 20% below the loan amount, so the VA sent another guy out. Their OWN guy. The PHFA, who handles PA VA loans, said they have to do that when the appraisal comes back at less then 80% of loan. There is also no negotiating a VA loan as far as we can tell. They come back and that is the price take it or leave it. The price is usually not less then 88% of the VA appraised value. Cases where there is a first and second or more mortgage liens are the best candidates for a short sale. If the first lender goes to foreclosure, the second and third only get what’s left after satisfying the first loan. So often, you can pay them off with a few thousand dollars. They realize this is better then nothing if they are in a poor equity position. Equity Position If the house is 200K FMV, and there is a first mortgage of 180K and a second mortgage of say 50K, the second is in a very poor equity position. The way the lenders generally do their calculations, the house would be expected to bring about 160K at auction (80%). That is not even enough to cover the first. The second is in a very bad spot and you could likely pay them off pennies on the dollar and $500.00 to $1000.00 payoff offer would be a good place to start for us on something like this. They will likely get nothing if it goes to sale. If the first mortgage is 130K and the second mortgage is 70K, the second is in a little better equity position as it would be expected that 80% at sale would get 130K to the first lien, and 30K to the second lien. So the second lien is in a better position and you would not expect to be ably to pay them $1000.00 to satisfy that 30K second loan. It is important to understand equity position when making your offer so that you have a higher success rate and don’t get rejected outright for trying to make those kind of low dollar payoff offers to lenders in a good equity positions. Getting Authorization If all these things check out, the homeowner is ready to do the short sale and we explain to them the process and those we need authorization from them to start. You need to get authorization from them so that you can send it to the bank and the bank is then authorized by the account holder to discuss any part of the account with you. Some lenders require their own authorization form to be filled out, but we ask the seller for one anyway as motivational insurance. If they aren’t going to send you the form, there is nothing to do. We make our form available for download from our website, so we send the user to our website, or we fax it or email it to them. You can see what the authorization look like. Go to our foreclosure site and click on downloads. We also have a Realtor presentation in there. Pretty cool I think and maybe it will give you some ideas for your own marketing stuff. Meeting the Homeowner The next steps are to go out and meet the homeowner and complete the homeowner paperwork. We usually e-mail, or call the homeowner a week in advance with a list of things we would like them to have ready at the appointment. This is what we ask them to have ready for us:
These are must haves. There are some additional helpful documents that you could add to the list, but we won’t go into that here. We also explain to them that repairs and cleanup are not necessary and that shortcomings in the maintenance of the house will help their case. We ask them to please be thinking about, and write down during the week all those big and little things that are wrong with or they don’t like about the house. We will use this as a place to get started when listing repairs and taking photos Did you know HSBC is NOT stand for Household bank? Many people think that. I know I did. It stands for HONGKONG AND SHANGHAI BANKING CORPORATION - HSBC. Upon meeting the homeowner, we have this neat little credibility kit (thanks Shaun McCloskey) that we hand them to build instant rapport. While they are thumbing through, we gather up their paperwork, take photos and tour the house and note any repairs. Then we sit down and go over the paperwork
The Paperwork, Contract, Land Trusts Etc. After we have all the other items out of the way we get into the paperwork. We fill out our own purchase and sale agreement that has been tailored to short sales. We don't need all that buyer protection and contingency stuff in there, we buy as-is, so we have a simple 3 page contract and the banks love it. I will explain how to take the house into a trust, but we don't do that anymore for reasons we will cover in our blog. Taking the house into Trust Our sales agreement has the land trust as the buyer. We always just made the address of the property the trust name. So 123
Of course, all our paperwork comes out pre-filled in from our software with the leads info that they entered or we followed up on so that we don’t have to spend anytime filling them in. It also means we have removed error from much of the process, and the forms come out filled in correctly already. When we were taking houses into trusts, which we may still do on occasion, this was the paperwork we use. I will write another article covering the land trust paperwork in detail and how it should be filled out. Look for it in our blogs. For now, this is what we use(d).
YOU CANNOT BE BOTH TRUSTY AND BENEFICIARY! You can be the trustee, and make a trusted friend the beneficiary, or a corporate entity (not sole proprietor) be the beneficiary, or vice versa, but you or any individual entity cannot be both. That's it. That is the paperwork if you’re going to take the house into trust. Again, we don't do that anymore here in PA and it is not because it is not legal, like many people will wrongly say. It is because it is a waste of time except in special circumstances. That is another article. Check our blog for Videos on how to complete land trust agreements and seller agreements for short sales. Data Entry We come back to our office and upload all the paperwork into our back office system so we have it all and do not lose it, and we initiate our contact with the lender. This usually involves calling customer service and getting as much info as we can about the house, including the value if possible. What we do is call them and ask a bunch of questions. If they try and transfer us to Loss Mitigation we tell them we want to talk to them and have a few questions first. Then we go down our list of 20 questions. During this time of course we will drop little things like, you guys must be swamped with all these foreclosures, things along those lines. By the time we get to our 20th question “Do you have a value on the houseâ€, they have forgotten who they are even talking to, or just glaze right over the fact that maybe they shouldn’t be giving the info. If they don’t we move on, or we hang up and call back. I have been able to get the value the bank has on file for the house every time doing this, except at Citi. Citi is on top of everything and they won’t even accept our authorization. THEY mail one directly to the seller. Once we have got what we need form the lender, we assemble the short sale package. This consists of all the paperwork, the repair photos, a cover letter and a table of contents.
Getting the Seller Some Money Back! If our negotiations go well with the lender, we want to help out our seller and get some money in their pocket. Normally, the lender will not allow the seller to make any money off the sale of a house that is a short sale. However, you can buy any personal property off the seller you want. Just write up a bill of sale for the amount you need to buy the personal property items or items. This is one way to get a little something back to the seller if you are able. Bank NegotiationsAfter the bank receives your paperwork, you may need to request an interior BPO. Many lenders will do a drive by or exterior BPO. This is not good enough. You want to explain to the lender that an exterior does not accurately reflect the value of the house and they really need to get inside to see what’s going on and all the repairs. Get the BPO guy out there and meet them at the property for the BPO At the BPO, have some docs ready like low comps, neighborhood statistics, code violations, whatever might help to accurately reflect the true value of the house considering the repairs needed to bring it to market. I will usually tell the BPO guy our offer and ask them what they think. Follow up with the BPO guy. See if he will give you a value. He probably won’t, but just say you didn’t know, and that’s ok. But try it anyway. As a real estate investor, you should be used to making offers that make your ears burn with embarrassment, so this should be easy. Follow up with the lender. Get any agreement in writing! Once you and the lender have agreed on the pricing and you have gotten agreement from any other lien holder that the contract and agreements are good, a closing date will be set. You can bring your check, or your buyers check and do a simultaneous close and do your deal.
Chris House Match LLC. housematchllc.com - Foreclosure and Pre-Foreclosure Website
sellfastpa.com - Motivated Seller Website instantreiprofits.com - Business and Marketing Tools for Real Estate Investors.
|
