MAKING MONEY IN 2015 WITH SHORT SALES & REO INVESTING
Jul 17, 2015
MAKING MONEY IN 2015
WITH
SHORT SALES
&
REO INVESTING
Maryknoll Road
Pikesville, MD
Profit - $14,280
Valarie Scott
Short Sale Mentoring – Deals Done 4 U Program
(410) 715-9696 - [email protected]
Arcadia Avenue
Capitol Heights, MD
Profit - $19,616
Hobart Ct
Randallstown, MD
Profit - $19,901.60
Valarie ScottsCenter.com
Arcadia Avenue
Capitol Heights, MD
Profit - $22,000
Valarie ScotteaCenter.com
Manatee Drive
Virginia Beach, VA
Before Rehab After Rehab
Profit - $30,657.23
Valarie – Deals Done 4 U
Spike in Foreclosures
According to CNBC in January 2015:
There was a spike in foreclosure activity
Pre-foreclosures – 48,838 (lenders began foreclosure
process)
Auctions – 51,782 homes were scheduled for foreclosure
actions
Foreclosure – 37,292 homes were repossessed
States With Highest
Foreclosure Rates 1) Florida
2) Nevada
3) Maryland
4) Illinois
5) New Jersey
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Spike in Foreclosures
How does this spike in
foreclosure activity impact
Real Estate Investors and
those who want to start
investing in Real Estate?
Valarie Scottra
Spike in Foreclosures
Lots of Inventory!!
Plenty of Houses For You
To Make Lots of Money in 2015!!!!
Valarie Scott Do 4
Spike in Foreclosures
What are some ways you can
make money investing in
foreclosures?
Wholesaling Fix and Rent
Fix and flip Lease Options
Valarie Scott
Realty Trac reported last month, that
approximately 119,888 properties were in
some stage of foreclosure.
Many of these houses are bound to end
up going through one or more of the four
stages of the Foreclosure Process.
Four Stages of the Foreclosure Process
1) Pre-Foreclosure - This is the phase in
which the homeowner stops making
mortgage payments to the bank. The
homeowner is receiving default letters
and if the delinquency is not resolved, a
notice of default is filed.
2) Foreclosure - The property is sold at
public auction.
Valarie Scott
Four Stages of the Foreclosure Process
3) Redemption Period - This is the phase
after the foreclosure sale and the property
has been sold at public auction. This is
the homeowners’ last chance to save their
property by paying off the mortgage in full
along with all fees. (A Redemption Period
is not applicable in all states)
Valarie Scott
Four Stages of the Foreclosure Process
4) REO (Real Estate Owned by the
Bank) If an acceptable offer is not
received at the public auction, the
property is then taken by the bank.
The bank will then try to sell the
property to (regain or recoup) some
of its loss.
Valarie Scot
Today, we will focus our attention on the first
and last stages of the Foreclosure Process.
Pre-Foreclosures and REOs
Pre-Foreclosures!!! This is the stage in which a
Short Sale can occur.
Foreclosure Laws
It is imperative that you
comply with all state and local
foreclosure laws
Valarie Scott
Short Sale Mentoring – Deals Done 4 U Program
(410) 715-9696 - [email protected]
Applicable Maryland
Foreclosure Laws Protection of Homeowners in
Foreclosure Act (PHIFA)
Owner occupied properties
Not more than four (4) single family dwelling units
Mortgage payment is at least 60 days in default
A purchaser can not represent directly or indirectly that
they are acting on behalf of the homeowner to save their
house from foreclosure
Valarie Scott
Applicable Maryland
Foreclosure Laws
Maryland Credit Services Business Act
No up front fees
2009 issued regulation stating you must be licensed to
provide loss mitigation consulting, loan modification
services, etc.
2013 revised regulation, no longer requiring a Credit
Services Business License to offer these services
Valarie Scott
Applicable Maryland
Foreclosure Laws
Maryland Real Estate Commission
Maryland Real Estate commission Short Sales & Real
Estate Licensees
www.dllr.state.md.us/license/mrec/mrecshortsales.shtml
Valarie Scott
The sale of a property that generates
less money than the amount owed on
the property
A Short Sale occurs when both the
lender and borrower agree that selling
the property at a loss is a preferable
alternative to foreclosure.
Valarie Scott
What is a Short Sale?
Creating Equity
The objective of a Short Sale for an investor is to create
equity in properties that have no equity.
What is Equity?
Equity is calculated by taking the market value of a
property and deducting the amount, if any, still owed on a
mortgage
Example: $187,000 Market Value
- $ 72,000 Amount still owed on mortgage
$ 115,000 Equity
Essential Building Blocks
for Successful Short Sales
“You” the Smart Investor Analyze and evaluate properties to determine
purchase offers
Estimate property repairs – Hammerpoint.com
Pull and analyze Comps (comparable sales)
Free Websites Paid Websites
Zillow.com realquest.com
Redfin.com mris.com
Valarie Scott
Real Estate Agents
Most banks want short sale properties listed on
the MLS
Per Fannie Mae guidelines:
Standard short sale/HAFA must be listed with
an active status on the MLS for a minimum of
5 consecutive calendar days, including 1
weekend, prior to submitting an offer to
Fannie Mae for review. Valarie Scott
Real Estate Agents All FHA short sale properties must be listed on the
MLS (Amount of time listed on the MLS determines
amount property will be discounted)
Liaison between the seller, bank and you (the buyer)
Collect and handle the short sale paperwork
Prepare Purchase Contract and submit Your Offer
to the bank
Valarie Scott
Real Estate Agents Locate Real Estate Agents
CDPE.COM website
MRIS
REIA Meetings
Valarie Scott
Real Estate Agents
Interview Real Estate Agents
How many short sales have you done
Do you like working with short sale properties
Explain to me the short sale process
Will you attend the BPO or will I be required to
meet the BPO agent?
Motivated Cooperative Sellers
How to Locate Potential Short Sale Properties
Realty Trac Your Website
List Source Social Media
Foreclosure.com Farm Neighborhoods
MRIS/Realtors Bankruptcy/Pacer
Craigs List Bandit Signs
Valarie Scott
Motivated Cooperative Sellers
Market to Delinquent Homeowners
Yellow Letters Real Estate Agent
Post Cards Social Media-Facebook
Valarie Scott
Short Sale Mentoring – Deals Done 4 U Program
(410) 715-9696 - [email protected]
Motivated Cooperative Sellers
Bank Incentive for Homeowners
HAFA Relocation Assistance increased from
$3,000 to $10,000 on February 1, 2015
Bank of America Cooperative Short Sale
Program
$2,500 - $30,000 in financial assistance
Valarie Scott
Short Sale Mentoring – Deals Done 4 U Program
(410) 715-9696 - [email protected]
Exit Strategies
Your exit strategies must be determined prior
to submitting an offer to the bank
Wholesaling
Fix and Flip
Fix and Hold as rental
Fix and Reside in the property
Valarie Scott
Exit Strategies
When Wholesaling a short sale property the
following closing strategies can be utilized
LLC Assignments (most common in this area)
Double Closing (when allowed, rarely used)
Land Trust
Release of Contract
***PLEASE NOTE*** Short Sale
Contracts Cannot Be Assigned
Investor Friendly Title Company
All Title Companies may not subscribe to the
closing strategies required to effectively close
your short sale deals.
Therefore, it is imperative that you have at
least 3 or more Title Companies / Attorneys
on your team.
Valarie Scott
Essential Building Blocks
For Short Sale Success
Loan Look Up
To determine if the homeowner has a Freddie
Mac or Fannie Mae Loan, use the following
websites:
Freddie Mac Loan Look Up tool
www.w3.Freddiemac.com/loanlookup
Fannie Mae
www.knowyouroptions.com/loanlookup
Valarie Scott
Some Advantages to
Short Sale Investing
In many cases, NO Earnest Money Deposit
Required
Real Estate Agent prepares Purchase Contract
and Applicable Addendums
It is not difficult to get out of contract if you no
longer want the property
What Is A REO?
A REO is Real Estate
Owned by Banks
Valarie Scott
How Do We Locate REO
Properties?
MRIS – Contact a Real Estate Agent
who can search for properties that meet
your buying criteria
Valarie Scott
Online Sources for
REO Properties
Hubzu.com Frankly.com
RealtyTrac.com Redfin.com
Zillow.com Homefinder.com
Foreclosure.com Homegain.com
Realtor.com Homepath.com
Valarie Scott
REO Bank Websites
www.reo.wellsfargo.com
www.servicing.chase.com/REO/Property/GetAdv
AdvancedSearch
www.realestatecenter.bankofamerica.com/pages/
map-search
www.ocwen.com/reo/home.cfm
Additional Sources of
REO Properties
Fannie Mae
Freddie Mac
Internal Revenue Service
The Department of Veterans Affairs
Hudhomestore.com.
Valarie Scott
Making REO Offers
REO real estate investing is a numbers game and
many offers must be submitted. If you are not
making lots of offers, you cannot make money
with REO Propeties.
As a REO investor, your goal is to acquire
properties at discounted prices. Therefore, your
offers will be typically low as compared with the
After Repair Value (ARV) of the property.
Tips for REO Investing
1. Banks Do Not like contracts with
contingencies Avoid using the following
contingencies:
Subject to home or interior inspections
Subject to Property Repairs
Subject to a Partner’s Approval
Subject to Termite Inspection
Tips for REO Investing
2. We Do Use a Financing Contingency to
avoid losing our earnest money deposit if for
some reason we are unable to close on the
property. Please note that some of your offers
may not be accepted when the financing
contingency is included in the purchase contract.
However, it is better than losing your Earnest
Money Deposit on a property when your offer has
been accepted and you are unable to close.
Tips for REO Investing 3. It is best to have the REO Listing Agent
write the contract. Remember Real
Estate Agents are commissioned driven.
REO agents make less on REO properties
than standard transactions. Typically 1%
to 2% per transaction, 2% to 4% if the
REO Agent gets the listing and selling
commission.
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REO Accepted Offers
When the Bank Accepts Your Offer:
Your Real Estate Agent will receive an email
advising that the offer has been accepted and
Bank Addendums will be generated by the
bank.
Be sure to read the Bank Addendums carefully.
Valarie Scott ng – Deals
REO Accepted Offers
When the Bank Accepts Your Offer:
All terms are outlined in the Bank Addendums,
Purchase and Sale Agreement
- Closing Date
- Financing Contingency Accepted or Not
Accepted
- Assignment of Contract
- Etc…
Valarie Scott
REO Closing Strategies ***Please Note*** REO Purchase Contracts
Can Not Be Assigned
If you plan to wholesale the REO property, the
following c/losing strategies must be used:
Double Closing (A to B, B to C)
LLC Assignment
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Legitimate Reasons to
Get Out Of A REO Contract Property Condition – If the condition of the
property has deteriorated since your offer was
accepted by the bank
Code Violations – Code violations that the
bank refuses to correct
Closing Delayed – Bank fails to close on time
due to foreclosure complications
Valarie Scott
Legitimate Reasons to
Lower Your REO Offer
Condition of property has deteriorated
since you signed the contract
Property has been recently vandalized
Code Violations or liens discovered by
the Title Company
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Some Advantages to REO Investing
You do not have to deal with
homeowners
You do not have to deal with
applicable foreclosure laws
regarding homeowners in
foreclosure
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Some Advantages to REO Investing
Short purchase time
In most cases, Real Estate Agent
prepares the purchase contracts
and applicable addendums
Valarie Scott
Short Sale Mentoring – Deals Done 4 U Program
(410) 715-9696 - [email protected]