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The article below is from the LA Times and Professor Brent T. White is echoing my thoughts on upside down loans/mortgages.  If you are upside down on real estate you should consider walking away. Do not look at it emotionally… it needs to be a business decision.  He touches on the ego and moral issues that the lender uses but it is even easier than that to describe… when the loan was taken out the agreement was if the borrower did not make the payments the lender would foreclose on the house and trash your credit (and possibly pursue shortages depending on the state you live in).  But the reality is most lenders are not chasing foreclosure shortages because it does not make financial sense. So the deal was if you don’t pay they get the house and trash your credit and if you are down 50k, 100K, 250K the best deal you can take may be to let the house be foreclosed.

Big Legal Disclaimer: I’m not an attorney nor do I give financial advice, etc. Consult an attorney, accountant, psychic, OBGYN or anybody else you deem necessary to help you make the right decisions.

Enjoy,

Gerald Romine

Professor advises underwater homeowners to walk away from mortgages

Brent T. White, a University of Arizona law school professor, says that it’s in the homeowners’ best financial interest to stiff their lenders and that it’s not immoral to do so.

Reporting from Washington -

Go ahead. Break the chains. Stop paying on your mortgage if you owe more than the house is worth. And most important: Don’t feel guilty about it. Don’t think you’re doing something morally wrong.

That’s the incendiary core message of a new academic paper by Brent T. White, a University of Arizona law school professor, titled “Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis.”

White contends that far more of the estimated 15 million U.S. homeowners who are underwater on their mortgages should stiff their lenders and take a hike.

Doing so, he suggests, could save some of them hundreds of thousands of dollars that they “have no reasonable prospect of recouping” in the years ahead. Plus the penalties are nowhere near as painful or long-lasting as they might assume, he says.

“Homeowners should be walking away in droves,” White said. “But they aren’t. And it’s not because the financial costs of foreclosure outweigh the benefits.”

Sure, credit scores get whacked when you walk away, he acknowledges. But as long as you stay current with other creditors, “one can have a good credit rating again — meaning above 660 — within two years after a foreclosure.”

Better yet, homeowners can default “strategically”: Buy all the major items they’ll need for the next couple of years — a new car, even a new house — just before they pull the plug on their current mortgage lender.

“Most individuals should be able to plan in advance for a few years of limited credit,” White said, with minimal disruptions to their lifestyles.

What kind of law school professorial advice is this? Aren’t mortgages legal contracts? In so-called anti-deficiency states such as California and Arizona, mortgage lenders have limited or no legal rights to pursue defaulting homeowners’ assets beyond the house itself, White said. In other states, lenders may decide that it is not worth the legal expense to pursue walkaways, or consumers may be able to find flaws in the mortgage documents, disclosures or underwriting to challenge the original contract.

The main point, he said, is that too often people’s emotions get in the way of clear financial thinking about mortgages, turning them into what he calls “woodheads” — “individuals who choose not to act in their own self-interest.” Most owners are too worried about feelings of shame and embarrassment after a foreclosure, and ignore the powerful financial reasons for doing so.

Buttressing these emotions is a system that White labels “the social control of the housing crisis” — pressures and messages continually sent to consumers by the “social control agents,” namely banks, government and the media. The mantra that these agents — all the way up to President Obama — pound into owners’ heads, White said, is that “voluntarily defaulting on a mortgage is immoral.”

Yet there is an inherent imbalance in the borrower-lender relationship that makes this morality message unfair to consumers, White says: Banks set the rules during the housing boom, handing out home loans with no down payments, no income checks and inflated appraisals. Now that property values have dropped 20% to 50% in many areas, banks have been slow to modify troubled mortgages and reluctant to reduce principal debts.

Only when homeowners cut through the emotional fog and default strategically in large numbers, White argues, will this inequitable situation be seriously addressed.

How does White’s 52-page manifesto go over with mortgage lenders? Predictably, not well. Officials at Fannie Mae and Freddie Mac — investors who fund the bulk of all new mortgages in the country — disputed White’s characterization of how quickly after foreclosure a walkaway borrower can obtain a new loan. It’s not three years, they said, it’s a minimum of five years, absent extenuating circumstances such as medical or employment problems that caused the foreclosure.

“Borrowers who walk away from their mortgage obligations face serious consequences,” including severely depressed credit scores for extended periods, said Brian Faith of Fannie Mae.

In addition, he said, “there’s a moral dimension to this as homeowners who simply abandon their homes contribute to the destabilization of their neighborhood and community.”

The markets are coming back quickly and the statistics in my market show things are turning very quickly!  Areas that were tanking just 3-6 months ago have heated up and are not the fastest moving segments on the market.  Truly unbelievable.

While forecasting results is a guessing game the statistics don’t lie. Business Week’s article PENDING HOME SALES RISE FOR THIRD STRAIGHT MONTH is further proof that the markets are now coming back.

To summarize the article:

• Low interest rates are pushing sales
• First time homebuyers are active
• The Northeast is the hottest geographic region
• The only decrease in sales was in the South region
• “The market has already bottomed in some areas.”

What we are seeing in the markets is that a bottom is forming! This “floor” is likely to represent the bottom of staggeringly low levels and present a phenomenal opportunity to buy real estate at prices we are unlikely to see ever again.

Three Super Simplistic Steps For Success

1.      Start looking for houses.
You have to learn your market and there is no substitute for getting active and looking at houses. See what is available.

2.      Determine values.
Right now home values are all over the board and this can be very confusing.  As a buyer you want to focus on the best buys which are currently REO’s and pre-foreclosures (short sale investing).  To determine the best buys in the market start by looking at REO listings which should be the lowest priced properties for sale in the area and serve as a benchmark for the lowest comps you can find. You’ll want to buy at or below the recent sales of those homes.

3.      Line Up Your Money.
Even if you are flipping or wholesaling houses you may need to line up your conventional, private, or hard money.  If you’re looking to live in the house yourself get qualified with a lender. If you need private or hard money line it and be ready to go.

With those three steps in place you are ready to start evaluating deals and making offers.  If you are buying property as an investment make sure you are buying based on your CASH ON CASH RETURN. More investing knowledge can be found in “Real Estate Magic 101 - How To Get Rich In Real Estate Even If You’re Dead Broke!”

Author: Gerald Romine

About The Author:

Gerald Romine is a nationally recognized real estate expert that has been featured across North America sharing the stage with political leaders, film stars, and business leaders. Since 1989, Gerald has been involved with real estate as a real estate agent, broker, rehabber, investor, and builder and has been involved with everything from houses to apartments. For more information about Gerald’s products or services visit www.kickassrealestate.com

It’s been almost 10 years since I’ve gone to visit my Mother in Oregon so last week I decided to show up un-announced. My Mom is a hard German woman who shows very little emotion and this really surprised her in a good way.

While in Oregon I was able to visit what many call the 8th Wonder of the World - Crater Lake. It’s absolutely beautiful!

If you’d like to check out some amazing pictures they are posted in my Facebook account. Just search for Gerald Romine.

My Mother is a real estate broker and Klamath Falls was hit hard like most of the nation but right now foreclosures and REO’s are what’s hot and selling in today’s real estate market. In the week I was there she had a flurry of activity with multiple offers coming in and a rush of new activity. All good things for her and good signs for real estate investors.

And… I’m big on the opportunities for short sales and REO’s. Right now they are the hottest thing on the market (that will change over time) and you should be looking here for deals. I’ve got a huge resource site that is absolutely free at www.kickassshortsales.com that you should check out because it has more info there then you can find in most short sale courses.

By,

Gerald Romine

Should You Let A House Go To Foreclosure?

Last week I had lunch with a good friend of mine who is a successful real estate investor and in the last several years he’s bought, sold, flipped, rehabbed and rented countless houses.

But the times have changed and he now finds himself owning several houses that he does not want.

With the values dropping/correcting he owes more than the houses are worth plus he has negative cash flow. Let’s just say with all the houses he owes 500K more than the houses are worth.

Financially he’s doing very well and has plenty of cash. His credit score is in the 700’s.

There is no bailout for him nor should there be. Nobody forced him to do anything. Nobody expected values to drop so fast or hard. It is what it is.

He asked me what he should do and my answer may surprise you.

I told him to make a business decision and asked him the following question…

Would it be worth 500K to trash your credit?

The answer should be obvious.

The challenge for many is pride and ego. The truth is when the loans were taken out the agreement was if the loan was not paid the lender could foreclose and the borrower will lose the property. As much as I am against losing a home to foreclosure tough decisions must be based on an intelligent decision and not emotion.

The markets have changed. If you are carrying negative equity you should consider making the best business decision available and this may include letting a house go to foreclosure. You could literally owe 200K today and buy back the same house or one like it for 100K as a foreclosure or REO on the same street.

Donald Trump has had companies file for bankruptcy several times and even the Governor of Texas filed for bankruptcy while they were governor.

These are changing times and even though my friend is well off financially he has to decide if it is worth 500K or more to lose several houses to foreclosure and rebuild his credit. The alternative is to keep losing more and more money every month.

What would you do?

Please post a response in the blog below.

Author: Gerald Romine

A real estate investor buddy of mine is doing a short sale where Countrywide has a 30K second and the property is overfinanced. The offer to Countrywide was 3K which is a very generous offer for a junk second that will be wiped off at the upcoming foreclosure sale.

Their response is unbelievable. “Insufficient Offer.”

But it gets better. Countrywide said they would prefer to write off the entire amount than take 3K on a short sale!

It makes no sense and it is no wonder the financial institutions of America are begging for handouts.

My friend called me up and asked what I thought. My answer was as soon as they sait they wanted to write off the entir amount I would have said “DEAL! I’m amending my offer to nothing for you and will submit it right away.”

I’m not joking.

Aside from changing the offer to zero I would remain calm and follow up as the foreclosure date approaches because the closer to sale date the more willing the lenders.

Short sales continue to be VERY LUCRATIVE.

The 4 keys to short sale success:

1. Followup.
2. Be non chalauent with an almost “who cares” attitude.
3. Be working several short sale deals at a time.
4. Play the short sale game.

If you need more information on short sales check out a totally free resource at www.kickassshortsales.com.

Author: Gerald Romine

Normally I am the bearer of good news but today is not one of those days.

The hard cold reality is that the economy sucks. 

People are losing their houses to foreclosure. Companies are laying off people. Banks are shutting their doors. A new President is coming which will bring in even more change and uncertaintity.

In short things are rough for most people.

But here’s where we have to draw the line in the sand and YOU need to decide which side of the line you’re gonig to be on. The dumb and broke side or the smart real estate investor and getting richer side.

My question to you: Are you going to crawl up into the fetal position and cry like a baby and whine with everyone else over the economy? 

Most people will and statistically that includes you. Sorry to be so blunt but it’s decision time and you’re either going to step up or get rolled over.

Me? I’ve decided I’m not going to participate in the bad economy! Sorry… it’s simply not for me. 

So here’s 2 things I want you to do right now. (Take 15 WHOLE minutes to be by yourself).

1. Ask yourself… Am I satisfied with where I am going in my life? (if yes you are done)
2. Decide what you are going to do differently to get where you want to go in life.

I know… sounds simple but the sad truth is the dumb and broke people will do nothing and stay dumb and broke. They don’t have to buy anything, go anywhere, or do anything another than think and take fifiteen measely minutes of their time to participate in something that could be life changing. 

Pick your side of the line.

There’s your short and direct message from me to you. I’m hoping your in the 5% that take action.

Author: Gerald Romine

How To Prepare Short Sale Packages

Lenders are freaking out and stressing out with short sales because of the current market conditions. In fact, there has been a major paradigm shift and lenders are accepting ridiculously low short sale bids and not even balking at paying real estate commissions.

The key is short sale contracts/offers must be packaged and presented to the lender/investor/loss mitigator/decision maker in the right format with all of the right documents to streamline and speedline the process.

To accomplish this give lenders a short sale package that does their job for them and makes it easy to sign off on your package without having to do research (www.kickassrealestatesoftware.com prepares perfect packages in 5 minutes instead of 5 hours).   All you want the lender to do is review your short sale package, order the BPO, and declare the deal a go!

The next step is to find a professional title company or closing attorney that specializes in short sale closings because they are worth their weight in gold.

How Much To Offer On A Short Sale

Because nobody knows how much further prices are going to fall it makes sense to make VERY LOW short sale offers to the lenders and it is not uncommon for lenders to accept 30% of the defaulted loan balance.

Let’s be clear… this is an aggressive short sale offer and MOST will be turned down but when you get one super short sale offer accepted it makes up for all the declines. You’re looking for killer deals and doing just a few per year will make you a wealthy real estate investor.

Take Action. Right now there are PHENOMENAL DEALS available in short sales and REO’s. With the glut of inventory you can make offers so low you will feel ‘weird’ until you experience the joy of success.

Make it happen then tell me about your success.

Author: Gerald Romine

I’m against the $85,000,000,000.00 bailout of AIG.  In fact I am against ANY bailout at all but will admit that if you can’t beat them join ‘em and I will as a real estate investor find ways to profit from what I’m calling the “GREAT Socialistic Bailout.”

So to bring a point home let me share an alternative bailout program that makes more sense.

---

Original Author Unknown:

Instead, I’m in favor of giving $85,000,000,000 to America in a We Deserve It Dividend.

To make the math simple, let’s assume there are 200,000,000 bonafide U.S. Citizens 18+.

Our population is about 301,000,000 +/- counting every man, woman and child. So 200,000,000 might be a fair stab at adults 18 and up..

So divide 200 million adults 18+  into $85 billion that equals $425,000.00.

My plan is to give $425,000 to every person 18+ as a We Deserve It Dividend.

Of course, it would NOT be tax free.  So let’s assume a tax rate of 30%.

Every individual 18+ has to pay $127,500.00 in taxes.  That sends $25,500,000,000 right back to Uncle Sam.

But it means that every adult 18+ has $297,500.00 in their pocket.  A husband and wife has $595,000.00.

What would you do with $297,500.00 to $595,000.00 in your family?

• Pay off your mortgage - housing crisis solved.
• Repay college loans - what a great boost to new grads
• Put away money for college - it’ll be there
• Save in a bank - create money to loan to entrepreneurs.
• Buy a new car - create jobs
• Invest in the market - capital drives growth
• Pay for your parent’s medical insurance - health care improves
• Enable Deadbeat Dads to come clean - or else

Remember this is for every adult U S Citizen 18+  including the folks who lost their jobs at Lehman Brothers and every other company that is cutting back. And of course, for those serving in our Armed Forces.

If we’re going to re-distribute wealth let’s really do it…instead of trickling out a puny $1000.00 ( “vote buy” ) economic incentive that is being proposed by one of our candidates for President.

If we’re going to do an $85 billion bailout, let’s bail out every adult U S Citizen 18+!

As for AIG - liquidate it.  Sell off its parts.  Let American General go back to being American General.  Sell off the real estate. Let the private sector bargain hunters cut it up and clean it up.

Here’s my rationale. We deserve it and AIG doesn’t.

Sure it’s a crazy idea that can “never work.”

But can you imagine the Coast-To-Coast Block Party!

How do you spell Economic Boom?

I trust my fellow adult Americans to know how to use the $85 Billion We Deserve It Dividend more than I do the geniuses at AIG or in Washington DC .

And remember, The “We Deserve It Dividend” plan only really costs $59.5 Billion because $25.5 Billion is returned instantly in taxes to Uncle Sam.

---

Now Go Buy A House,

Gerald Romine

Note: I did not write the above article and the math error has been left intact.

The worst is not over and if you think the real estate markets are in bad shape now it’s going to get a lot worse! Bad news for some and good news for investors that understand how to capitalize on the ever changing real estate markets.

Foreclosure rates are continuing at record levels and there is no end in site. Investors and homeowners of financial means have been hanging on and clinging to the hope and dream that things will soon turn around and get better. Many have been hanging on because they are financially sound, they are too proud to lose a home to foreclosure, or they were dreaming that somehow things would work out. They are waking up to reality in a cold sweat!

The homeowners and investors that have been hanging on and bleeding to death financially by supporting upside down houses are quickly coming to the conclusion that it is financially more prudent to lose a house to foreclosure because there is no point in riding the titanic to the bottom of the sea. If you have negative equity of 50K, 100K, or 250K it does not make sense to make payments on the loan when it would take years and years to recapture the losses by hanging on and hoping the prices return. Foreclosure has become a financial decision that now makes sense.

Walking away from an upside down house may ruin your credit now but many are discovering it is worth it to be rid of the negative equity that would lock them into losses for years! Because of this realization people are walking away from portfolios of houses that will be lost to foreclosure. The good news for investors is we can buy foreclosures and REOs for pennies on the dollar.

The next major setback for the market is effective October 1^st the Housing Act prohibits seller-assisted financing (presumably this includes the Nehemiah program) and this will lock millions of would be homeowners out of the market and add steam to the housing melt down. How many buyers do you know that have 10% available for a down payment?

The good news? Seller financing will return in force. Banks will be forced to accept lower offers on short sales and REO’s as a matter of necessity and many will carry their own financing. Investors will dominate because they have the means, skills, and ability to buy properties.

In fact, it is already happening and there are greater opportunities now in this emerging market that investors can exploit. In many areas it is now possible to buy newer houses at price levels not seen since the 1990’s. Lenders are negotiating as low as 30% of the defaulted debt amounts. Houses are selling for amounts that provide great cash flow for rental properties.

The best part about the so called housing crash is that it has all been manufactured and is not a real reflection of the market. Bold words… maybe. But if you look at the situation intelligently you can see that there is no shortage of people who want to buy houses. What has created the ‘housing crash’ is the money supply has been turned off which prevents buyers from getting loans and buying houses.

It’s just like a water faucet and the availability of money has been turned off and a draught has ensued. And like a water faucet the availability of money can be turned on at any time and when that happens there will be a rush of buyers to take advantage of the lower prices and the rebound will be in full swing. Imagine the popularity of a new President that ‘turned on’ the money supply and rescued the housing markets. It could happen that fast.

With the changing times there will be a changing of wealth as there has always been throughout history.  While most become victims of choice a few will become wealthy by taking action and seizing  the opportunity.

Author: Gerald Romine

A question I’m commonly asked is what effect does a short sale, deed in lieu of foreclosure, or foreclosure have on my credit and when can I buy another house?

Believe it or not a short sale, deed in lieu of foreclosure, and foreclosure all have roughly the same impact on your credit score. In other words your credit score is going to be hammered.

Most new loans are resold to Fannie Mae and Freddie Mac and beginning August 1 Fannie Mae generally will not buy loans to borrowers involved in a short sale in the last two years. A deed in lieu of foreclosure is 4 years. A foreclosure is 5 years.

Although your credit score will be treated the same your ability to buy a house will vary greatly since most lenders sell their loans to Fannie Mae and Freddie Mac.

Why Do Short Sales Get The Best Treatment

Short sales are the preferential loss to lenders because it saves them the trouble of having to sell the house!

This is POWERFUL information because it gives owners an incentive to work with you for completing a short sale because they have a better chance of buying a home in two years instead of 5 years if the home is foreclosed on! And when you can complete short sale packages in minutes negotiating short sales because easy and routine.

Author: Gerald Romine

The news is filled with doom and gloom about real estate, real estate investing, and the economy.  Home values dropping. Foreclosures at record highs. Mortgage rate is up, etc.

If you read the news don’t believe the hype because contrary to popular belief we are in transition to a new economy, and you must choose whether to make the transition or to stand still. People are making money, big money right now.

Just last week a good friend of mine made over 30K on one little house deal. Here are his steps. 1) Bought REO. 2) Blow and Go (quick rehab normally 10K or less spent). 3) sell best property a little lower than comps(about 10-15K).  It’s quick and easy and the biggest catch is you might have to hold the property 90 days to meet lender’s seasoning requirements.

How To Make Money With Bad News In The Media

When you see a short article that serves your purpose (like the one below) send it to the lender with your short sale or REO offer.  Simply highlight the most important parts and let the article speak volumes for you.

In this case one paragraph talks about houses losing 25% of their value and that goes a long way to justify a low offer!

Author: Gerald Romine

Banks have a real big ugly problem because foreclosures are at record highs, property values are falling, there is a shortage of real buyers, and once they foreclose on a property it becomes there dead asset. What’s a bank to do???

When the market was booming banks scoffed at the idea of selling properties at a discount through foreclosures or REO’s. Many banks laid off most of the loss mitigation staff because they had grown fat and lazy with the market boom. But oh how the times have changed.

Short sales are now hotter than ever and I’m going to let you in on a dirty little short sale secret. Sometimes a bank can do a shortsale and sometimes they can’t . You see… it all depends on who the “investor” is on the loan, if it is tied to a security, and a few other important behind the scene facts most investors are never privy too.

To keep it simple just understand that a bank could have two houses side by side with the exact same loan balances and with one house they can short sale and with the other house their hands are tied and they can do little or nothing other than foreclose on the house.

Does that mean you should not pursue short sales? No! It means you should understand that the “bank” is not always calling the shots. Personally, I love short sales because you can get some TREMENDOUS BARGAINS… But today I’m going to focus on REO’s because not only can you get phenomenal deals they can be quick and easy too!

ANALYZING and MAKING OFFERS On REO PROPERTIES LIKE A PRO

Whether you are buying a house to live in, to hold as an investment, or to flip for a quick profit, knowing your profit BEFORE your offer is the key to making a great deal! As easy as this sounds most investors do not take the time to “run the numbers” on a property before making an offer and in today’s market it has never been more important because with the changing markets you could go into a NEGATIVE EQUITY position if you do not buy right.

Bottom line is you have to run the numbers and know your profits before you even make an offer.

The Art Of Presenting The Offer

Let’s face it, nobody likes to lose money!

While it is true that the banks are writing off losses faster than the ink can dry that does not mean the bank is going to just give you an REO property for pennies on the dollar. The key to your REO success is presenting the offer in such a manner that the bank sees your offer as a fair and reasonable solution to their problem of holding a non performing asset – AKA a vacant house that is bleeding them dry.

Sounds simple enough, but presenting the right offer to the bank is not nearly as easy as you think. The key is to do the bank’s job for them and put together “the right” package presented in the right manner with the right words so it is easy for the bank to JUSTIFY accepting your offer.

Basically, you are doing the banks job of justifying your offer for them. When you make the REO departments job easy to say yes then it goes without explanation that your offers will be accepted faster.

Fortunately there is the Ultimate Real Estate Investing System available where it takes you just 5 short minutes to analyze and put together near perfect REO offers that are worded and justified so the bank can easily say yes and accept your offers!

Here’s what happened when John Pierro used the Ultimate Real Estate Investing System to make an REO Offer:

“My Very First Offer Using UREI”

“I can describe my very first offer I made on an 2 Family REO property using the UREI software. The offer was accepted on the first try because of the Justification that UREI explains for you. I was actually expecting to receive a counter offer from the bank, and was prepared to go up an additional 10K. To my surprise the offer was accepted at $ 204,343.00. The ARV(true property value) on this property is $ 380,000. I spoke with the REO agent afterwards and she was blown away, and said she had never see an offer quite like the one I provided, she (REO AGENT) went on to say it made her job a whole lot easier, because the bank called her, and ask her opinion and she was able to justify it by simply confirming what was written on the offer as the bank rep followed along.” John Pierrro - Ronkonkoma, New York

The Advantage of REO’s Over Short Sales

When attempting a short sale the cooperation of the lender and property owner are required to complete the short sale. The bank does not own the property and the only power they really have is to foreclosure on the note (which takes time) or to negotiate a short sale or other workout program. In short the bank may want to work something out but because the bank is not the property owner they have limited options.

Buying REO properties can be much easier because the bank is the owner and they alone make the decisions to sell the house. Once a property becomes an REO the bank now becomes responsible for property upkeep, HOA dues, utilities to have the property show ready, property insurance, etc. Once the property becomes an REO the bank has real property owner expenses and for most banks the only option is to sell the property. And since banks make their money by creating and servicing loans they want/need to get rid of REO’s fast so they can be in the loan making business and not have the expenses, risks, and liabilities of vacant houses. REO properties are prime for major SWEET deals!

Not since the 1980’s have we seen REO opportunities like we have in today’s market. So long as the foreclosure rates are high the REO opportunities will be plentiful. For an REO buyer the part is we are in an election year and much of the real banking fiasco is being swept under the rug as politicians battle for the presidency and control of the house and senate. This translates to the banking fiasco not being answered anytime soon and no end in sight for REO Investors to make extreme deals and profits.

The REO Investing System

The Ultimate Real Estate Investing System(UREI) is the most complete real estate investing system ever created and includes a NEW REO Module. Go here for more information on REO’s and UREI.

Note: The New REO Package has just been released and is not shown in the above link… but is part of the system.

EXISTING UREI SYSTEM OWNERS can request the NEW REO MODULE be uploaded to their account free of charge by completing a support ticket request for the REO PACKAGE for Existing UREI Users.

Author: Gerald Romine

When I first heard the news that the FHA waived the 90 day seasoning rule I thought it was cause for celebration because right now approximately 90% of the buyer loans are reported to be FHA loans. Dropping the 90 day seasoning requirement would be huge for flippers and the market in general.

Say it Ain’t So Joe!

The government who thinks they know more than anybody else put the 90 day seasoning requirement in place for FHA Loans because they thought this would deter flipping schemes. Chalk this up as another government screw up.

Seasoning had nothing to do with “flipping” schemes because the value of a property is determined by the property and not the time it has been owned. If an investor buys a 100K property for 50K and wants to sell it the next day for 100K what’s the problem. Definitely not the seasoning or time the property was owned.

The real problem has been fraudulent appraisals. After all, it is the appraiser setting the value for the new loan. The problem is obvious to anyone of intelligence… which by default rules out the government.

Check The New Waiver From HUD For Yourself

Who Really Benefits?

The lenders. Big surprise right? The bottom line is the lenders are now able to sell their REO’s that were acquired by foreclosure to FHA buyers without having any seasoning requirements. Which brings us back to the government screwing things up again. Funny how the lenders can quick turn a property but you and I cannot buy and sell a property with an FHA loan unless it is seasoned for 90 days.

What About Investors?

No change. You still can’t buy and sell a property to an FHA Buyer unless you meet the seasoning requirements.

Author: Gerald Romine

If you are already actively buying and selling houses in the current market consider this message an update of what you are already experiencing in the market.

If you are NOT currently an active real estate investor you will find this message helpful to move you from thinking about taking action to improve your income and life…to actually taking action to do so.

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First, I want to start off with a WARNING:

This is a warning that you could easily be locked out of possibly the biggest real estate buying opportunity ever due to sheer ignorance. The truth hurts and before you discredit those harsh words realize I am not trying to sell you anything.

Have the markets changed? Definitely.

Is it harder to get financing on properties? Absolutely.

Are investors making money? Yes… and lots of it. Are you???

Between my involvement in the market and the feedback I get from successful investors using the Ultimate Real Estate Investing System I have an understanding of what’s really happening in the markets like no other.

Now, I want to tell you about what’s really working in the real estate markets.

1) Short Sales: With record foreclosures and REO properties backing up the lenders are seeing the need to play ball and move short sales whenever possible. Make no mistake that short sales are a REAL opportunity and unbelievable deals are being done. Understand that some lenders are easy to work with and other lenders are nearly impossible. UREI users have a distinct advantage because it takes less than 5 minutes to prepare complete short sale packages and if you are in the short sale game be sure to have an efficient system.

Note: UREI users are even getting short sales accepted on properties that are current on the payments.

2) Subject To: A VERY successful strategy in today’s market is to find a price range of a properties that will cash flow as rental property then go after that range with offers to take over the existing financing.

Example: A 3/2 in Phoenix may rent for $1000 per month. Searching the MLS I found 67 homes in the city of Phoenix that are 3 bedrooms and 2 baths and have 1000 square feet or more with a price that is under $90,000. The lowest priced property is $37,500! The second home is $45,500 and is an REO offering a $1000 bonus to the buyer’s agent.

Let’s look at the possible numbers for a house with a $90,000 loan. If the loan was a 30 year fixed at 6.5% the monthly principle and interest payment would be $569. Add another $200 for taxes and insurance and the PITI would be $769. If the property rents for $1000 per month the cash flow after reasonable expenses would be positive and let’s assume $100 per month. Not bad for a nothing down deal and taking over the payments.

Huge opportunities abound and subject to’s do not require you to get new loans or qualify for financing.

3) REOs: I can’t say enough about the opportunities to buy REO properties. Banks are leading the pack with price reductions and the opportunities to make once in a lifetime deals are everywhere.

WHY IS THIS SO IMPORTANT?

For many, for a growing number of would be real estate investors, the news about a bad economy is keeping them out of the market and stopping them from what may prove to be the biggest opportunity and fastest way to wealth ever presented through real estate!

The three types of investing outlined above can be the solution to negative developments and news in the real estate industry that we are constantly bombarded with by American TV and media.

It can permit profitable focus on small niches or sub-niches of the real estate market.

I’ve put hundreds of real estate investors on this fast track, one way or another, and I’m on top of the markets daily and aware of the latest developments.

You may think real estate success is beyond you in the current market but you may change your mind if you learn to focus on what’s really working and ignore all of the media noise. And if you have any thoughts of actually building a thriving real estate investing business that can secure your financial future now is the time to tune in and get involved.

Author: Gerald Romine

Note: Your comments are encouraged.

Why are bankruptcy’s so hot?

The truth is most people hear bankruptcy and because they do not understand much about the process they give up thinking it is too difficult or that they need a lot more knowledge to pursue bankruptcy investing. That’s BIG Mistake #1.

The second big mistake is people think that a bankruptcy real estate investor deal is a longshot deal because you have deal with the BK court, petition for releases, etc. While that can be true that IS NOT what Mark and Caryn do with BK’s!

Mark and Caryn specialize in Bankruptcy Properties that have just been released from bankruptcy and when you understand why they specialize it will make perfect sense that you do the same.

Here’s What’s Critical To Understand

When you do what Mark and Caryn do you are targeting specific properties that have been released from the bankruptcy and now the seller/owner is under the gun to get things done. Many of the properties will be lost to foreclosure in days or weeks and at this point the seller recognizes the bankruptcy game is over and they are either going to get something or nothing… but they do not have time to hold out and stall or they get the big goose egg.

Here’s The Best Part

This segment of bankruptcy property has virtually no competition! Think about it and it is easy to understand why. Just start asking the investors you know how many of them have bought a bankruptcy property and you’ll quickly discover it is a rarity. Not because it is hard but because virtually nobody understands what to do and how to do it.

So do it NOW!

Do yourself a favor and watch this video for the education. You’ll be glad you did.

Bankruptcy Secrets Webinar.

Author: Gerald Romine

I could not resist the urge to reply to a real estate agent that thought foreclosures and short sales would be the death of the real estate market and went on to beg everybody to vote for the President that would fix the mortgage mess. Just another example of somebody with a victim mentality wanting somebody else to come to the rescue.

Here’s my unedited response:

You’ve got the wrong approach there my friend. Short sales and foreclosures are not the death of real estate markets they are a result of the current real estate market.

The fact is if buyers must have 100% financing to get a loan then MAYBE they shouldn’t be buying! Here’s a revolutionary idea… how about if people started spending less than they make and saving money so they would have a down payment, rainy day stash, etc.

I get that bank financing is hard to come by for most buyers but where one door closes another opens. I have properties I’d like to sell but it is better to hold them now and be in the buying mode looking for deals.

And one does not need bank financing to buy properties. Alternatives include cash, subject to, private money, hard money, and owner terms.

As an agent a LONG time ago I remember simultaneous note purchases and this is still a possibility for owners and agents if they get creative. Have you ever carried a real estate commission in the form of a note?

Wake up, this is nothing new and some of us have been there before and could tell you some real war stories about 23% interest and banks offering financing like it was “you name your terms.”

Best thing for the market is if the government stays out of it and it is left to correct itself. And PLEASE, what could the President do to fix this mortgage mess? Throw more taxpayer money at it?

Gerald Romine

Today I had to be in the bankruptcy court because a seller wrongly included a property that was not longer theirs in a bankruptcy filing as a way to stay in the house payment free. A real sleazy thing to do.

So we show up to petition the court for a release and what a surprise, the seller doesn’t show up and the judge releases the stay per our request.

This is one example where the former owner was doing something very wrong… especially considering that they were hours from losing the home to foreclosure when they took out a private money loan in the first place.

That aside, there can be legitimate uses for bankruptcy and many real estate investors have decided that bankruptcy was the right tool for them to start over after having made some bad investment decisions.

How To Establish Credit After A Bankruptcy

1. 1. Apply for a secured credit card. Forget the other advice because this will save you time and frustration.
2. 2. Charge everything you can on the secured credit card without going over the limit. Pay the card off every month.
3. 3. Open a savings account and set aside a certain amount into the account every month. Don’t touch this money… just let it grow.
4. 4. Check out www.annualcreditreport.com. You’re able to get a free credit report but make sure you agree to see the report for 30 days or you may not be able to access the report later.
5. 5. Find and dispute all negative reports online. State reasons and be sure to add personal statements whenever possible. Repeat every 20 days. Repeat challenges every 20 days!
6. 6. Repeat steps 4 and 5 every 3 months until you have the desired results.
7. 7. Simple as this sounds be sure to PAY your accounts on time.

Author: Gerald Romine

Gerald Romine’s Kick Ass Training Call For Real Estate Investors. The Easy Way To Profit With Real Estate Bankruptcy Join us for a Webinar on May 14th

Frustrated with how much you’re not making as a real estate investor? Tired of trying to get a deal from the foreclosure list? Wishing you could market to sellers who are unknown by other investors? That’s exactly what Mark Klee & Caryn McKinney discovered in the bankruptcy niche market. They’ve made a fortune in real estate investing through bankruptcies and you’re not going to want to miss this ONE time event where I bring in Mark and Caryn to our training call to show you how to take advantage of Bankruptcy Profits!. Wednesday May 14, 2008 Eastern: (9:00-10:30 PM) Central: (800-9:30 PM) Pacific: (6:00-7:30PM) Reserve your Webinar seat now at: Kick Ass Real Estate Bankruptcy Webinar With Gerald Romine, Mark Klee & Caryn McKinney

IndyMac bank has adopted a new policy of charging $300 for real estate
investors to submit a short sale. This is absolutely insane for Indymac bank or
any lender to expect an investor to flush $300 down the toilet.

My conversation would be something like… “Let me get this straight… you want
me to pay you $300 for the privilege of you saying no and taking my $300. Do I
look like and idiot? Here’s something for you to think about. Right now I’m
holding the deed on the property in escrow pending our negotiations on a short
sale. How about if you pay me to release the deed to you won’t have to wait 3
months to file foreclosure, 3 months for the foreclosure process, miss at least
6 months of payments, and hope the borrower does not file bankruptcy which
delays your losses indefinitely all while the value of your security is dropping
like a rock. Did you want to review my short sale package or play or watch the
values drop on your security?”

Check out my video real estate tip for more information.

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For as long as I can remember I’ve wanted to go skydiving. Why? For the same reason people climb mountains… because the opportunity is there! The thrill of freefalling from 12,000 feet at 120 MPH and then floating down to earth just has an undeniable appeal for the adventurer in me.

Today would be the day my skydiving dream came true.

When we arrived at the Skydiving Hanger in Coolidge, Arizona, there was an old Cessna 182 (a tiny plane designed to seat 4 people at the most) sitting in front of the hanger. The engine cover was off and it was undergoing some kind of mechanical repair. Obviously, that wouldn’t (couldn’t!) be our plane. We wondered aloud what type of plane we’d be jumping from today.

Our wonderful experience was scheduled for 9:00 AM, and, from what we could tell, the jump crew was in a state of recovery from a fun night before. It must have been a blast — the pilot did not arrive until 11:00 AM, and the state of the jumpmaster’s eyes told us he too had a long and interesting night.

Before we could jump, we had to watch a skydiving video. It details all the disclaimers that have to be signed. The bottom line of the disclaimers: there could be a malfunction with the plane, parachute, instructor, or act of God and you could die.

I remarked to Denny, an attorney, that their insurance must be very expensive. He nodded in agreement. And then I noticed on the title of the disclaimer that the company is “uninsured.” Huh. Interesting. Maybe I’m crazy, but none if this mattered. Why? Because if you go skydiving you’re nuts if you don’t realize that death is a possibility (even though statistics tell us driving a car is far more dangerous).

While waiting for the pilot to arrive, we filled the time. We talked about real estate investing and then Denny and I found a bench press and did a quick chest workout. Finally the pilot arrived and it was time for the first jump of the day.

I quickly volunteered to jump first. When the jumpmaster discovered I was an “Adrenaline Junkie” he asked me if I wanted to “Drive the Lamborghini” today. Sounded like fun to me! Fast cars are great! I quickly agreed without really understanding what I was agreeing to. Turns out the “Lamborghini” is a smaller, more maneuverable parachute. You come in at a (much) higher speed because there is less drag created by a small parachute.

Most people wear a jumpsuit, but it was over 100 degrees and I chose to wear my street clothes. Soon it was time to board the skydiving plane. Guess what? It was the little Cessna 182 that was now back together. In fact, much of the passenger area of the plane was now literally held together by duck tape! Great confidence-builder!

I jumped into the plane along with the pilot, cameraman, and jump instructor. After a 15-minute climb, we were ready to jump. The surrounding air temperature was a comfortable 60 degrees. The time had come. With a few butterflies in my stomach, I bravely stuck my feet out the door and onto a small metal step. A quick count of, “1-2-3,” and the jumpmaster and I were in a freefall 12,000 feet from the earth below.

We fell forward, positioned ourselves with bellies toward the ground, and were soon traveling downward at 120 MPH. Supposedly the freefall lasts about 50 seconds, but it goes by in the blink of an eye. Finally, the chute opened and I was given the steering controls to the Lamborghini-style parachute. I steered for a few hard turns left, right, and then made a pretty tight corkscrew. As the ride neared the end the jumpmaster took the controls for the landing.

Landings can be dangerous if you don’t slide correctly. You could easily break a leg or ankle. It is tricky to coordinate if you’re coming down at a high rate of speed and you need to quickly lift your legs up, then set your feet down to slide to a stop. Our approach to the ground was fast, and luckily, our landing smooth.

My first skydiving ride took only about five minutes but is an experience I’ll always remember!

So what did I think of my experience? Well, it was not what I expected. I had been looking for an adrenaline rush and instead had a very peaceful experience. An experience I enjoyed immensely and will do again and again. However, I do think I’ll get that adrenaline rush when I finally make a solo jump and have total control and responsibility for the entire skydiving experience.

But really, my biggest and most rewarding triumph of the day was finally making one of my long-held dreams come true.

I’ve had this dream for years and it was finally realized on a random Thursday when I simply decided to take action and make it happen. What did this dream cost? A grand total of $237, with $148 for the skydiving and $89 for the pictures. It’s hard to believe that I waited years before making a $237 dream come true. Lesson: Take action today to make your dreams come true.

I shared this exhilarating skydiving experience with my friends Denny and Ryu. They have my admiration because they came for the experience of venturing outside their comfort zone. (Additionally, Denny is truly terrified of small planes). Ryu had a great skydiving experience and his landing was perfect. He landed like a butterfly, or as Denny put it, “more like a princess.” Denny provided the real entertainment of the day because during his super-fast landing he “tore it up” and left a rut in his wake!

But What Does Skydiving Have to Do With Real Estate?

Everything, if you let it. Think of the possibilities. We all went skydiving and spent the extra $89 to get pictures and a DVD that we can use in our future marketing. With these pictures I’ll be able to put together an outstanding letter campaign that will generate seller leads.

Five Steps to a Successful Marketing Letter

1. Picture - Normally at the top left and designed to get the reader’s attention. Crazy non-standard pictures are great. My skydiving picture certainly qualifies!
2. Headline - The headline is critical to your letter. If your headline does not suck them into your letter it will likely be thrown away.
3. Problem - State or define a problem for customer. For example, their need to sell their house.
4. Agitate - Now describe the problem in detail to get the customer worked up and mad about their problem.
5. Solve - You solve their problem! The solution is your product or services.

Let’s do some brainstorming. Here’s a few headlines off the top of my head that could go along with the skydiving picture in a marketing letter:

For foreclosures:

• Doing nothing about your foreclosure is like skydiving without a parachute! Let me show you how to…
• Warning: anybody that will jump out of a perfectly good airplane is the type of person you should have work with idiotic banks to stop your foreclosure.
• Are you in a financial freefall? Do you need someone with a different approach?
• Are you in a financial freefall? Tell me when to pull the chute!
• Stop foreclosures like a skydiver without a parachute!
• I’ll jump all over your foreclosure!
• I’ll be on your bank like a skydiver without a chute!
• Warning: sometimes situations call for drastic approaches. I’m coming in to stop a foreclosure.

Follow up foreclosure letter:

• I’m looking for you, but it ain’t easy. Will you call me…

For houses:

• Yes, I’m crazy & I want to buy your house!
• I noticed your house and want to make you an offer!
• I’m looking for houses to buy!

You get the idea. Your body copy under the headline and picture builds on your headline. Suddenly you have a story the seller will remember and will actually read. Isn’t this more exciting than a marketing letter or ad that simply says, “I Buy Houses?”

Along with my skydiving-themed letter I’ll create a 3-step mailing campaign and I’ll bet prospects will remember my letters and know I buy houses. That’s marketing. Also in my letter I can introduce other themes: my Marine Corps background, systematic approach to problems, never take no for an answer, no man left behind, and more.

No matter what you want to achieve in your life, it starts with action. Making progress and moving towards your objective happens only when you make up your mind that you are going to do it come hell or high water.

Author: Gerald Romine

Buying properties in pre-foreclosure can be the most profitable segment of a real estate entrepreneur’s business! Unfortunately, it is also the most misunderstood. Hopefully, this article will shed some much-needed light on pre-foreclosures and how and why you should become involved.

How does the foreclosure process work? When a person buys a house, they normally have a small down payment and obtain a loan from a bank or mortgage broker for the balance of the purchase price. This loan is secured by the property in the form of a mortgage or deed of trust. If the lender does not receive their payments, they may file foreclosure to recover their debt.

The foreclosure process allows the lender to foreclose on any liens or encumbrances in order to take the property and become the legal owner of record. This allows the lender to resell the property and recover the original loan amount, plus expenses associated with the foreclosure. The foreclosure process can be lengthy depending on the state, but up until the public auction, the homeowner owns the property and has several options available to avoid it.

It’s important to realize when talking about pre-foreclosures, we are talking about acquiring the property any time before the public auction sale. The sooner you contact a homeowner in pre-foreclosure, the more time you have to structure a deal and purchase the property yourself.

A common misconception is that people buying homes in foreclosure are taking advantage of another person’s misfortune. This is simply not true. The lender made a loan in good faith and the borrower agreed to repay the loan. If the borrower does not make the required payments, they have broken the agreement and the lender must protect their financial interests. They may foreclose on the property as agreed to by all parties when the loan was originally made. Any time there is a foreclosure, the borrower has broken the terms of the agreement, and your intervention solves a problem the homeowner created.

When facing foreclosure, many homeowners bury their heads in the sand, hoping it will just go away. No action by the owner ensures losing the house in foreclosure, a severely damaged credit profile, and a loss of all equity in the home. When dealing with an owner in pre-foreclosure it is important to explain the benefits to them of avoiding foreclosure:

1. Protecting their credit profile. A person in foreclosure is often overwhelmed with battling life-changing events and has multiple financial challenges. By working with an investor, it may be possible to stop the foreclosure and start rebuilding their credit profile or prevent their credit profile from getting worse. In today’s credit-conscious society, a damaged credit rating negatively affects everything from buying a car to getting property insurance.
2. Protecting their equity. When a home is foreclosed, all of the equity is lost. That includes any down payments and other money contributed to principal. By working with an investor, it may be possible to recover some of the equity and prevent the foreclosure.
3. Rebuilding their life. The pressure and strain of a foreclosure affects all areas of a person’s life. Under such pressure people often become depressed, are unkind to loved ones, or make poor personal and business decisions. Stopping the foreclosure allows a person to remove an albatross from their neck and start getting their life back on track.

For the real estate investor there are many ways to financially profit. It can also be a great feeling to help people move on with their lives. If not for investors, lenders would foreclose on most properties and the homeowners would lose all equity and have a foreclosure on their records. Investors provide the vital role of helping homeowners salvage some equity, can often help the homeowner’s credit, and help people start rebuilding their lives. Unfortunately, many homeowners will not see or understand the vital role investors have, but it is not uncommon to receive thank-you letters after stopping foreclosures.

In order for an investor to be involved, there must be a profit, or there is no reason to be involved in the first place. When working with sellers, we let them know up front we expect to make a profit, and for us to make a profit we need to be able to stop the foreclosure. There is no charge for our services and the only way we make a profit is if we can stop the foreclosure. By being direct, the seller understands our incentive and motivation and this helps establish trust and rapport. When dealing with pre-foreclosures there are 3 main ways to profit:

1. Purchase the property from seller at a discount. Many times, a seller is willing to sell the property well below market value because they recognize it is better to cut their losses and move on instead of hanging on and going down with the ship. If the seller has enough equity, we can structure a purchase so they receive cash at closing, the balance of their equity in payments, or a balloon payment due at a later date.

   This can be a good option for sellers with enough equity. Unfortunately, in today’s society the majority of sellers owe close to the value of the property and when an investor takes into account acquisition costs, sales costs, holding costs, and repairs there is not enough equity in the property for an investor to make a profit.

2. Take over the loan and make up back payments. When a seller is in foreclosure it is possible to buy the house from the seller, take over the loan, and make up the back payments. The advantages for the seller are that the foreclosure is stopped and the property is sold to an investor who will make the payments. A drawback for the seller is that the loan remains in their name until paid off by the investor or a third party at a later date.

   The process of buying a home and taking over a loan in another person’s name is commonly referred to as buying a property “subject to.” In such a transaction, the title of the property transfers to the new owner, but the loan remains in the seller’s name. Lending institutions frown on buying properties “subject to” and include a due-on-sale clause stating the lender can call the loan due upon a transfer of title. In practice, lenders rarely enforce a due-on-sale clause and are more interested in receiving timely payments then enforcing the loan-due clause.

   Selling “subject to” is not without risks to the seller since the loan remains in their name and if payments are not made, their credit can be affected at a later date.

   The benefits for the investor are that they can acquire a property with little money out-of-pocket, no loan costs or appraisal fees, and their credit is not affected or put at risk by the loan they are taking “subject to.” This is a powerful investing strategy unknown to most investors. It is one that should be used by ethical individuals. Like many powerful tools, it has the ability to be used for good or bad. When purchasing “subject to” properties there are documents that must be signed for the protection and understanding of all involved.

3. Discount the loan(s) from the lenders. Commonly referred to as a “short sale,” this is nothing more than negotiating with the lenders to accept an amount less than they are currently owed. Why would lenders discount their loans? There are a couple of reasons:

   a) Lenders do not want to own properties. If a borrower does not pay the loan, a lender’s recourse is to foreclose on the property. If the property is not bought at public auction, the lender becomes the new owner of the property. Lenders are in the business of loaning money, not owning homes. When a loan is not being paid, it is considered a non-performing asset and affects their lending ratios. Also, as owner of the property, the bank becomes responsible for property taxes, insurance, association fees, Realtor commissions, and closing costs. Things they do not want to deal with managing.

   b) “Cash now” is better than “cash later.” Many times a bank would prefer the certainty of accepting a discount instead of unknown holding costs, liability, and unknown sales price at a future date. The bank understands that a discounted offer today could actually net them more than a higher potential future offer when considering the closing costs, Realtor fees, and lost opportunities of lending money based on their ratios.

Whether buying a property “subject to” or attempting a short sale, you want to complete many of the same documents. Since short sales can be a lot of work before we begin, we hold title to the property “subject to” before negotiating with the lender. Experience has taught us the painful lesson of working months on a project and having everything worked out with the lenders, only to have a previously cooperative seller change their mind and refuse to complete the transaction. Trust our experience on this.

The following documents are necessary:

• Standard Purchase and Sales Agreement & Escrow Instructions:
  This document details the terms of the sale.
• Authorization to Release Information:
  This document allows us to contact the bank, discuss the property and the loan, and work out payment/payoff arrangements.
• Letter of Agreement and Addendum:
  This document clarifies that we will do our best to stop the foreclosure, but cannot and do not make any guarantees. We will not make promises we are unable keep.
• Warranty Deed to Trustee:
  This document conveys ownership of the property. Must be signed before a notary.
• Agreement and Declaration of Trust:
  This document creates the land trust. A land trust is nothing more than an entity we use to title the property and keep our name off public records.
• Notification Letter That Trustee is Making Payments:
  This letter is used when taking property “subject to” and notifies the lender that payments will be coming from a trustee.
• Escrow Letter:
  This letter instructs the lender to apply to funds in any escrow account to the loan balance when the loan is paid in full. There is no guarantee the lender will comply with the instructions and they may send the escrow proceeds to the original borrower.
• Special Power of Attorney:
  Applies only to the property and is used to handle any situations that may arise. Must be signed before a notary.
• Residential Real Estate Disclosure:
  Discloses any defects in the property and prevents parties from saying, “I did not know about that defect.” Complies with state law.
• Hardship Letter:
  When dealing with foreclosures, the lender normally requires a letter from the borrower explaining their hardship and why they are unable to make the payments.
• Financial Statement:
  Before discounting a loan and taking a known loss, the lenders will want to review the original borrower’s financial statement and make sure the borrower does not have the ability to repay the debt now or in the foreseeable future.

When preparing a short sale, lenders require a short sale package before they will consider accepting a discount. We recommend you provide the following documents:

• Cover Letter:
  A letter requesting a short sale and why the lender should consider your offer.
• Authorization to Release Information
• Standard Real Estate Purchase and Sale Agreement
• Hardship Letter from Borrower
• Financial Statement From Borrower
• Proposed Closing Statement (HUD1):
  All lenders want to see a HUD1 so they know their bottom line and to ensure the seller is not receiving any compensation.
• Opinion of Value:
  We recommend you provide the lowest comparable sales in the area.
• Estimate of Repairs:
  Most properties need repairs, and if you expect the lender to discount, you need to detail the necessary repairs.
• Notice of Trustee’s Sale:
  The actual foreclosure notice should be included. This subtly lets the lender know you understand the foreclosure process.
• Color Photos:
  Supply the lender with photos of all problems on the property. This helps the lender justify accepting a lower price for the property.

Short sales provide a great opportunity for creating equity and can be done without risking your cash and without using your credit.

By negotiating discounts with the lender, you can create a situation where the property can be purchased well below market value. Then other investors will purchase this opportunity from you and close the transaction with cash!

Everyone wins: the seller has the foreclosure stopped and may receive some of their equity, the lender receives a negotiated amount of cash at closing, the investor that purchases the property is able to buy at a below-market price, and you receive a well-deserved profit for your negotiating skills and ability to put the transaction together. And of course, you can always buy the property yourself.

Author: Gerald Romine

A Deed in lieu of foreclosure is a deed instrument in which a mortgagor (i.e., the borrower) conveys all interest in a real property to the mortgagee (i.e., the lender) to satisfy a loan that is in default and avoid foreclosure proceedings.

The deed in lieu of foreclosure offers several advantages to the lender but is a bad deal for the borrower. Advantages to a lender include a reduction in the time and cost of a repossession, and additional advantages if the borrower subsequently files for bankruptcy.

The principal advantage to the borrower is that it immediately releases him/her from most or all of the personal indebtedness associated with the defaulted loan. However, a deed in lieu of foreclosure is reported to the borrowers credit and has the same effect as a foreclosure. The simple translation is with a deed in lieu of foreclosure the lender gets the property back saving the time and expense of a foreclosure and the borrower’s credit is marked for 7 years with the equivalency of a foreclosure.

In order to be considered a deed in lieu of foreclosure, the indebtedness must be secured by the real estate being transferred. Both sides must enter into the transaction voluntarily and in good faith. The settlement agreement must have total consideration that is at least equal to the fair market value of the property being conveyed. Generally, the lender will not proceed with a deed in lieu of foreclosure if the current fair market value of the property exceeds the outstanding indebtedness of the borrower.

Because of the requirement that the instrument be voluntary, lenders will often not act upon a deed in lieu of foreclosure unless they receive a written offer of such a conveyance from the borrower that specifically states that the offer to enter into negotiations is being made voluntarily. This will enact the parol evidence rule and protect the lender from a possible subsequent claim that the lender acted in bad faith or pressured the borrower into the settlement. Both sides may then proceed with settlement negotiations.

Neither the borrower nor the lender is obliged to proceed with the deed in lieu of foreclosure until a final agreement is reached.

Summary: A deed in lieu of foreclosure is a good deal for the lender but the borrower is left with a foreclosure/foreclosure equivalent on their credit file. A deed in lieu of foreclosure offers no tangible benefit to the borrower.The best alternatives are a short sale or Arizona homeowners may be able to just walk away.

Author: Gerald Romine

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When doing a short sale the debtor may receive a form 1099-C for the amount of the lender’s losses. This is considered loan forgiveness in the eyes of the IRS and the lender may issue a form 1099-C.

If the debtor has other assets such as savings and is not insolvent, the debtor may end up being responsible to pay ordinary taxes on the amount of the 1099-C.

If the debtor settles a debt with a creditor for less than the full amount owed, the debtor may be required to report the forgiven debt as regular income, with certain exceptions. The forgiven debts include money owed after foreclosure or property repossession or credit accounts are not paid. Exceptions noted below.

If a lender forgives or writes off $600 or more of a debt’s principal (the amount not including interest or fees) the lender must send the debtor and IRS a Form 1099-C at the end of the year. When the debtor files tax returns for the tax year in which the debt was written off, the IRS requires that the amount is reported as income.

Warning: The debtor may not receive this form from the creditor even though the creditor submitted the form to the IRS. If the creditor does list the income on their tax return and the IRS has the information of the transaction on file, the debtor could get a tax bill or, worse, an audit notice.

There are several exceptions stated in the Internal Revenue Code. For example, you do not have to report the income on your tax return if the write off of the debt is intended as a gift, you discharge the debt in bankruptcy, or you were insolvent before the creditor agreed to settle or write off the debt. Always encourage the debtor to consult qualified tax and legal counsel to see if these circumstances apply.

It is important to realize the tax implication is only on the amount of the forgiven debt.

Example: The lender is owed $150,000 and agrees to accept a $100,000 short sale. The amount of forgiven debt is $50,000 and the most the lender could report on a 1099. Assuming the debtor was in a 15% tax bracket the tax consequences would be $7,500.

By comparison if the property was sold at public auction and brings $100,000 the lender could seek a deficiency judgment against the mortgagor to recover the $50,000 shortage, plus foreclosure expenses. The short sale is the much better alternative.

Note: Arizona Residents May have a better option. Click Here For Details.

Author: Gerald Romine

A deficiency judgment is a judgment lien against a debtor, defendant or borrower whose foreclosure sale did not produce sufficient funds to pay the mortgage in full. This option may or may not be available to the lender, depending on whether they have made a recourse or non recourse loan.

The fuller, statutory definition as defined by New York is: “the whole residue, or so much thereof as the court may determine to be just and equitable, of the debt remaining unsatisfied, after a sale of the mortgaged property and the application of the proceeds, pursuant to the directions contained in such judgment, the amount thereof to be determined by the court as herein provided.

The plaintiff’s attorney (in other words, the bank’s lawyer) must make a motion to receive such a deficiency judgment. Otherwise, the amount gained from the sale shall be deemed the full amount owed, and the plaintiff has no right to collect the additional debt. However, if the parties (mortgagor and mortgagee) have already agreed in their mortgage or promissory note, then the debtor could be liable for the full amount.

A debtor who has a deficiency judgment should see an attorney for possible remedies, including bankruptcy, an exemption from creditors,an appeal, or a motion. As with all legal research sources on-line, Internet users should take caution before applying such advice to your own case, and perhaps should consult an attorney.

Example: Upon Default by the Mortgagor a lender Forecloses on the mortgage. The unpaid balance of the loan is $102,000. The property is sold at public Auction and brings $80,000. The lender then seeks a deficiency judgment against the mortgagor to recover the $22,000 shortage, plus foreclosure expenses.

Deficiency States

Legislation enacted during the Depression still restricts the availability of deficiency judgments in several states. In some jurisdictions, deficiency judgments are prescribed in certain situations, while in other states, they are limited to the amount by which the debt exceeds the fair market value of the property. Waiver, the intentional relinquishment of a known right, of the benefits conferred by anti deficiency legislation contravenes public policy and is ineffective.

In non-deficiency states like Arizona a lender is unable to pursue any type of a deficiency judgment. Concerning foreclosures non-deficiency states are advantageous to owners in foreclosure because the lender is unable to pursue the deficiency judgment. (If you live in Arizona and want to walk away from an upside down house visit www.overforeclosure.com.)

The good news is many lenders do not pursue deficiency judgments because someone that has lost a house to foreclosure is a poor candidate for collections on a deficiency judgment.

For more information on foreclosures and how to complete short sales visit www.kickassshortsales.com.

Author: Gerald Romine

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Foreclosure is the equitable proceeding in which a bank or other secured creditor sells or repossesses a parcel of real property (immovable property) due to the owner’s failure to comply with an agreement between the lender and borrower called a “mortgage” or “deed of trust.” Commonly, the violation of the mortgage is a default in payment of a promissory note, secured by a lien on the property. When the process is complete, it is typically said that “the lender has foreclosed its mortgage or lien.”

Types of Foreclosure

The mortgage holder can usually initiate foreclosure anytime after a default on the mortgage. Within the United States, several types of foreclosure exist. Two are widely used, with the rest being possibilities in a few states. The most important type of foreclosure is foreclosure by judicial sale. This is available in every state and is the required method in many. It involves the sale of the mortgaged property done under the supervision of a court, with the proceeds going first to satisfy the mortgage, and then to satisfy other lien holders, and finally to the mortgagor. Because it is a legal action, all the proper parties must be notified of the foreclosure, and there will be both pleadings and some sort of judicial decision, usually after a short trial.

The second type of foreclosure, foreclosure by power of sale, involves the sale of the property by the mortgage holder not through the supervision of a court. Where it is available, foreclosure by power of sale is generally a more expedient way of foreclosing on a property than foreclosure by judicial sale. The majority of states allow this method of foreclosure. Again, proceeds from the sale go first to the mortgage holder, then to other lien holders, and finally to the mortgagor. Other types of foreclosure are only available in limited places and are therefore considered minor methods of foreclosure. Strict foreclosure is one example. Under strict foreclosure, when a mortgagor defaults, a court orders the mortgagor to pay the mortgage within a certain period of time. If the mortgagor fails, the mortgage holder automatically gains title, with no obligation to sell the property. Strict foreclosure was the original method of foreclosure, but today it is only available in a few states, such as Connecticut, New Hampshire and Vermont.

For more information on foreclosures visit www.kickassshortsales.com.

Author: Gerald Romine

Have you ever wanted to know the rules the loss mitigator is following when you are negotiating a short sale? Here’s the rules from Fannie Mae that should be very enlightening if you take the time to read them.

NOTE: These are merely guidelines and because a lender has a guideline does not mean it has to be followed.

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FNMA Short Sale

Introduction:

The purpose of these procedures is to complete a successful short sale workout in accordance with FNMA Federal National Mortgage Association guidelines.

References

1 FNMA – Home Savers Solution Network
2 FNMA Delegated Schedule of Authority
3 Mi Companies Work Rules

Mortgagor Qualifications

When you are qualifying the mortgagor, it’s important to review the financial information on file to determine whether or not the mortgagor has experienced a verifiable loss of income or increase in living expenses. The following information is reviewed to make this determination:

• Current POI Proof of Income should not be older than 60 days for all sources:
• Pay stubs: Pay stubs must be legible and include the mortgagor name or Social Security Number, pay dates, rate, and deductions.
• Profit and Loss:Must be for the last 90 days, signed, and dated by the preparer.
• Rental: Need a signed and dated letter from the renter or a lease agreement including payment frequency and amount.
• Non-Obligor income: If the non-obligor is contributing to the household with his income, need a signed and dated letter stating how much is being contributed monthly from the non-obligor.
• Child Support: Need a copy of the child support order or letter from the person paying child support that states the amount and how often it is paid.Need copies of three months worth of bank statements if direct deposited from the state disbursement unit.
• Social Security: Need current copy of award letter or if direct deposited.
• Reason for Default – You need a brief explanation indicating cause of delinquency. Verify the mortgagor had a decrease in income and/or increase in expenses that caused the delinquency.This can be a separate letter or on the space provided on the Financial Worksheet.
• Completed Financial Worksheet: Completed, signed, and dated by all mortgagors.This is only necessary if the financial information on DLQ3 has not been updated in the last 30 days.
• Credit Report:Must be pulled within the last 90 days.

Order Appraisal – When the appraisal is completed, you must complete three steps before the mortgagor(s) are considered for a short sale.
- Qualify the mortgagor
- Qualify the property
- Qualify the sales contract

Qualify the Mortgagor
The Liquidation negotiator will…

1. Calculate all qualifying income.
2. Verify the expenses on the Financial Worksheet.The reason for default is due to a verifiable increase in expenses or decrease in income.
3. If the expenses are greater than the income, proceed with qualifying the property.If the expenses are less than the income, the mortgagor may qualify for a retention option. Redirect the file to the FNMA Retention team. Also, if there is a positive cash flow you may want to ask the borrower to make a cash contribution or sign a promissory note.

Qualify the Property

Property may be occupied or vacant. Most MI insurers request 91% of the “as is” appraised value; FNMA requires 90% of the “as is” appraised value.

Qualify the Sales Contract

Sales Contract

The Liquidation negotiator will…

1. Make sure the contract is executed by all parties.
2. Counter the offer to the FMV Fair Market Value (appraised value).The contract must have a closing date.
3. Have any “and/or assigned” clauses removed from the contract.“And/or assigned” clauses cannot be included in the sales contract. This clause means they can place the deed in someone’s name other than the listed buyers which could violate HUD’sArm’s Length Policy.
4. Have the contract addendum and listing addendum signed by all parties.

HUD 1 or Net Sheet

The Liquidation negotiator will…

1. Verify all seller closing costs are normal and customary.

• Realtor commissions do not exceed 6 percent of the sales price.(6% if 2 realtors are involved; 3% if 1 realtor is involved)
• Sales price on the HUDI matches the sales contract.
• The net proceeds are at least 90 percent of the appraised value & 91% for most Mi Co.

Cost Analysis

The Liquidation negotiator will…

1. Verify outstanding foreclosure fees and cost.
2. Run the cost analysis (Be sure to include the outstanding f/c attorney fees & costs & the appraisal fee). Submit the presale through HSSN to obtain approval on non-delegated deals. Wait to obtain approval from the investor & Mi Co before issuing out the approval letter.

Issue Approval

The Liquidation negotiator will…

1. Make sure the Approval letter contains the following:

• The buyer(s) and seller(s) names on it.
• The date of the sales contract.
• The estimated closing date.
• The approved closing costs.

Steps to Follow Prior to Closing

The title company or closing attorney will need to provide the estimated final HUD Housing and Urban Development I for approval.

The Liquidation negotiator will…

1. Fax the approved HUD I and Attachment F back to the closing title company or closing attorney.
2. Complete Attachment G.

Steps to Follow After Closing

The Liquidation negotiator will…

1. Verify you have received the net proceeds check, HUDI signed by all parties.
2. Make sure the proceeds check and the net amount on the HUDI match or funds wired confirmation.
3. Make sure the disbursement date on the HUD1 matches the check date.
4. Forward the complete file to Settlement along with the Settlement Checklist.

Removals/Denials

The mortgagor(s) may be terminated from the Pre Sale program for the following reasons.

• Un-resolvable title issues.
• The mortgagor did not market the property at FMV to obtain an offer.
• Voluntary withdrawal by the mortgagor(s).

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If you need software to complete short sale packages, address loss mitigator concerns, and use a proven format for getting offers accepted this one is the best available.

Author: Gerald Romine

Short Sale Definition

Short Sale: In real estate, a short sale is when a bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of the mortgagee. Extenuating circumstances delegate whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market climate and the individual borrower’s financial situation. A short sale typically is executed to prevent a home foreclosure. Often a bank will choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. Here’s a free site completely dedicated to short sales and foreclosure investing. Author: Gerald Romine

If you are facing or considering foreclosure, you’re not alone.

The foreclosure rate is up 60% in February and homeowners nationwide are struggling to make ends meet. The most common options are 1) Hang on and hope, 2) Sell if you have equity, 3) Foreclosure, 4) Bankruptcy, 5) Short Sale, and 6) Deed In Lieu of Foreclosure.

Depending on the state you live in there may be another option that is very appealing. For example in Arizona there is a way to walk away from a property without a foreclosure and without damaging your credit.

Warning: There are many scams and rescue programs out there dealing with foreclosure, this is not one of them. Be sure to complete your own due diligence for any such program or claim.

The Arizona Foreclosure Away Program

Is a program based on state and federal law that allows a property to be returned to the lender that prevents a foreclosure or deed in lieu from ever happening. Basically, a foreclosure never takes place so no foreclosure can be reported. The program cost is about 1.5 times a mortgage payment.

We’ve actually gone up against Fannie Mae and although they first protested our program once the laws were explained to the them they accepted the property and stated in writing the transfer to the lender would be reported to the credit bureau as a ‘voluntary conveyance’, would not mention foreclosure, and that no 1099 would be issued!

If you have Arizona property check out this site. If you are in other states similar programs may exist.

Author: Gerald Romine

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