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The Foreclosure Boom
Who we are:
A North American Group Of Real Estate Professionals Who
Specialize in Foreclosed Properties
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How Did It Happen?
The dot.com Bubble Burst in 2000-2001.
People bailed out of the stock market and into real estate after 9/11 Terrorist Attacks.
The Federal Reserve attempted to avoid a recession by dropping interest rates to 40 year lows fueling the biggest real estate boom in U.S. history.
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Risky Loans
Banks and Lenders created risky loan products and loaned money to virtually anyone who was “breathing.”
Lots of Easy Credit
Bad Lending Practices
Rapidly Rising Real Estate Prices
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Wall Street Greed
Wall Street “packaged” risky mortgages and loans and sold them to other financial institutions around the world.
2007 – Reality sets in and real estate markets across the U.S. adjust sharply downward.
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The Numbers are Staggering
The Housing Market was rocked by nearly 2.5 Million foreclosure filings last year.
2009 is projected to rise to 3 Million according to RealtyTrac
Almost 7% are falling behind on their mortgages.
1 in 10 are delinquent or in foreclosure.
+ 72% from last year.
Many project that the crisis will rise and peak in 2011
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Disturbing Economic News is Everywhere!!!
Banks, Stocks, Money-Market Funds, Bonds and Mutual Funds are losing
Over 220 Mortgage Lenders are Out of Business
Unemployment, Layoffs & Cutbacks Fuel Daily News Headlines
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Meltdown Realities
The U.S. Foreclosure market is at an
All-Time High.
You have a once-in-a-lifetime opportunity to buy property at prices that were unthinkable only one year ago.
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It’s a Huge Opportunity! (Investors)
The Best Investment Opportunity in over 30 Years!
Buy Positive Cash Flow Properties for a Fraction of their Original Value.
Increased Demand for Rentals
Fortunes will be made by those who “Take Action.”
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It’s a Huge Opportunity!- (Owner Occupied)
Purchase homes at a fraction of the cost – Means instant equity PLUS a bigger boost when the market rebounds.
Afford a larger and/or nicer home compared to 2 years ago during market bubble
Pay less on mortgage than rent
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What is a Foreclosed Property?
A foreclosure occurs when an owner can’t make principal and/or interest payments on the mortgage or loan secured by the property.
The bank takes the property back and hires a real estate listing agent to market and sell the property.
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Foreclosed Homes
For today’s class, we are focusing on the real estate transaction after the bank takes back ownership.
REO = Real Estate Owned
REO Properties will be listed by a Real Estate Agent and Sold
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Other??
Let’s quickly review some other types of real estate that are often confused with foreclosed homes
Pre-Foreclosure/Short Sale Courthouse Auction
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1. Pre-Foreclosure - Short Sale
Short Sales- when a lender, through negotiations, agrees to accept less than what is owed on the home to satisfy the loan.
Complicated and time consuming process. We could spend 8 hours just on short sales
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Perception of Short Sales
“Short sale” has become a buzz word in a market desperate to hear something less discouraging than “foreclosure.”
Buyers see the short sale list price and mistakenly believe they can obtain the home for that price or less.
Buyer thinks bank should be thrilled to have the property sold and out of trouble.
Buyers think Short Sale is a great deal
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Reality of Short Sales
Only a SMALL Percentage of short sales close List price NOT realistic-Price set to get buyer’s
attention NOT at price the bank will accept. Agent doesn’t know what bank will accept.
The bank doesn’t have to respond on your timeline. Typically takes 60-90 days to hear from bank.
It doesn’t make sense that a bank should be thrilled and answer quickly and sell home cheaply!
Bank is already facing a loss so they aren’t eager to let someone steal it when the next person may come in and offer more
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2. Sheriff Auction- Courthouse Sale
After 90 days of non-payment, a Notice of Sale (NOS) is published, setting an auction date within 45 days and detailing the amount owed.
Not all homes that fall into foreclosure go to public sale because owners have the right to make up back payments up to the point of auction
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Foreclosure Auction Pitfalls In today’s market, the price you pay at an
auction is usually higher than market value, based on mortgage amount due.
Must pay with cash or cashier’s check. As is – no warranties or inspections Must be an expert title researcher. Bidding war could leave you out or force you
to pay more than you should. No Clear Title & No Title Insurance. You may need to evict residents. Property could be trashed by angry owners Lost of cash, resources and risks.
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Perception of buying Foreclosed Homes
1. The home is a good deal since it is a foreclosed home
2. Buyer will save money by purchasing a foreclosed home vs. buying on the open market
3. The home needs a lot of work
4. Anyone can make money (equity) buying foreclosed homes
5. Any Real Estate Agent can help buy and process foreclosed home transactions
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1. Bank Foreclosed Homes Are Good Deals
Definition of a foreclosed home - Bank takes ownership due to non-payment. Doesn’t mean the home is a good deal.
The bank’s goal: Get the highest sales price possible in order to cover mortgage
The list price could be more or less than market value
You need knowledge in the particular market and must perform market research to determine what the property is worth to you
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2. Buyer Will Save Money By Purchasing Foreclosed Home
There are many additional risks and potential expenses purchasing a foreclosed home vs. an occupied, MLS-listed home
Financing a foreclosed home can be costly and time-consuming and many times can’t be completed
Potential repair costs are unknown many times and will usually require cash out of pocket to fix
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3. Foreclosed Homes Need A Lot Of Work
In the current market, approximately 5-10% of homes are in move-in condition (and increasing)
10-20% of homes need little work. Less than $5k
70-85% need work, and repair costs vary depending on the home
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4. Anybody Can Make Money (Equity) Buying Foreclosed Homes
If you listen to all the radio ads, Internet ads and everywhere else you turn, you believe foreclosures are easy money – homes are just being GIVEN away.
Well, if it were that easy, why isn’t everyone doing it?
The truth is that for the inexperienced, buying a foreclosure can be a difficult process if they try to go it alone.
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5. Any Real Estate Agent Can Buy & Process Foreclosed Transactions
Well, if it were that easy, wouldn’t EVERY real estate agent be listing and selling foreclosures?
Most agents do NOT want to deal with foreclosures, which means few have experience
You’re no better off than going it alone.
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The Property
Locate Homes in nice neighborhoods Preview homes to make sure the home fits
client’s wants and needs. We perform extensive market research to
determine value of home Looking at the big-ticket items in the home
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The Property
1 out of 15 homes is a best buy If we find 3 Best Buy homes, we
have previewed 45 homes Time-consuming process These best buy homes reflect the
best values in the current market with low fix-up costs
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How To Get The Best Deal?
Most banks will not even consider an offer in first seven days on market
You must know WHEN to negotiate. There is a point when banks will start negotiating.
There are critical points in the foreclosure timeline when banks will make price adjustments. Your agent MUST anticipate these points.
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Negotiating Strategies…
Good Negotiating Strategies can save
you thousands of dollars and hours of time
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How and When You Submit Your Offer Is Critical
1. If offer will be accepted
2. Price of home
3. Terms of deal
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Submitting The Offer 32.4% of Foreclosed home transactions
fall apart before they close Lenders are:
Getting burned on non-closing agreements
Getting more discriminating when accepting purchase agreements
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Submitting The Offer
CASH IS KING!
Cash Deals are better than finance deals
Line of credit is NOT the same as cash
Financing deals are possible but must be structured properly
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What And How to Offer
Low-ball offers will not get reviewed or considered by bank. Based on % of list price
Higher $ earnest money deposits
Bank will ALWAYS counteroffer
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What And How To Offer
If financing is required: Strong Pre-approval letter National Lender Local Lenders??? Longer closing
Lender needs to have experience financing bank foreclosures
$100 per day if closing date is missed
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Property Inspections
Buyer can walk through home and observe the home before making offer
Buyer can perform home inspection Timeline of inspection is critical -verbal
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REO Pitfalls For The Inexperienced Buyer
Banks can be difficult and unresponsive Contracts may be overwhelming Bank selects Title Co. even though you pay Utilities may not be on for inspections Cash takes precedent; no contingent offers Close on schedule or subject to $100/day fine Default on closing and lose deposit May be countered with “Highest & Best Offer”
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Our Real Estate Network And Foreclosed Properties We are a North American group of Real Estate
Professionals who specialize in foreclosed properties.
We do extensive market research to find the best priced homes for our clients.
Our clients (investors and owner occupied) have purchased many foreclosed homes over the years, before the foreclosure market was booming.
Let’s look at some examples
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Foreclosed Sale Example
Clients:James Bailey and Leah Sator
Market Value: $220,000Purchase Price: $ 49,000Savings: $171,000Percent (savings): -78%
1202 Chapel Oaks DriveCapitol Heights, MD
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Foreclosed Sale Example
Client:Mike Hardy
Market Value: $104,000Purchase Price: $ 48,000Savings: $ 56,000Percent (savings): -54%
Devoe AvenueEuclid, OH 44123
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Foreclosed Sale Example
Clients:Anonymous
Market Value: $135,000Purchase Price: $ 73,900Savings: $ 61,100Percent (savings): -45%
4740 Grasset AvenueCharlotte, NC
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Foreclosed Sale Example
Clients:Jackie and Tim Benson
Market Value: $180,000Purchase Price: $135,000Savings: $ 45,000Percent (savings): -25%
21625 Palmer CourtRobertsdale, AL
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Foreclosed Sale Example
Clients:Jim and Patricia Fogarty
Market Value: $670,000Purchase Price: $485,000Savings: $185,000Percent (savings): -28%
653 and 655 Lisbon StreetDaly City, CA
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Foreclosed Sale Example
Clients:Vale and Deidra Bacon
Market Value: $295,460Purchase Price: $225,000Savings: $ 70,460Percent (savings): -24%
3063 Sweetgum WaySaint George, UT 84790
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What Did We Learn Today? Only a SMALL % of short sales close Bank is not motivated to sell home in short
sale. No timeline required Sheriff auctions are risky:
Bidding starts at mortgage owed No inspections Need cash
Purchasing foreclosed homes correctly results in lower purchase prices vs. short sale or sheriff auctions
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What Did We Learn Today? All foreclosures are NOT good deals
Extensive market analysis need to be completed to determine market value
Significant amount of time is required to find the home
Knowing WHEN to submit an offer will affect the price you pay
HOW you submit an offer will determine if the offer is accepted
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Banks can be difficult to work with Potential risks for unknown repairs – no
utilities/inspections National Lender with experience in
foreclosures is a must $100 per day fine for missing closing
date Lose earnest money if transaction is not
completed
What Did We Learn Today?
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We also learned that Foreclosed opportunities are everywhere
BUT
They must be purchased correctly
What Did We Learn Today?
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Do you see why a Real Estate Agent specializing in foreclosed properties could easily be the #1 reason you will succeed or fail in buying foreclosed homes?
What Did We Learn Today?
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Real Estate Agents Must:1. Have experience in buying foreclosed
homes2. Find the best deals in the local market3. Find the best quality homes4. Know when to make the offer5. Know how to make the offer6. Know how to negotiate – counteroffers7. Know how to handle home inspections8. Be able to time the purchase closing -
$100 per day if they don’t.
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The Buyer Must Realize The Process of buying a foreclosed home is
completely different from a traditional home purchase.
Prior to last year, only a handful of real estate agents ever purchased a foreclosed home. Investors only bought foreclosed homes prior to 2008.
Currently there is a huge foreclosed home market and some real estate agents are advertising the market. However, most of these agents have ZERO experience buying foreclosed homes
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We have engineered our foreclosure search process and market research around timing. The critical points on the timeline are crucial in REO negotiations.
We are able to save our clients a great deal of time, frustration and money.
Most foreclosure lists are not built around the best timing for buyers. You get sent on a wild goose chase.
Experienced Lenders
Our Real Estate Network And Foreclosed Properties
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You can probably tell that the foreclosure crisis presents enormous opportunities for those who take action.
Here’s a serious point for you to answer about investing in a foreclosed home today…
If you do, will you be better off in a few short years?
Or
If you don’t, will you be kicking yourself for standing still today?
Our Real Estate Network And Foreclosed Properties
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Are You Ready? If you are ready to take action and capitalize on
this tremendous opportunity, then our team might be able to assist you.
So if you are ready, then you should take the next step and together we’ll see if this is right for you.
We have a simple and short process…
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Reply to the email that was sent to you regarding the call in details for this class and include a note stating that you are ready to take the next step.
Be sure to specifically include all of the information on the next page for our team’s review.
Next Steps
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Next StepsReply to the email and include the following:
Contact Information
First and Last Name:
Address:
Phone 1 (best):
Phone 2 (cell):
Fax Number:
Questionnaire
1. Are you interested in a primary residence or investment property? (Pick one)
2. What is your time frame for purchasing a home? (Pick one from below)
Next 3 Months 6 Months to 12 Months 12 Months or Later
3. Are you Pre-Approved with a lender? (Yes or No)
4. Have you purchased a foreclosed home before? (Yes or No)
5. Have you owned a home any time in the last three years? (Yes or No)
6. Other comments (Please add is needed)
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Once your information is received, you will be contacted by a team member shortly.
Our team member will consult with you to determine if this is right for you.
If so, we will schedule a One-on-One Consultation meeting with you
At the meeting we will: Review your goals, buying criteria, & time frame Set personalized searches & tours focused on
your buying criteria Help you get Pre-Approved with mortgage lender
Next Steps
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Important Notes Please know that we can’t guarantee that
every applicant will be accepted as a client. Register immediately because client spots
are limited. If you apply at a time when client openings
are not available, we will put you on a waiting list.
Next Steps
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Next StepsReply to the email and include the following:
Contact Information
First and Last Name:
Address:
Phone 1 (best):
Phone 2 (cell):
Fax Number:
Questionnaire
1. Are you interested in a primary residence or investment property? (Pick one)
2. What is your time frame for purchasing a home? (Pick one from below)
Next 3 Months 6 Months to 12 Months 12 Months or Later
3. Are you Pre-Approved with a lender? (Yes or No)
4. Have you purchased a foreclosed home before? (Yes or No)
5. Have you owned a home any time in the last three years? (Yes or No)
6. Other comments (Please add is needed)