WORKING WITH MOTIVATED SELLERS - Connected …...2018 CONNECTED INESTORS WORKING WITH MOTIVATED...

© 2018 CONNECTED INVESTORS

WORKING WITHMOTIVATED SELLERS

WHAT YOU NEED TO KNOWTO NEGOTIATE A PURCHASE

IN THIS MODULE, WE WALK YOU THROUGH:

• The Differences when Buying a Pre-foreclosure Property

• Working with Motivated sellers - Gathering the most important information

• Scripts for Working with Motivated Sellers

• How to use the Seller Info Worksheet to get the details on the deal

• Sample Seller Info Worksheet to use in your business

INCLUDES Authorization to Release and Seller Information Worksheet


It’s not uncommon for people to misunderstand the differences between a foreclosure and a pre-foreclosure property. But there are very big differences - and knowing them can pave a path to profits when you’re looking for the best deals available in your market.

In this module, we define the differences and walk you through the buying process:

• Why Foreclosure and Pre-Foreclosure Status Matters• What is Foreclosed Property?• What is a Pre-Foreclosure Property?• The Upside and the Downside• How to Buy Pre-Foreclosures

WHAT YOU NEED TO KNOW ABOUT BUYING PRE-FORECLOSURE

PROPERTIES


WHY THE FORECLOSURE (AND PRE-FORECLOSURE) STATUS MATTERSWhen most people think foreclosure, they’re thinking of the bank-owned REO (real estate owned) property listed by a real estate agent - and they’re right.

But all foreclosure properties go through a “pre-foreclosure” phase before they ever land on the MLS. Understanding the bigger picture of what happens BEFORE the bank owns the property can help you identify good investment properties and close better deals. And as an added bonus, you get to help a homeowner avoid losing their house to the bank.

WHAT IS A PRE-FORECLOSURE PROPERTY?A pre-foreclosure is simply a property that has a mortgage that is in default - meaning the owner hasn’t made any number of payments (usually three). The lender has begun the legal process to repossess the property. The pre-foreclosure is the period of time between the initial legal filing of the notice of default (NOD) or lis pendens and the lender’s auction sale of the property. Pre-foreclosures can be a valuable source of great deals on houses - but they require an entirely different buying process.

WHAT IS FORECLOSED PROPERTY?The most commonly recognized foreclosure is the bank-owned REO. These are properties that lenders have foreclosed on and repossessed for non-payment of the mortgage. First, the lender offers up the property at a “courthouse” auction. If it doesn’t sell at the legal courthouse auction, it then becomes a bank-owned REO. At some point after taking possession, the lender offers the property for sale through any number of sales channels including listing on the MLS, selling through third party auctions and through asset managers.


The Pros and Cons of Buying Pre-Foreclosures

We covered finding and connecting with pre-foreclosure sellers in the Working with Sellers module. The next step is knowing how to actually navigate the purchase of a property that is in the pre-foreclosure stage. It an entirely different animal than you may be used to. Before you jump into pre-foreclosure purchasing, consider the both the upside and the downside.

THE UPSIDE

• In many areas, there isn’t a lot of competition. Most people think of buying foreclosures at auction or on the MLS. Pre-foreclosure gets the jump on both.

• You can negotiate with the seller. Working directly with the seller gives you the opportunity to negotiate all sorts of things that auctions and banks can’t and won’t. Think “subject-to” deals and other creative solutions.

• In most cases, you can inspect the property. If the owner has vacated, since you’re in contact with them - ask for access.

• Depending on the foreclosure timelines, you have time for thorough due diligence.

THE DOWNSIDE

• Working directly with homeowners in distress can be a challenge. It requires knowledge and a willingness to work them through a problem.

• Pre-foreclosures are bad candidates to purchase through lease option. The owner has a history of non-payment. You don’t want to get into an lease option arrangement on a property that could be foreclosed on if the owner defaults again.

• It isn’t unheard of that an owner won’t leave the property after you close the deal. Know your rights (and theirs). TIP: If the owner is due equity, hold money in escrow with the closing attorney. When the owner vacates, release the funds. Cash is a big motivator.

• You’ll need contracts. When buying direct from the owner, it’s on you to take care of the legal stuff. You need a good closing attorney to get the deal closed.


HOW TO BUY PRE-FORECLOSURES The bank does not own the property - the owner does...but a foreclosure procedure is underway. Finding pre-foreclosures typically involves researching at the local courthouse and contacting the owner directly to purchase the property. However, PinPoint Profits puts that (and other important information) at your fingertips.

Since you work directly with the owner to purchase the property, you will do some of the leg work most often done by a real estate agent. You do not need a license and you do not need a real estate agent. You do need to understand the steps to buying a pre-foreclosure and you need to engage the services of a closing attorney or title office.

The Two Types of Foreclosure Processes: Judicial vs Non Judicial

States use different foreclosure processes and procedures. Be sure to identify which applies to your state so you are able to navigate the buying process.

NON-JUDICIAL States do not require that the lender file a formal lawsuit. But the process does go through the local county’s government system - sometimes called “Special Proceedings.” In non-judicial states, the homeowner is served a “Notice of Default” which begins the lender’s process of foreclosing.

JUDICIAL states require that the lender file a formal lawsuit against the borrower. The home owner is served a Lis Pendens to begin the process. Foreclosures in judicial states are a more lengthy process - and can give home owners more opportunity to cure the default by bringing their loan current or selling the property.

Both non-judicial and judicial foreclosure proceedings are handled by area attorneys on behalf of the lender. When negotiating the purchase of a pre-foreclosure property, you will need to communicate with both the lender and the representing attorney (sometimes called the “foreclosure trustee”).


THE THREE STAGES OF CLOSING A PRE-FORECLOSURE PURCHASEVERIFY

During your analysis of the deal and due diligence, you should have discovered the mortgage balance, the foreclosure proceeding deadlines as well as market values for the property. You need to verify that the information is correct. In some jurisdictions, the information is available online. In other areas, you can visit the local courthouse to verify. It is also possible (and best) to get the information from the lender or the foreclosure trustee/attorney who works on behalf of the lender.

CONTACT THE LENDER & FORECLOSURE ATTORNEYNeither the lender or the attorney will communicate with you without the owner’s permission. You will need to execute a simple “Authorization to Release Information” with the owner (sample at the end of this section). Contact the lender and the attorney to get instructions on submitting the authorization - and be sure to get contact information of the person or department you should speak with once the authorization is in place. Once you are able to communicate with them on the owner’s behalf, you need to get the following information:

• Debt. How much is owed? How much to bring the loan current?• Dates. What is scheduled? Hearings? Sale dates? Other?

This information is critical and can indicate two major things: 1. Is there the potential for a purchase based on the debt owed? 2. Is there enough time to close the deal?


CONTRACT AND CLOSEOnce it’s determined that a purchase is possible, you will need to engage the services of a closing agent - either a closing attorney or title office. You will need to provide the executed contract and information on the foreclosure proceedings - especially the upcoming dates and the contact information of the foreclosure attorney.

If you are new to executing contracts, it’s recommended that you consult with your closing attorney prior to signing on the dotted line with the seller.


Authorization to Release Information

Loan number: _____________________________________________________Home Owner Name(s): _____________________________________________ ________________________________________________________________Lender: __________________________________________________________

I/We hereby authorize you to release to [INSERT YOUR NAME] and representatives all information requested for the purpose of a loan transfer/negotiation, short sale and/or sales agreement. You may reproduce this document to acquire reference from more than one source.

Thank You.

________________________________________________________________Homeowner Name (print)

________________________________________________________________Signature Soc. Sec. #(last four) Date

________________________________________________________________Homeowner Name (print)

________________________________________________________________Signature Soc. Sec. #(last four) Date

[Consider adding a header or footer with your contact information including your name/business name, mailing address, email and phone number]


ONE ON ONE WITH SELLERS - USING THE

SELLER WORKSHEET TO GET THE INFO YOU NEED

In the section on Phone Scripts, we showed you how to make a good introduction, discover more about the seller, and qualify your prospect for further follow-up.

Now it’s time to continue the conversation...with the goal of getting all the information you need to analyze the deal - and ultimately negotiate the purchase of the property.

When talking to sellers, it’s easy to get off track and forget to get the most important information you need to qualify and fully analyze the deal.

In this module, we’ve provided a sample Seller Information Worksheet and identified the key info you need to get when talking to sellers.

IN THIS MODULE, YOU’LL LEARN:

• How to Fine Tune Your One-on-One Interactions• What Info You Need to Vet the Deal

You can customize the form we’ve included here to use in your business and use it with every contact you have with potential sellers.


ONE ON ONE WITH SELLERSWhen you begin to work directly with motivated sellers, it’s best to fine tune your communications to their situation. Motivated sellers are typically financially motivated - and being able to tap into that motivation and provide a viable solution can net incredible opportunities. And the bonus...you get to help someone rid themselves of a problem property (that becomes an investment opportunity for you!). It’s a win-win.

TALKING TO OWNERS OF VACANT PROPERTIES VS. PRE-FORECLOSURE SITUATIONSFirst, let’s take a look at the different situations faced by owners:

OWNERS OF VACANT PROPERTIESOwners of vacant properties are feeling the pain with every mortgage payment, insurance premium, and tax bill. Plus, vacant homes are at risk for vandalism, vagrancy and dilapidation. To top it all off, many insurance companies cancel policies because of the additional risks vacant homes pose.

All of this creates urgency for the owner of a vacant home. If the property has been a rental, the owner could be suffering from burnout of both time and money. If the owner is an absentee (meaning they live in a different town than the property’s locale), the hassles of long distance ownership could be the tipping point.

If the property is an estate - expect some extra leg work and hand holding. The key to the success of buying estate properties is discovering how many and who the heirs are. You want to carefully


consider properties with multiple heirs...navigating the needs of multiple sellers can be a minefield.

OWNERS IN PRE-FORECLOSURE As painful as it can be to own a vacant house, you’ll find that most owners of homes in pre-foreclosure can be even more motivated to sell. When the bank is on course to repossess the home, the owner is very likely to be on a short and more urgent timeline to find solutions.

The pressure is on for the pre-foreclosure owner - the process to repossess is marching forward and the owner may feel a sense of failure, anger, or even a sense of helplessness. Some owners may be ready to move on; others may have tried every avenue to save their property.

Gaining some understanding of the owner’s position can help you work through their concerns with the sale of the property and get the purchase over the finish line.

PINPOINT TIP

We recommend you check out the Phone Scripts and Buying Pre-foreclosure sections. They’ll give you even more insight into talking with and negotiating with the owners of vacant and pre-foreclosure homes.


OPENING THE DOOR TO THE “SELL YOUR HOUSE” CONVERSATIONWhen you’re talking to the owners of distressed properties - whether it’s the condition of the property or the finances, it’s important to remember that most people don’t understand the process of selling their house without a Realtor®. It’s up to you to walk them through what to expect.

WORKING WITH THE SELLERFrom initial contact to getting the property closed, the seller is relying on you to do what you say and see the transaction through to the end.

BUILDING TRUST WITH THE SELLER IS CRITICAL. You’ve got to remember, the seller is seeking an alternative solution. They chose not to rely on a real estate agent for any number of reasons. Your initial conversations should work to build trust with the seller. Listen carefully to determine the seller’s needs and lay out a series of next steps.

“Thank you for contacting me. Yes, I buy houses and I also work with business associates who are looking for specific types of homes for rentals and renovation projects. Tell me about your house and why you’d like to sell it. Once I know more, I can do a little homework to see how I can help (solve your problem). Then, I’d like to visit the property with your permission. After that, if it looks like something my associates or I can work with, I’ll present you with an offer. But the first thing we need to do is talk about what you need help with.”


BE CLEAR ABOUT WHAT YOU CAN AND CAN’T DOIt never pays to lead a seller to believe that you can pay more than realistic or that you can close on unrealistic timelines - especially when an owner is facing foreclosure. You may be their last hope. Once you’ve assessed their situation, it’s time to do your homework and determine the potential of the deal. Take in their information - what do they need, what is their timeline, what problem are they trying to solve? Use that information to set a foundation for moving forward.

“You say the house across the street sold for $100,000? I will certainly take that into consideration, but I wouldn’t want to promise that I can pay that. Every home is different - and I’d like learn more about yours, that way I can give you a fair offer. I’d like to see it as soon as possible. Are you up against any deadlines? When would be a good time? While I’m there, I’ll also check out the other homes in the area. This way I can get all the information I need to see how we can work together and get this taken care of.”

EDUCATE THE SELLERHelp them understand the process. Like every house, every seller is different. Some won’t care about how you’ll buy the house - they just want it to close so they can collect a check. Other sellers will want every detail. As you begin working with the seller, pay attention to their mindset. If they want details, give them details; if they don’t, don’t.


“So you’d like to understand exactly how this works? It’s pretty simple. I buy houses “as-is” and make the selling process very easy for you. First, I’ll visit the property and then I’ll do a market analysis based on the location and condition of the home. After that if everything looks workable, I can present you with an offer. Once you accept the offer, I’ll need access to the home for further inspection by either myself or my business associates. We map out a plan for repairs and from there, we can finalize the date to go to closing through a local closing attorney or title office. If everything goes as planned, most closings can happen within 30 days - and sometimes even less. But every house is different, so it could take more time or it could take less. Once we get started, I’ll know more.”

SAY WHAT YOU’LL DO AND DO WHAT YOU SAYThis further establishes trust and goes a long way toward getting the deal to closing. If you say you’ll call back, do so. If you have an appointment to see the home, get there early.

“Thank you for calling me about your house. I appreciate the opportunity to work with you to (solve the problem). I’ve had a chance to do a little market research and told you I would call you back. I’m interested in talking with you more and would like to see the house today. What time would work for you? I can be there in an hour or whatever time will work best for you.”


FOLLOW UP AFTER SHOWINGObviously, this is critical if you would like to pursue the purchase. But it is just as important if you find the house doesn’t fit your criteria. Not only is it the right thing to do, it further establishes your integrity and can lead to referrals.

“Thanks for letting me take a look around. I told you I would get back to you right away. After taking a look around, I don’t see anything that would prevent me from presenting you with an offer. In fact I have one drawn up already and would like to sit down with you to go over it. Once we have an agreement, I’ll get started with further inspections so we can work toward closing which shouldn’t take more than (X) days.”

It’s up to you as the knowledgeable professional to guide the seller through the process of selling their home in a non-traditional way. Taking the time and effort to build a good working relationship with the seller will pay off. Even if you don’t get the deal closed with the initial contact, the seller will remember you as someone who is helpful, easy to work with and a problem solver. Establish that kind of rapport and it’s likely they’ll call you back.


GETTING THE INFO YOU NEED TO DETERMINE THE DEALRegardless of a property owner’s motivation to sell, there’s critical info you will need. Using the Seller Info Worksheet, you can gather the key info you need to determine the property’s value, equity and the seller’s situation. While you don’t want to robotically quiz them, you do want to try to get as much information as you can. And once you have it, it needs to be verified!

Whether working with vacant or pre-foreclosure owners, you need to gather this basic information either in your initial conversation or in follow up contacts and/or property visits.

GET PROPERTY INFO ON THE STAKEHOLDERS

Find out who is on the deed, the best point of contact and the easiest way to connect. If the property is part of an estate, ask about heirs and their role in the settlement of the estate property.

“I’m happy to talk to you about possibly purchasing the house. Are you the owner? Who else is on the deed?” “So this is an estate home? I’m sorry for your loss but am happy to talk with you about your options. Are you the executor of the estate? Are there other heirs we will need to include in future discussions? (Multiple heirs can complicate negotiations and closings. Before committing, be sure that all heirs can be reached.) “What is the best way to reach you in the future?”


GET PROPERTY INFOYour conversation with a seller should be fluid and conversational. In the process, you want to get good property information including the property characteristics and condition. It’s very useful to ask about big ticket home repairs like roof, heating and air systems, and windows. As you are talking with the seller, review the Seller Info Sheet to make sure you get the details.

“Where is the home located? Yes, I know that area. Is your property a 3 bedroom, 2 bath? “What improvements have been completed lately?” “What repairs would you say the property needs? How are the roof, air conditioning and windows?”

ASK ABOUT THE MORTGAGE“Is there a mortgage to pay off when you sell?” is a great way to open up the conversation about the financial status of the property. If there’s no mortgage, there could be an opportunity for owner financing. If there is a mortgage and the seller will disclose an approximate balance, you can determine the equity in the property which can help you negotiate. And finally, if you get a ‘yes, there is a mortgage,” you need to know if it’s current. If the mortgage is behind, be sure to ask about deadlines.

“Is there a mortgage to pay off? Do you have a second mortgage? “Is the mortgage current?” “Has your lender scheduled a hearing or filed suit? Can you tell me the date of that?”


“Can you send me a copy of the notice you received?” (this info will tell you if there is time to negotiate a purchase before the foreclosure sale) “When did you put this mortgage on the home?”

ASK WHY THEY ARE SELLING AND WHENListen for important clues about the problems they need solved. What’s their motivation? Most likely you will have gathered that from your discussion but if not, just ask. And be sure to ask what their back up plans are if they don’t sell. It helps create urgency.

“It sounds like you want to sell the house. What would be the ideal time frame for you?” “What makes you want to sell the house instead of (mention an option)?” What will you do if you don’t sell it?”

ASK HOW MUCH THEY WANT FOR THE PROPERTY This is a great screening question. Many sellers (but not all) have an unrealistic view of the value of the property.

“What are you thinking you would like to get for the property?” “How did arrive at your asking price? Have you had an appraisal recently?”


“Have any houses on your street sold recently? Do you know how much?”

PULLING IT ALL TOGETHEROnce you have some of the most basic information on the property and the financials, you can determine if the property has potential. Determine a baseline market value then deduct the mortgage balance. This gives you a picture of their equity position and if there is any potential as an investment property. However, if you have a property that needs work or an owner with an unrealistic notion of the value, it’s incumbent on you to dig deeper to see if the property is a deal. Make an appointment for a property visit so you can discover more about the neighborhood, the home and the seller.

PINPOINT TIP

Be sure to review “Cheat Sheets for Running the Numbers.” You learn more about the critical information you need to vet your deals.

HOME SELLER INFORMATION Address ________________________________________

Date of 1st Contact___________________ Area __________________________________________

How did you find us?_________________

Names on Deed _________________________________________________________________________

Best Way to Contact You? (phone, email, other)

_______________________________________________________________________________________

THE PROPERTY House MH Condo/Other ________BD_____BA______Built_______SF______LotSz ___________________

Style_____________________ Foundation________Garage_______ Fenced Yard ___________________

Any Recent Improvements? ________________________________________________________________

Other Repairs Needed? ___________________________________________________________________

THE MOTIVATIONHow Soon & Why Selling? _________________________________________________________________

_______________________________________________________________________________________

Listed w/Realtor? ______Who?______________ How long? _________How Much? __________________

Back up plan if you do not sell? _____________________________________________________________

THE FINANCIALSIs there Mortgage?_____Is it Current?___________ Do You Know Mtg Balance? $ ____________________

How much are Payments? $ __________Does that include taxes/Insurance? _____HOA Fees? $ ____________

Date of Loan________ Lender__________________________Other: ______________________________

Asking Price______________Recent Appraisal? _______________________________________________

How did you determine asking price? ________________________________________________________

Was the Property a Rental? _____How Long? _______Monthly Rent? $_____________Current? ________

Anything Else for Sale? ____________________________________________________________________

FOR MY USEWhat is the Tax Value?_____________________ Zillow/other Online valuations? _____________________

Value based on Recent Comps?_____________________________________________________________

Once you determine a preliminary value on the property (after repairs), complete a profitability analysis. Use any of the formulas found in Cheat Sheets for Running the Numbers in the PinPoint Training Center. Follow up with your seller ASAP to schedule a property visit when warranted.

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