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NOTICE! The authors and publishers of this manuscript are not attorneys and so are not qualified to give legal advice. All information is based on their research and is presented in good faith. They are not responsible for errors and omissions. Contracts and agreements are exhibits only and should not be used until approved by your real estate attorney. No legal advice is being given in any of our material. Laws and real estate practices change from time to time. The reader is advised to keep up to date on activities in their locale by consulting with a real estate attorney before doing any investing.

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Table of Contents
Introduction ......................................................................................................... 6

BUYING BANK OWNED HOMES - REOs

Refresh On What A Foreclosure Is .....................................................................8 Why REOs Are Wealth Source ............................................................................9 Missed Mortgage Payments ...............................................................................10 Advantages of REO vs. Foreclosed Property .....................................................10 Real Estate Owned ............................................................................................12 Bank Owned Properties .....................................................................................12 Understanding REO Opportunities .....................................................................13 Why No Foreclosure Auction Bidders? ...............................................................13 A Property Does Not Sell At Auction Because ...................................................14 Why Banks Sell REOs at Discounts ...................................................................16 Fix'em and Profit ................................................................................................21 Timing and Good Deals ......................................................................................23 What About Cash Needed For Purchase? .........................................................23 Four Ways to Find REOs ...................................................................................24 Contacting the REO Manager ............................................................................26 Finding REOs On The MLS ................................................................................29 Hot Prospects .....................................................................................................31 Higher Deposits ..................................................................................................32 Double Loan Applications ...................................................................................32 Bank Chooses Service Providers .......................................................................32 Not the Usual Contract .......................................................................................33
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Double Check Everything ..................................................................................33 Choosing A Real Estate Agent ...........................................................................34 Some REOs Are Time Wasters ..........................................................................35 Ask the Bank To Pay For Repairs ......................................................................37 More on Purchase Offers ...................................................................................37 Signals ...............................................................................................................38 Stay Away From These REOs ...........................................................................39 Three Steps To An Offer ....................................................................................40 Inspect The Property ..........................................................................................41 Do You Need A Real Estate Agent? ...................................................................41 When Should You List With A Real Estate Agent ..............................................42 Profit Formula .....................................................................................................42 Always Buy Hazard Insurance ...........................................................................45 REO Negotiating Tactics ....................................................................................49 Understanding The Banker's Problem ................................................................49 Price and Terms .................................................................................................51 Intimidation Proof Yourself .................................................................................52 The Price ............................................................................................................53 Discussing Instead of Negotiating ......................................................................54 Honesty First ......................................................................................................56 Flipping REOs ....................................................................................................56 Assigning The Contract ......................................................................................58 Cash Is King .......................................................................................................59 Flipping Step by Step .........................................................................................60 Qualifying Money Partners/Buyers .....................................................................62
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The Benefit Of Buying at 65% Of Value .............................................................62 Advantages of Buying Bank REO Properties .....................................................64 REOs Overview ..................................................................................................65 Contacting The Lender .......................................................................................65 Make Your Offer .................................................................................................66 How to Contact Lender .......................................................................................67 3 Ways to Find Bank REO Property ....................................................................67 How To Create Bank REO Offers That Get Accepted .........................................68 Markets .............................................................................................................71 How To Get Real Estate Agents To Bring You Deals 3 Times a Day .................74

PRE-FORECLOSURE INVESTING

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Flipping Foreclosure Houses Online ...................................................................76 Learning The Foreclosure Process In Your State ...............................................79 The Signal ...........................................................................................................81 Pre-Foreclosure ..................................................................................................86 Direct Marketing Plan ..........................................................................................90 When to Do What ................................................................................................95 How to Do It ......................................................................................................100 Direct Marketing Details ....................................................................................103 The Letter ..........................................................................................................109 Postcard Power .................................................................................................118 Audio/Video Recordings ....................................................................................121 Inserts ...............................................................................................................126 Managing Response .........................................................................................132
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Face to Face .....................................................................................................145 Structuring the Deal...........................................................................................154 Now that You've Bought It .................................................................................164 Title Search .......................................................................................................170 Due-On-Sale .....................................................................................................176 Left-Overs .........................................................................................................180 Seven Secrets ...................................................................................................187 For California Only ............................................................................................189 Creating a Cash Buyer Feeding Frenzy ............................................................191 Co-Wholesaling for Instant Deals ......................................................................193

Introduction
You are about to encounter a situation that will be colored by your own thinking, your own outlook on life, your own system of values and your own evaluation of yourself. All of these things and more will come into play as you make decisions and judgments about the information you are now reading. Will these words sentences, paragraphs come to life for you? Will you accept the concepts and opportunities that it is their job to present to you? Will you be able to open your mind and put aside reservations and skepticism? Can you get past the words alone and allow yourself to discover the wealth building power and force of the ideas that will be presented here? We KNOW you can! Now, as you prepare to read on, please promise to give the words a chance to come alive. Let the ideas grow and fill you with excitement. Perceive that not everything you read must be new and startling. Realize that it is the combination - the inspired blending - of new and old that creates a magnificent, money generating system. A concept that can provide you with everything you have ever dreamed of - if you will believe that dreams really are just a preview of your future. This manual is about reaching financial independence. The techniques explained can easily be mastered by spending a few hours studying these pages and doing some basic research in your own area. Make the commitment right now to focus on putting this system into action. Dont be distracted by other business opportunities. Put aside extraneous interests. Make this your hobby, your vocation, your passion. It can be fun, especially as you start seeing yourself succeed. These pages contain the formula for success. You CAN DO THIS! Just put the plan into action! Youve been looking for and waiting for something that would inspire you to action.
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Something you could feel confident about. Something that is worth your time and commitment. Youve found it! In real estate you make your profit going into the deal. You do this by finding and controlling discounted properties. One prime way to do that is by focusing on distressed property, and distressed sellers. In the Foreclosure Wholesale System, well focus on 2 different phases of this process Bank REOs and Pre-Foreclosures.

BUYING BANK OWNED HOMES - REOs

Refresh On What A Foreclosure Is
Let's begin by getting a clear idea of what happens during a foreclosure action. Then well crank things up by focusing on the ability to find incredible discounts with Bank REOs, and then a VERY unique and effective way to market for preforeclosures that most people have no clue aboutwhich is good for you! Foreclosure is a legal process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership (repossession) of the property securing the loan. The foreclosure process begins when a borrower/owner defaults on loan payments (usually mortgage payments) and the lender files a public default notice, called a Notice of Default or Lis Pendens. Depending upon the state where the real estate is located, mortgage loans may be secured by a recorded mortgage or a trust deed. The only difference is how a lender is required to foreclosure upon a delinquent loan. We need not concern ourselves here, because by the time a property becomes an REO the lender/bank has already followed all rules to control the property. The foreclosure process can end one of four ways: 1. The borrower/owner reinstates the loan by paying the amount due before the foreclosure auction is scheduled. This period is known as pre- foreclosure (more on how to profit from this later). 2. The borrower/owner sells the property to a third party during the pre- foreclosure period. The sale allows the borrower/owner to pay off the loan and avoid having a foreclosure on his or her credit history. 3. A third party buys the property at a public auction at the end of the preforeclosure period.
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4. The lender takes ownership of the property, usually with the intent to re-sell it on the open market. The lender can take ownership either through an agreement with the borrower/owner during pre-foreclosure (a deed in lieu of foreclosure) or by buying back the property at the public auction. When ownership vest in the lender it becomes know as an REO property. This process allows for three opportunities for finding bargains on foreclosure homes: a.) Pre-foreclosure, b.) Foreclosure auction, c.) When it becomes an REO. Once the lender has an REO they usually sell the property to recover the unpaid loan amount. The lender typically clears the title for any buyer. The price of an REO is often less than what you would pay during the pre- foreclosure period or at the foreclosure auction sale often times much less!

Why REOs Are Wealth Source

Many investors consider an REO property to be an untapped source of wealth. An REO is different from a foreclosure property in that the bank has already tried to sell it at a foreclosure auction and has had no luck getting bids. Because the property was not bid on, the bank then became the owner of the property. Banks are not in the real estate business and so don't want to keep the REO any longer than necessary. You might say they are a special category of "don't wanter". This makes it a great opportunity for an investor. Not every REO is a good deal, but when you look at many REOs youll commonly find that there is a lot of money to be made.

Missed Mortgage Payments

Technically speaking, the home was foreclosed on because the owner of the home failed to make their scheduled payments. That allowed the bank to take possession of the home. The first thing that a bank or mortgage lender will have to do is handle any eviction. The eviction removes any tenants that are squatting on the property that they once owned and therefore frees the prospective buyer of the obligation to remove the tenants themselves. This action usually makes the property more attractive, as the stress and cost of removing the tenants will not be the concern of the buyer. The banks next step was to offer it for sale through a public auction. The bad news for the banks was that there were no bids placed on the home. That meant that the bank was stuck owning the property. Now the bank will be anxious to get rid of the property.

Advantages of REO vs. Foreclosed Property

When you are thinking of buying an REO you have distinct advantages that a buyer does not have with a foreclosure auction. The first is that you are able to buy on your schedule. You do not have an auction deadline to meet. Theoretically you can make an offer for an REO property any time; you dont have to wait for bidding to begin. Another big advantage of an REO compared to a foreclosed property is that you can inspect it before you buy. You cannot do this with the majority of foreclosed homes that you might buy at the auction sale. Being able to inspect the property
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before you buy can save you from a financial disaster with properties that might cost thousands to return to saleable condition. With this guide you will avoid wasting hundreds of hours on unprofitable investments. The purpose of the Foreclosure Wholesale System is to show you how to make the most amount of money in the least amount of time... and with a minimum of risk.

Here is an example why buying REOs is worth the effort:

PURCHASE AT MARKET Purchase Price Repairs Needed Down Payment $135,000 2,500 4,050 PURCHASE AS REO Purchase Price Repairs Needed Down Payment $110,000 6,000 3,480

Mortgage w/ 3% Down Repair Paid by You $130,950 Prin/Int Payment at 6.5% for 30 years Total Interest Paid in 5 years Principal Paid Estimated Value in 5 years at 4% Apprec $159,950 Mortgage Balance EQUITY POSITION $122,583 37,367 $41,295 8,366 $827.69

Mortgage w/3% Down w/ Finance of Repair $112,520 Prin/Int Payment at 6.875% for 30 years $739.18 Total Interest Paid in 5 years Principal Paid $37,605 6,746

Estimated Value in 5 years at 4% Apprec Mortgage Balance EQUITY POSITION $159,950 $105,774 $ 54,176

There is a $16,809 profit in the REO property.

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Real Estate Owned

In banking they call the homes they acquire through foreclosure REOs. That stands for "real estate owned". Investors are interested in REOs because they often can be purchased for a fraction of their market value. But to get the deals you must understand exactly how to zero in on the best opportunities. To make the killer profits you must know how to identify profitable properties, how to negotiate with banks and how to protect your interest. Get ready for the insider story on how to make money with bank owned properties.

Bank Owned Properties

In the world of real estate there are many, many types of properties that you can buy. The majority of the time people hire a real estate agent to help them buy a property that is listed on the MLS (multiple listing service). More astute bargain hunters look at houses that are either in foreclosure or are owned by a bank or loan company. A common misconception of people outside of the real estate industry is that foreclosure and an REO purchase is the same thing. Although they are similar, they are in fact different. They are corollaries of each other, with an REO being a direct result of a failed foreclosure sale. To understand the difference between the two and how they vary from each other it is best to define what each is, and their respective merits. The term Real Estate Owned property has a specific meaning in the real estate industry. It identifies a property that has been foreclosed upon by a
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bank or loan company and has reverted back to the ownership of the lender. So as already explained, an REO is the result of property that has been foreclosed on, but failed to sell at the auction sale. To be successful in any endeavor you must have a plan that allows you to use your time wisely. Your plan should allow you to evaluate the REOs in your area quickly and easily. You are looking for the best deals.

Understanding REO Opportunities

When a bank takes a home through foreclose it is required to sell it by means of a public foreclosure auction. A foreclosure auction is a quick way for the bank to get the home off of its books and recoup at least a portion of its mortgage loan. If the property does not sell at the auction it becomes an REO. Banks hate REOs. That's why it is often possible for an investor to buy an REO at below market value. Sometimes way below value. Under certain conditions many banks will take large losses just to get rid of their REOs.

Why No Foreclosure Auction Bidders?

When a bank makes a mortgage loan it is legally able to foreclose on the property if the borrower/owner stops making payments on the loan. Foreclosure law allows the bank to recover the amount still owing on the loan, plus the expenses of the foreclosure. That amount is called the bank's "credit bid" at the foreclosure auction. For example: The bank made a mortgage loan of $200,000, the borrower owned the home for 2-years before defaulting. During those two years they paid down the principal of the loan by $20,000. That means the bank is still owed $180,000 on the loan. Add $4,500 in legal costs and expenses and the bank would have a foreclosure credit bid of

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$184,500. On the day of the sale if no one was willing to bid more than that amount, the property title would transfer to the bank and become part of the bank's REO inventory. Just because the bank owns a property does not make it a good deal. In fact, when you see that a home or property is an REO you have to wonder exactly what IS wrong with it. There are several reasons why a property does not sell at a foreclosure auction:

A Property Does Not Sell At Auction Because

1. The property had little or no equity. When there is little equity in a property, bidders will not attend the foreclosure auction. If a property has less than 15% equity there is no chance for a bid from a knowledgeable investor. There would be no room for profit.

2. The property needs extensive repair and no one would take the risk of buying it at the auction. These properties can be very profitable, because you can often get the bank to allow you to inspect the property before making your offer. The bank will be willing to sell the property at a deep discount, because they know that the property needs work. It is not unheard of for investors to get REOs that are in poor condition for less than 50% of their market value. For the investor who understands rehabbing, very large profits are possible. 3. There is an IRS lien attached to the property because the homeowner

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owed back taxes to the federal government. Many bidders at foreclosure auctions will not take the risk of buying a property that has an IRS lien. After a foreclosure auction the IRS has 120 days in which it can take the property from the successful bidder. The IRS must reimburse the bidder for the amount of his bid. Many investors who buy properties at foreclosure auctions do not want to wait 120 days only to find out that the IRS has decided to take the property and refund their money. These properties can, therefore, be better than average opportunities. You can get the bank to accept a low offer while you both wait for the IRS 120 day "right of redemption period" to end. In the meantime, you can flip the property to another investor contingent upon the IRS not exercising its right to take the property. The bank can negotiate with the Internal Revenue Service for the removal of tax liens and pay off any homeowners association dues. This again makes the property more attractive, and will most likely result in a quick sale. 4. There is a coming change in the neighborhood that will drive down the value of all property. You must be sure that if you are purchasing an REO to fix up and sell that the property is located in a desirable part of town. If the home is not located in an attractive area, you should be sure you have a plan for getting to your profit. There are investors who specialize in such properties and you may be able to flip it to them for a small, but quick profit. It's an old rule, but a good one: In any real estate investment the three big things to consider are location, location, location. Never let a seemingly good deal let you lose sight of how important location is for any piece of real estate that you intend to buy and then sell.

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Why Banks Sell REOs at Discounts

(In the pages here we will use the word "bank" to represent any institution that makes and forecloses upon real estate loans.) An REO on a bank's balance sheet is a liability rather than an asset. Every month that the REO remains unsold, the bank loses money. Here are seven reasons that a bank would sell an REO to you at a deep discount: 1. The bank has received a large cash settlement from their Private Mortgage Insurance Company. Private Mortgage Insurance is also known as PMI. PMI is insurance that covers the bank for losses when it must foreclose upon a homeowner and its not able to sell the property for the amount still owing on the mortgage loan.

PMI does not cover the full exposure of the lender. PMI covers the top slice of the loan, maybe 20% plus some fees. In the case of a 90% loan, PMI usually covers 10% of the loan amount. In order for the bank to receive the PMI coverage it must manage the default to its completion - the foreclosure sale. Just know that unless you are paying 100% of what is owed the bank, they will need to get the PMI company to concur with a decision to sell. Otherwise the bank could lose their opportunity to file the insurance claim. In the rarest of instances a lender may decide to forego the PMI claim. So, depending upon what is bid at the auction, PMI will make the bank a full or partial settlement. This settlement helps offset any loss of money the bank may have when it sells the REO at a discount.

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With most REOs, the banks are willing to take a loss even if the PMI settlement does not cover them fully. This loss is viewed by banks as the cost of doing business and is factored into their operating expenses. For example, the bank is foreclosing on a property and has given their attorney instructions to start the bidding at $140,000 (their credit bid). No one shows up to bid on the property and the bank ends up with it. Since the bank has followed the bidding instructions of the PMI company, it will receive a cash settlement of about $14,000 and possibly more, depending upon the terms of the original mortgage insurance premium. This means that the moment the auction is over it can now sell the property to you for $126,000, because it will get $14,000 from the PMI company. Since many banks are willing to take a loss on REOs, there is a good chance that you can get the property at an even deeper discount. 2. Banks are regulated by the federal government. The Feds penalize banks for having too many REOs. A bank with a lot of REOs may not be able to borrow money from the Federal Reserve or may have to pay a higher interest rate on the money that the Federal Reserve loans it. Banks need to borrow money from the Federal Reserve in order to operate. An above average number of REOs are a sign that the bank has been making bad loans. If a bank makes enough bad loans it could be forced out of business. The U.S government insures these banks through the FDIC and keeps a close eye on their operations. This means that every bank has a strong incentive to minimize the number of REOs in its inventory. 3. Banks are not organized to manage real estate. In good economic times many banks don't even have an REO department. When a small lender gets an REO, it assigns the task of disposing of the property to a high ranking manager, such as a department manager or a regional manager.

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The REOs are dropped into this manager's lap on top of all other normal duties. He or she does not get paid more money to deal with REOs. This manager wants to get rid of the property as fast as possible. This makes it feasible for an investor who understands the process to make the bank a low offer and have it accepted. All banks differ from one another; however the large banks and loan companies will have an entire department that is solely for REO sales. Depending on whether the bank that you are purchasing the property from has its own REO department will largely affect the time it takes for them to look through the offer.

A large bank will have a number of people who are involved in the decision making process of whether or not to accept an offer. It is not unusual for 3 or 4 people to look through your offer and give their opinion. Generally you may expect the bank to take a week to consider your offer. 4. Banks sometimes own mortgages on out of state properties. When a property is foreclosed upon and a bank ends up with an REO that is located in another state, it makes it doubly difficult for the bank to make decisions about the sale of the property. In most cases it doesn't make financial sense to have a bank representative travel to an out of state property, assess its condition, then hire contractors, oversee fix-up and then list the property for sale with a real estate broker. As you might guess some of your best REO opportunities will be with local properties that are owned by banks located in other states. They can however have a BPO made which stands for Broker Price Opinion. This is an estimate of value made by a local Realtor.

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5. The REO will have carrying costs associated with the property. These include property taxes, water and sewer bills, insurance bills and electricity bills. If the property is a condominium, there will be condominium fees. If it is a townhouse, there will be homeowner's association fees. In addition to carrying costs, there are seasonal maintenance costs. The property must be winterized in the colder months. In the milder months, the lawn has to be cut and the shrubs trimmed. Banks want to avoid these responsibilities whenever possible and so have incentive for a quick sale. 6. The REO must be put into marketable condition. Banks are not set up to deal with the renovation of a property. They run the risk of paying too much for repairs and end up over-improving the property, or worse, under- improving the property. Because banks always want to sell a property in its as-is condition means that the most you can expect from a bank, or loan company, in terms of certification regarding the house is what is called a section 1 pest certification, which says that the property is fit for human habitation, i.e. there are no pests in the property. Even obtaining the above section 1 pest certificate can be hard work on your part, as banks will only provide it if you specifically ask for it in your offer to them; again it costs them money to obtain the certificate, something which they want to minimize. The bank may wait until there is a contract and then negotiate with a buyer before they have needed repairs done. This often results in the property sitting unsold for months, because 90% of those buying as owner- occupants want a property that is in move-in condition. 7. Carrying costs mount up, making the bank more and more anxious to sell. The bank must hire a real estate agent to market the property. This will cost the bank around 6% of the total sales price. In cases where the bank is willing to sell directly to an investor, it can save the six percent commission that a real estate
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agent will charge. As an investor you must remember these seven reasons and use them to your advantage when negotiating an REO purchase. It is plain to see why banks do not want their REOs and will often sell them at deep discounts.

Advantages of Buying Bank REO Properties

All liens against the property are removed once it becomes an REO, and taxes are paid. Unlike properties at foreclosure auction, REOs can be inspected prior to contract, and are listed with real estate agents. While many foreclosures are often in deplorable condition, REOs are sometimes restored to at least a readily salable condition by the lending bank. The bank or lending institution that owns the property will often offer you better financing on an REO purchase than they would on an ordinary mortgage loan. The bank or lender that owns the property will often provide an allowance for certain repairs. You can save money in your title search if you use the same title company that the lender used during foreclosure. They will often discount the cost up to as much as 100%! REO properties are usually listed on your local MLS (multiple listing service), or can be located by going directly to your local REO banks website.
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REOs will often include appliances While in hot markets, you may not see a difference in price between an REO and a typical property, during slower markets, you can buy REOs at deep discounts to the propertys actual value. All back taxes and liens are removed. Allows negotiation on rehab costs, interest, closing points, loan amount, etc.

In a REO sale the bank will evict the tenants/occupants (or you could leave them there and let them pay rent), remove any liens, etc. and do the basics. It varies from lender to lender, but often the bank will not make any repairs to the house and want to sell it to you in what is called as-is condition. In this situation you should seek the services of a home inspector to find out the state of the property and to help you decide whether you wish to continue the transaction. Although a bank owned property might look like a good deal on the outside, it is necessary that you do your background research on the property before you commit to any contracts. Your first priority should be to find out what the house is worth in todays current market; having a comparative market analysis carried out will help you with this aspect of the purchase. If you are working with a real estate agent he or she will do this for you.

Fix'em and Profit

The biggest discounts on REOs are attached to those that need repairs. REOs that are in poor condition can often be purchased for a fraction of their value and quickly resold for huge profits. By targeting these properties you will get tremendous discounts and be able to make good money with them.

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People who receive notice of foreclosure from a bank or loan company normally will have little incentive to clean the house as this will take time and money. The reasons that they are in foreclosure will probably be because they cant afford the mortgage payments, therefore it is highly unlikely that they will have the time, money or motivation necessary to either clean the house or make the necessary repairs that are usually needed.

In general around 4% of the value of a property is required each year in maintenance alone. For example a $250,000 property will require $10,000 in repairs and maintenance each year. A person in foreclosure, who could not afford mortgage payments, is unlikely to be able to afford such costs. Do not buy an REO if the property has major structural problems unless you have the knowledge and cash required to supervise repairs. Houses with foundation or structural defects are risky investments and should be avoided by most investors. If you have any doubts about the structural condition of an REO, then get a professional home inspector to perform an inspection on the entire house. If it needs more work done than you are willing to deal with, do not buy it. Stick to houses that look bad, but can be quickly made presentable with affordable fix-up. Many REO houses that need fix-up work are listed for sale at reduced prices. Don't let the asking price fool you into thinking that the bank won't take an even lower offer. Each bank works differently, but one thing they all have in common is that they want to get rid of their REOs. This represents a tremendous opportunity for you to cash in on REOs.

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Your offer may be the only one they've had and they may jump at the chance to get rid of that liability.

Timing and Good Deals

Some banks are motivated to sell many of their REOs at the end of their fiscal year, or at the end of the month or quarter. They do this because they want to clear their books. Some banks decide to sell their REOs at discounts when they accumulate too large an inventory. When a bank has too many properties in their REO account that they want to sell any way, they can and will often accept low offers for them. Here's the catch. You probably will never be able to pinpoint when the timing is exactly right, but that is why you should make offers and counter offers. Remember that you can always raise your offer if your first one is not accepted. Timing is a factor that many banks use when they adjust the price of an REO. To be successful with REOs, you must continuously make offers! If you make one offer each month, it will take you a long time to get a good deal. If you make several offers each week, you will strike gold sooner. Don't worry about rejection. There are plenty of deals coming down the pipeline, particularly in tough economies.

What About Cash Needed For Purchase?

What about the money needed to buy REOs? If you build a reputation as someone who can consistently find bargain property, you will attract people with cash to invest. In the beginning they can become partners and share in the profit. Later they can become a source of short term loans. You can pay a generous rate of interest on loan money you only need for two or three months. That's the time you need for fix-up and a quick sale. Will a bank give you a mortgage loan to purchase their REO? Rarely, but

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you can always ask. The best deals are made when you have ready cash from some other source. Once you have located an REO at a deeply discounted price, you'll find it easy to sell, because you can offer it for sale at a below market price and still make a nice profit.

Four Ways to Find REOs

Here is a look at four ways to find REO deals: 1. Subscribe to an online foreclosure listing service. usually include bank contact information.

They list REOs and

Simply do an online search for "foreclosure list" and "bank foreclosures list" and you'll discover plenty of lists to choose from. 2. Call the foreclosing attorney right after the auction and see if the property was taken back by the bank. 3. Create a list of banks, lending institutions and finance companies. Contact them on a regular basis. 4. Have your real estate agent find REOs on the MLS.

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Here are details of the four methods: Number One -- Subscribe to an online foreclosure listing service. Without question, joining an online foreclosure listing service is the fastest and easiest way to find REOs. These listing services specialize in finding REOs all across the U.S. Their databases hold literally thousands of REOs. They group the REOs by city, state and zip code so you can search for them at the click of the mouse. Some online foreclosure listing services offer a one week free trial. Join one and perform a search for REOs in your area. You'll be surprised at how easy to use and affordable these services are. Do not limit yourself to your immediate area, especially if you live in a small town. Search for all REOs within a reasonable driving distance of your home. You can stretch your reach to anywhere in the U.S. by finding cash buyers who will buy houses anywhere if the price is right. Number Two -- Call the foreclosing attorney. An attorney or company specializing in foreclosure sales is usually engaged to handle a bank's auction sales. The name of that attorney or legal firm is usually listed in the notice of foreclosure. Call that office late on the day of the auction and see if the property was sold. If not it has become an REO and you may have a purchase opportunity. Ask the attorney if the bank was foreclosing on a conventional mortgage loan. You can explain that if it was a conventional loan you would like to talk to the bank about purchasing the property.

(NOTE: A conventional loan is one that is not insured by an agency of the U.S. government - like the FHA. The FHA handles its own foreclosures through HUD. Conventional loans may be partially insured with Private Mortgage Insurance (PMI). More about that later.)
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If the attorney is cooperative and tells you the loan was conventional you can next ask if he could give you the name and number of the manager who handles REOs at that bank. Sometimes they will and sometimes they won't. If you don't get a bank contact from the attorney you must call the bank and find the person that is responsible for that property. Chances are you will be passed from person to person until you find the right manager or department - don't give up! It's a good idea to always give the property's address as you move from one person to the next. The bank may have various people handling various properties.

Contacting the REO Manager

Keep track of everyone's name and phone number. That will save you time in the future. Your telephoning might go something like this: Question One: "Who should I talk to about making an offer on the bank owned property at (property address) that was not sold at yesterday's foreclosure auction?" Question Two: "Can you please give me that person's direct telephone number?" Question Three: "Do you know what might be the best time to reach that person?" You will often be talking to secretaries or clerks who don't really know much about REOs, so always be very patient and polite. Once you have reached the person responsible for the REO, you can explain that you would like to make a purchase offer on the property in question. If the
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manager is receptive make your first offer right there over the telephone. Even if your offer is very appealing, the banker will probably tell you that he has to clear it with a supervisor. Be prepared for the bank to counter your offer. Later we will discuss how to negotiate with banks and get their REOs at tremendous discounts.

TIP: When you finally find an REO manager always ask them if their bank has any other REOs in their inventory. You may find that the bank has several REOs that it would like to get rid of. At this point, get the addresses of the properties and go take a look. If they have potential you might be able to get a package deal. Imagine the amount of money you could make if you can get several properties at the same time and flip all of them to one or more investors!

You can sometimes get exceptional cooperation from an REO manager if you agree to take a junk property as part of your deal. The few thousand dollars you allocate for the purchase of that junk property can cement a relationship that can be like gold to both of you. If necessary flip the junker at cost to an investor who specializes in fixers. Number Three -- Create a list of lending institutions. Create a list of banks and lending institutions. Usually, the larger the lending institution, the more REOs it will have. Since banks are not the only institutions
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that make loans to homebuyers and owners, make sure your list includes all of the lending institutions in your area. This method takes some time because you must put a list together, but it will pay off big if you use it regularly. Look in your Yellow Pages for lenders/mortgage loans. Here is a list of headings to look under: Banks Financing (especially "Finance Companies") Mortgages Loans Many lenders sell their mortgage loans to large financial institutions that package the loans and sell them to retirement funds and other such buyers. But you will find other lenders who keep the loans in their own portfolio. Call each lender and ask if they have an REO manager. You will quickly target the ones who, at least occasionally, have real estate they want to sell. With this method, it is important that you are persistent. Spend a couple of hours each week making phone calls to locate REO managers. Then remind them that you are an investor who is interested in buying their REOs. After you have called them several times, they will remember you and some may begin calling you when they have something to sell. If you have trouble contacting the bank by phone, another option is to overnight or fax a letter to the bank stating your interest in the property. Some buyers and investors include a check made out to a local escrow company to get the bank's attention. This check is usually a small percentage of the total purchase price and should be refunded if no transaction takes place, but it shows you're a serious buyer. An important part of your REO investing business will be building and
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maintaining a relationship with these people. Number Four -- Build a relationship with a real estate agent or broker. Most banks list their REOs with a real estate agent, so that the listing will appear on the MLS. That's where all other agents in the area look to find homes for their prospective buyers. Once your real estate agent knows what to look for he or she can alert you to the best opportunities. It will not take your agent much time to find REOs if she/he knows what to look for on the MLS online database. The Multiple Listing Service, also known as the MLS, is a computerized service that provides real estate agents with a detailed and comprehensive list of all the properties for sale that are represented by other brokers in the market. A "listing" is a term real estate agents use to describe a property that they currently have for sale. You can also have a search done on the MLS for listings that are bank owned. See if the same Realtor is the listing agent for more than once. Youre looking to find agents that are the ones the banks list their REOs with. These can be the agents you want to work with so you can be the ones who gets the good deals. When they know you can close quickly, you will become valuable to them and they may be more willing to work with you on these types of deals. The more deals you get from them, the more responsive your cash buyers will be as youll be supplying them with a steady stream of profitable deals.

Finding REOs On The MLS

In the MLS, REOs will usually not be called REOs. They will be listed as "foreclosures" or "bank-owned" properties. Your agent will have to enter the word "foreclosure" or "bank-owned" as a key search word in the computer. When your agent pulls up all of the foreclosures in the MLS, the property owner will be listed as a bank. Some agents do not know this. Make your real estate agent aware of what you are looking for.
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Now your agent can provide you with a listing summary for each foreclosure listing. A listing summary is a one-page fact sheet for any selected property.

It gives detailed information about each property something like this: The property's address The asking price The type of property - single family home, townhouse or condominium The number of bedrooms and bathrooms The number of days that the property has been on the market. A brief description of the property, including its current condition and other important facts. The description will be brief, but it can reveal clues that the bank is motivated to sell at a steep discount. The "number of days" is a strong signal. The longer the property ha s been sitting unsold, the more anxious the bank will be to get it off the books. Make offers on properties that have been on the market the longest period of time. Give priority to properties that are in poor condition. Hard to sell properties that sit on the market for long periods of time and properties in poor condition are hot potatoes that lenders want to unload as quickly as possible. In the "description" look for phrases like "Bring all offers!", or "Foreclosure property -- bank says to sell!" or "Property in need of repairs, Great deal for investor or handyman", all are signals that the bank is ready to sell for the best deal they can get.

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Hot Prospects
Now that you have targeted some properties that appear to hold profit potential, have your real estate agent call the listing agent. The listing agent was hired by the bank to sell the REO. From that agent find out if there have been any offers. Often you will learn that there have been two or three offers on the property that have been turned down by the bank. What do you think that means? You may have found an unmotivated bank. Have your agent ask the amount of the purchase offers. A few listing agents will furnish this information, but most will not. The listing agent has a fiduciary obligation to the bank and is not obligated to give you this information. What if the listing agent does share that information? If the rejected offers were higher than what you would offer you should move on to another REO. If the real estate business is slow you might consider checking into this property later. The bank may have decided they are ready to sell. As with all real estate investing, you want to spend a limited amount of time and effort on each prospect. Do not waste a lot of time on any one property. Now you have four methods for finding REOs. Use them all or use a combination of them until you find the method that works best for you.

TIP: It's always best to make a purchase offer before the REO manager lists the property with a real estate agent. Over time you will build relationships that will allow you to do this on a regular basis. Always try to contact the bank's REO manager as quickly as possible after a property has not been sold at the foreclosure sale. You might be able to buy the property before it is listed with an agent.

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Often, after the initial offer is made in writing, counter offers are made verbally until agreement is reached. This is a slow process because the bank REO manager may be in a different time zone, or the responsible people who must approve the deal are tied up in meetings. It may take many days of verbal countering before a final agreement is signed by all parties. During that time, there is a danger that another offer will come in and the bank may accept it. This is especially likely to happen if negotiations go over a weekend. Try to reach agreement with the minimum amount of counter offers.

Higher Deposits
A bank will require a higher good faith deposit than a private party would. Expect to write a check for 3% to 5% of the purchase price when making an offer on an REO.

Double Loan Applications

If the bank is willing to finance your purchase they will probably require that you get prequalified with their institution within a few days of accepting your offer. Unless you are paying cash which is preferable, you may have to go through the loan application process with them, even if you get the loan somewhere else. While they can ask you to apply with them, you are under no obligation to accept their financing, unless, of course, not to do so would kill the deal.

Bank Chooses Service Providers

The bank will insist that an escrow and title company of their choosing be

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used to close the transaction. They have previously negotiated fees with these companies, so they know what their expenses will be.

Since these companies are favored by the banks you'd expect them to be very efficient, right? In fact, everyone in these companies seems to be overworked and service can be slow and careless. Many times it will be your real estate agent (or you) who will do much of their work to push the deal through to the close. You may go through a few agents before you find one who is consistently willing to work harder than normal to make sure you get the house you want.

Not The Usual Contract

The bank may insist that you use their contracts, not the standard one used by real estate brokers in your area. It's critical that you or your agent read every word of this contract to make sure your interests are protected. Remember the bank's attorneys who wrote the contract are protecting the bank. You must be careful to protect yourself. Just because something is printed in a contract does not mean that it can't be negotiated out or changed to suit your needs.

Double Check Everything

As mentioned above, you will find that the bank's listing agents and escrows officers are often overloaded with work. Repairs may get ordered, but there is seldom a follow-up to see that the work was done. You must take it upon yourself to double check everything and assume nothing.

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If you are buying REOs off of the MLS try and find an agent that has experience working with banks and is not afraid of some extra work to protect your interests. You may find that your local board of realtors has a publication that will allow you to place an ad for an agent with REO experience. Interview a few and see if you can find one that seems to understand what will be expected of them. Do not work with an agent who will not give you priority. You will buy several REOs each year, and you will end up listing some of those properties for sale with the agent. As a repeat customer, you deserve to be at the top of his or her list of clients. As mentioned above, you can search out REO Agents and see if you can be one of the first people they alert about new REO listings. By dealing with you, they will be able to double end their commission and make twice as much vs. if you had a different agent representing you who would be getting half the commission.

Choosing A Real Estate Agent

A word of caution here You will find that just about any agent you speak with will want an opportunity to do business with you. Finding an agent to work with is easy. Finding a good agent requires a little more effort. That is why it is important that you interview at least three experienced agents before making a decision. Questions You Should Ask an Agent Before Choosing One

1. Have you worked with investors before?

If you end up working with an agent who has never worked with an investor, then you'll need to make sure he or she understand that you are in this business to make a profit. In REO investing, this means buying properties that will sell quickly. Make it clear that you only buy properties in neighborhoods where properties are selling quickly and that will be part of the agent's job to warn you about neighborhoods where properties sell slowly. One way to do that is to search areas by zip code to find the areas with the most CASH buyer activity in the lower price ranges. This is where the cash buyer investors are actively buying. By suggesting to your agent that they find these areas, youre helping them target areas for you to be
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buying in because you know you should be able to sell quickly to these people. Your agent can be compiling a list of the cash buyers in these areas so you can reach out to them and invite them to get on your buyers list. Now you have people to sell your properties to quickly who understand what wholesaling is all about. When looking for properties to buy, let the agent know that you want only conservative, fair market values when choosing deals. You must not overpay for a property. Explain that since you are buying these properties at a discount, you will be able to offer them to buyers at below market value. The agent should understand that the low price will make earning her commission much easier when she begins marketing the property for sale. Remember, if you have the lowest priced property in the neighborhood, your agent should have a buyer for you very quickly.

2.

How long have you been a real estate agent?

The number of years an agent has been selling real estate gives you an idea of their experience. However, you may find a less experienced agent who is hungry enough to understand exactly how to work with you. I feel it is better to have a less experienced agent who will be there when you need him or her, than a more experienced agent who is always busy with other clients.

3.

Are you willing to spend the time necessary to help me do this? Explain to the agent that they will need to search the MILS and find the fair market values of several properties each week. Stress that the payoff for them is that you will end up purchasing several properties a year, totaling a number of nice commissions.

Those are some of basic questions you should ask real estate agents when interviewing them. Remember, you are not necessarily looking for the smartest, the most experienced, the wealthiest or the most personable agent - just one who will be eager to give you prompt service.

Some REOs Are Time Wasters

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Bankers are not stupid! They will only discount the price of a home if it suits their needs or they have no other choice. Any REO in reasonable condition will be listed for sale at prices close to its market value. Remember... that is the ASKING PRICE! You don't know if the bank will accept a lower offer until you make it. Don't talk yourself out of any profitable offer. If your offer is refused you can always counter... or move on to another property. Each bank works a little differently, but they all have similar goals. They want to get the best price possible and have no interest in "dumping" real estate cheaply if they don't have to. Generally, larger banks have an entire department set up to manage their REO inventory. Once you make an offer to purchase, banks usually present a "counteroffer." It may be at a higher price than you expect, but they have to demonstrate to investors, shareholders and auditors that they attempted to get the highest price possible. You should plan to counter the counter-offer. Your offer or counter-offer will probably have to be reviewed and approved by several individuals and companies. Even once an offer is accepted, the bank may insert wording like ..."subject to corporate approval with 5 days." Banks always want to sell a property in "as is" condition. Most will provide a Section 1 pest certification, but not unless you include it in your offer and negotiate the point. They will allow you to get all the inspections you want (at your expense), but they may not agree to do any repairs. That doesn't mean you shouldn't ask for repairs! You must A-S-K to G-E-T! Your offer should include an inspection contingency period that allows you to terminate the sale if the inspections reveal unanticipated damages that the bank will not correct. (As you get to know the REO Agent, you may elect not to include this to assure them that the sale will go through quickly. This may help you get more deals down the road offered to you. If youre getting a big enough discount, this may be
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worth the effort.)

Ask The Bank To Pay For Repairs

Even though you agreed to as is, always give the bank another opportunity to make repairs or give you a credit after youve completed your inspections. Sometimes theyll re-negotiate to save the transaction instead of putting the property back on the market, but dont take it for granted. Banks do not want to see a lot of proprietary disclosures. In many states the banks are exempt from presenting a Sellers Transfer Disclosure Statement. If there are real estate agents involved, either representing you or the bank, state regulations often require those agents to provide you their disclosure statements. That means they must report any defects they have noticed in the property. That is only a help if the agents have actually looked at the property. Often they have not. Most banks will not provide financing on their REOs, but it doesnt hurt to ask. Especially if the property has extensive damage and you are purchasing it "as is.

More on Purchase Offers

Before making an offer, have your agent contact the listing agent and ask the following: Are there any inspection reports? What work has the bank agreed to? Is there a special "as is" form? How long does it take the bank to accept an offer? How does your agent deliver the offer?

Offers are usually FAXED to the bank. The listing agent needs to FAX your original documents. There often is no formal presentation. Nothing happens evenings and weekends, because banks are closed... and they probably leave early on Friday. Since there is usually no face-to-face presentation to the bank, provide the listing
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agent with a loan pre-qualification letter or better yet, a pre-approval letter if you plan buying with a mortgage loan. The bank wants to be sure you have the financial ability to close the deal. If you are an experienced investor, providing a buyer biography may also be a good idea. Make your offer easy to accept. After a year or two of doing deals you may have accumulated enough ready cash to finance your own deals. When you are flipping properties your own money will only be tied up in a deal for a matter of days. That means it doesn't take a fortune to keep buying with your own cash. When you reach that point you can get the manager of the bank where your money is on deposit to write a letter to the REO manager confirming that you have enough cash on deposit to do the deal.

Signals
It's not always easy to identify signals that indicate what a bank expects out of a property. Here are some examples that will save you time when looking for bargains. Move on if you find the following: The bank has rejected offers that were higher than you are willing to pay. For example, an REO with a fair market value of $250,000. You know that you would pay no more than 65% of its value, which equals $165,500. You find out through your real estate agent that the bank has recently rejected two offers. One offer was for $196,000 and one offer was for $179,000. Both of these offers were higher than the $165,500 you would be willing to pay.
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In a case like this, wait one or two months before submitting an offer. The bank may become motivated and sell it for a deeper discount. Make notes on this property so you will have the information ready when you make your offer. The bank has had the property fixed up. The bank has invested a good deal of money into getting the property into marketable condition and it will not be willing to quickly sell it at a deep discount. If the bank has made just a few minor cosmetic repairs and you see that the property still needs a plenty of work - make an offer. If the property is in move-in condition, you are probably wasting your time... but it never hurts to make an offer.

Stay Away From These REOs

As with any investment you must use common sense when considering an REO purchase. Avoid REOs that are in bad locations. Bad location makes it hard to sell any type of real estate. REOs in rundown sections of town where there is obviously no pride of ownership may be difficult to sell at a profit... unless you find a rehabber that is experienced in dealing with property in those areas. Rural property is only for specialists. Very few buyers want to live a thirty minute drive from the nearest school or grocery store. Watch out for junk property. Unless you are skilled at rehabbing always get a professional home inspection performed to assess the amount of fix- up work a property will require. Better yet... get a contractor to give you an estimate of repair costs. Always be on the lookout for investors and rehabbers that have the skill to handle what would be problem properties for others. They want deals and will pay you for them... if they are priced right. Generally you want normal homes in pleasant neighborhoods. These are the best
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homes to buy and they sell to an owner-occupant. Those are the homes that have the largest pool of potential buyers and where you can make the most profit if you are willing to do minor fix up and then have your agent place them on the MLS at a below market price. High end homes in very expensive neighborhoods are tempting targets, but like rural property they are for specialist only. You can lose your shirt in the blink of an eye if you don't know what you are doing with big money deals. Start off with deals that are sure things. When you have experience and some financial strength you might try some luxury home deals. A good rule is to always make sure you are buying a property that is affordable to most people.

Determining Value
Find the fair market value of the property. If you are working with a real estate agent they can help you with that. If you are an experienced investor you might be able to trust you own judgment as to the value of the property. You can get a free ballpark estimate online at Zillow.com, HomeGain.com or HouseValues.com If you are still unsure of fair market value, you can hire a certified real estate appraiser to give you an "opinion of value" or "drive by appraisal". These will be far less expensive than a full appraisal and should give you an accurate idea of the property's value. Use them only when you have a bank that is ready to sell you an REO at a low price, and for some reason you are not sure what the fair market value is. When formulating your offer always be conservative in your estimate of the fair market value.

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Inspect The Property

Some feel that it is important that you personally inspect every property. It's your neck that will be at risk, so it's important that you know exactly the condition of the property. Just ask the REO manager to arrange for your visit. During your inspection make a detailed list of all the needed repairs. Your list will be invaluable when making your offer to the bank. You will be able to enumerate to the banker all of the various repairs that are needed.

Do You Need A Real Estate Agent?

Real estate agents are professional salespeople who are responsible for selling most of the real estate that is marketed in the United States. When homeowners and bankers want to sell a property, they usually hire a real estate agent. Real estate agents greatly increase the odds that a property will sell quickly, and for a fair price. Real estate agents work on a commission basis. Commissions usually range from 3 to 6%. The majority of agents want a commission of 6% of the total sales price.

The reason real estate agents want 6% is that much of the time you will list your REO property with an agent, and an agent from another real estate agency actually finds the buyer. When this happens, the agents from the two different realty companies will split the commission 50/50. The agent who had originally listed the property ends up getting only 3%, rather than the whole 6%. It's very common that a property is listed with one agent, and a different agent brings in a buyer. When an agent from another company brings in a buyer, it does not mean that the agent you hired to sell your property has not earned their money. Your agent has put a lot of time and effort into marketing your property up to the point that a buyer is found. They will work with the other agent and make sure that the sale of the property
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goes smoothly. Real estate agents don't get a commission until the property is sold. You don't have to pay them anything unless they sell the property. Your agent will pay all the costs of marketing your property. They will protect your best interest in the property at all times. Overall, you will find that an agent's 6% for marketing your property and finding a qualified buyer is well worth the money. One of the best things about using real estate agents to sell property is that they don't get a commission until the property is sold. You don't have to pay them anything unless they sell the property. Once they find a qualified buyer, their commission comes out of the proceeds from the sale of the property. So you never have to pay them out of your pocket up front. They get their money at the closing of the deal.

When Should You List With A Real Estate Agent

You will only need to list with an agent when you want to sell a home at its retail value to an owner-occupant who qualifies for a mortgage loan. That's where you find the most profit, but it usually takes longer than selling to an investor. If you reach a point where you are consistently buying and selling 3 to 5 properties per month you may consider putting your agent on a yearly retainer. For that guaranteed money they would do the MLS search, determine a market value for the properties, push your purchases through closing and handle of sale of your listed properties. Many REO buyers build a list of investors and flip (make a quick sale) the properties they buy to the names on that list. The profit is less, but you get immediate income and you don't have to pay a real estate agent's sales commission.

Profit Formula

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Once you have found a desirable REO it is critical that you understand how to calculate the potential profit of the deal before you buy. Use this easy formula... Before I explain the formula you must pledge to never pay more than 65% of an REO's fair market value. This gives you a minimum of a 35% discount. If the property needs more than cosmetic repairs deduct the cost of those repairs from your offer. You need a 35% margin because of the many costs involved with each deal. To figure the potential profit there are five different costs that must be factored into the deal: 1. You will have the total amount of money you are offering the bank for the REO. 2. Settlement or closing costs. These are all the costs associated with the buying and selling of a property. When a property settlement occurs, both the buyer and the seller of the property have costs that must be paid in order for the ownership of the property to transfer. These include attorney's fees, transfer taxes, fees charged to record the new deed, etc.

TIP: Here's a rule-of-thumb figure that can be used to estimate the purchaser's closing costs. Use 2% of the purchase price as a general estimate of the amount you will pay for the purchaser's side of the settlement costs. In most areas of the U.S. that will be close to your actual cost. If you are using a real estate agent ask if their experience shows that 2% is a fairly accurate figure. Another idea is to ask an escrow agent or attorney. You may want to adjust this percentage up or down depending upon the various closing costs in your area.

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3. Fix-up cost. All the costs associated with getting the REO into top marketing condition. You want it to show well and sell quickly. Examples of fix-up costs are painting and carpeting; plumbing and electrical repairs; renovation or updating of kitchens and bathrooms, if needed; and any other repairs you must do to get the property into salable condition. If you will be flipping to a rehabber you will not have fix up expenses. 4. Carrying cost. These are your monthly expenses during the period you will own the property before selling. They include monthly loan payments, property taxes, monthly utility bills, and monthly hazard insurance premiums. You should factor in at least four months of carrying costs. If the real estate market is slow in your area ask your agent for the average time it takes to sell a house and base your figure on the information. They can find that number through the MLS.

Here's another rule of thumb Calculate monthly loan payments and taxes to be about 1% of the loan amount.

Utilities and insurance will be about another two hundred dollars a month. The two hundred dollars per month includes one hundred dollars a month for all utility bills, such as electricity, gas and water. No one is living in the home, so utility bills should be near the minimum.

Another one hundred dollars or more per month is for hazard insurance. Insuring a
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vacant property is costly.

Always Buy Hazard Insurance

Listen! Never try to save a few dollars by ignoring hazard insurance on your properties! Without fail you must always have your properties covered by insurance... and it must be a policy that covers an UNOCCUPIED home. If you have normal homeowner's insurance and the house burns down before being sold, the insurance company will provide you with nothing but sympathy. Establish a relationship with an insurance agent and explain that you are an investor and need each of your unoccupied houses covered for a few weeks or months before they are sold. The agent will understand and write the correct policy. When you buy a new property you can just telephone the agent and they will arrange immediate coverage. Here's a question- Does responsibility for damage to a property transfer the moment the deed is signed, or not until that deed transferring title is recorded? One may consider choosing to notify their insurance agent of the date on which the deed will be signed and ask that the property be covered by insurance from that day forward. 5. Marketing costs. These are the costs of selling the property. Use 10% of the selling price as a rule of thumb. That will include: a.) 6% for your real estate agent's commission. b.) 2% for the seller's settlement fees. Remember to check with your real estate agent to see whether you should adjust this figure up a little or down a little, depending on the area you live in. c.) 2% for helping your buyers pay their side of the settlement fees. Many buyers have barely enough money for their down payment and cannot afford to buy the home
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from you unless you help them with their settlement fees. In a buyer's market you will often be asked to help pay for some of the buyer's settlement costs. Factor this cost into the formula. (You can ignore these if you are flipping the contract to a wholesale buyer/investor.) There you have the primary costs. You must add them together in order to find the amount of potential profit you will make. Because fix-up costs vary with each property, there is no percentage that can be used for that in the formula. You will need to get a contractor to give you estimates on your first few deals. Once you have completed a few deals, you will be able to start estimating fix-up costs on your own.

Never overlook any of the five costs:

1. Purchase price 2. Purchaser's settlement cost (2% settlement cost when you purchase the property) 3. Fix-up cost 4. Carrying cost 5. Marketing cost (6% real estate agent commission, 2% seller's settlement costs, and 2% for helping the buyer pay his settlement fees, totaling 10% of the price you sell the property for) Examples of Calculating the Five Costs: Example 1. Let's say you have found a bank willing to sell an REO. The property is in a clean, well located neighborhood. Your agent informs you that houses sell quickly in this neighborhood when they are in good condition and priced fairly. This property has a fair market value of $200,000. After negotiating with the bank, you agree to pay $130,000. The property is in good shape and needs only painting inside and out, new carpeting and a few minor general repairs that cost about $200. Your contractor estimates the
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total fix-up cost will be $3,500. Let's calculate your potential profit. $130,000 $ 2,600 $ 4,500 $ 3,400 1. Purchase price. 2. 2% of the purchase price for your settlement costs. 3. Estimated fix-up costs. 4. 4 months of carrying costs. $200 a month for insurance and utilities, and $1300 a month on your first trust loan of $130,000 (1% of the $65,000 = $1300). This adds up to $1500 a month X 4 months = $6000. 5. 10% of the fair market value of $200,000 = $20,000. (6% real estate agent commission, 2% percent seller's settlement fees, and 2% for helping the buyer pay his settlement fees).

$10,000

$159,100 Total for all five of your major costs. Take a look at you potential profit: $200,000 -159,100 $ 40,900 Sales price based on the fair market value Total for all five of your major costs Potential amount of profit you could make on this deal

Your potential profit for this deal is $40,900. Not bad when you consider that this can all be done in your spare time! Example #2: You have found an REO in a good neighborhood where houses sell well. The property's fair market value is $150,000. The bank is willing to sell at a discount. Your standard offer is up to 65% of the fair market value. With this property that comes to $97,500 ($150,000 fair market value X .65% = $97,500). After careful inspection you find a need for painting, carpeting, and a new roof.
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It also needs new kitchen appliances. All of this will cost about $8,500. Since the property needs so much work, you decide to offer the bank just 60% of the fair market value ($150,000 fair market value X .60% = $90,000). The bank accepts your offer. Now it's time to add up the five costs to be sure there will be enough profit in the deal. $90,000 $ 1,800 $ 8,500 $ 4,400 1. Purchase price 2. 2% of the purchase price for your settlement costs 3. Estimated fix-up costs 4. 4 months of carrying costs. $200 a month for insurance and utilities, $900 a month on your first trust loan of $90,000 (1% of $90,000 = $900), totaling $1100 a month X 4 months = $4,400 $15,000 5. 10% of the fair market value of $150,000 = $15,000 (includes a 6% real estate agent commission, 2% seller's settlement fees, and 2% for helping the buyer pay his settlement fees) $119,700 Total for all five of your major costs Now how much potential profit is there in the deal for you? $150,000 Sales price based on the fair market value - 119,700 Total for all five major of your major costs $ 30,300 Potential profit you could make on this deal $150,000 sales price minus $119,700 total costs, gives you a potential profit of $30,300. A nice profit, wouldn't you say? Now think about doing three or four such deals in a year! That should put a smile on your face. Sure, the formula seems just a bit complicated at first. After using it a few times, you will see that it's a nifty way to project your profit on any REO deal that you plan on
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buying and selling at retail. Keep in mind that this formula is meant to be an estimating tool. A property could take four months to sell, or only two months. The actual fix- up costs of a property could be a little less, or a little more. And you must accept that you could make more or less profit depending on the situation. Use the formula whenever you have a bank ready to sell an REO. Let the formula tell you if you have a winner. It's more efficient to just flip a contract, but the profit will be less. When flipping you can use the formula to run the numbers and show your investorbuyer what his or her potential profit will be on the deal.

REO Negotiating Tactics

Your key to success with REOs is knowing how to deal with a bank when you make your offer. Remember, the property did not sell at auction and you are doing the bank something of a favor by taking an REO off its hands. You are therefore dealing from a position of strength. There is a chance that you are the only person who has shown any interest in the REO. This means that the bank will have a genuine interest in helping you buy.

Understanding The Banker's Problem

Here are five factors that are most important to bankers: 1.) Type of property - Some properties are harder to sell than others. Usually a condominium is harder to sell than a single family home. A four unit apartment building may be harder to sell than a well located townhouse. 2.) The bank's inventory - A bank with 50 REOs is more motivated to sell properties at a discount than a bank that has only one or two. If you ask the banker may tell you how many REOs are in their
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inventory. More than one? Ask for a package price if you buy them all. The banker will understand that you expect a LARGE discount. 3.) How long in inventory - The longer property has been in the bank's inventory the better your chance of getting a serious discount. Occasionally and depending on the market, REOs can stay on the market for a year or more. The bank should be ready to listen to your offer no matter how low it is. 4.) Timing - Is it getting near the end of the bank's fiscal quarter or year. A bank's fiscal year may start in March and end the next February. Banks like to dispose of non-performing assets before the start of the next fiscal year. This can be a major factor in a bank's motivation to sell at a discount 5.) Condition - A property's condition is the biggest factor in the kind of a deal you can expect. If an REO is in poor condition, the bank will be much more willing to sell at a deep discount. The ideal situation would be one where you could negotiate a deep discount and get the bank to loan you the money to buy the property. Seldom will you find a bank that will give you both a good price and good terms unless the country is in the middle of a severe recession. Those are the periods when nobody is buying homes and the bank is desperate to get rid of the property. If a bank is willing to make the loan you may be able to get either price or terms, but probably not both. If you manage to get both price and terms, it will usually be a compromise of the two. In other words, you may get some terms, but the discount you get on the property will not be as deep as it could have been. There are periods when the economy and real estate market plunge. That is when you can forget the rules and try for anything you can get. Many banks will be hanging on by their financial fingernails... and they will deal!

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Price and Terms

Now let's have a little more talk about price and terms: Price: When you want to buy at the lowest possible price, you will make the bank an all cash offer. An all cash offer means that you will get financing from another source and pay the bank cash for the property. You do not ask the bank to pay any of your closing costs or to finance the REO. This makes a low offer more attractive to a bank. They know they will take a loss on the property, but it is worth it to them to get a non- performing asset off of their books without any more costs. Terms: When you ask the bank for terms, you are asking it to finance your purchase of the property and pay as many of the costs as they will accept. Sometimes this can be the smart way to buy, but understand that a rock bottom price usually comes with an all cash offer. Terms can be anything you are willing to ask for. For example: a.) The bank finances the property for you. Since you are dealing with a bank, why not have them lend you the money for the REO? A bank would rather have a paying loan on its books than an REO which costs it money each month. b.) Ask the bank to give you an interest rate at least 1% below the going rate. Even if you negotiate an interest rate that is one-half of a percent below the going rate, you are saving money. If you are planning on living in the property or finding a renter, then this will lower your monthly payment and give you a shot at positive cash flow. c.) The bank agrees to charge you no points for the financing. Points are another way of saying "percent." One point equals 1%. Points are what banks charge you for the privilege of loaning you money. It is just another

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expense you must negotiate with the bank. Always ask the bank to waive the points if they are going to finance your purchase. One point on a $100,000 loan equals $1,000. Two points on the same $100,000 loan equals $2,000! Negotiate a "no-points" loan with the banker and you are paying yourself hundreds of dollars for a few minutes of your time. d.) Bank to pay all closing costs. Closing/settlement costs can easily add up to 2-3% of the purchase price. Avoid paying those costs whenever possible. When you begin negotiating with a bank that is willing to finance the REO, decide which of these is the most important to you and the deal: Price (a deep discount) Terms (low cost bank financing) Both price and terms (a slight discount and low cost bank financing) If you are going to flip the property, then you must buy at a deep discount that a cash offer will provide. If you are planning to purchase the property for use as a personal residence or as a rental, financing and terms will come out on top. Terms would include the lowest possible monthly payment.

Intimidation Proof Yourself

Remember, bankers are just people doing a job. If they do a poor job they get fired. If you don't make good buys you soon go broke. If you have had limited opportunity to negotiate deals it is only natural that you will feel unsure of yourself in the beginning. Just don't let yourself get intimidated by bankers. You both have the same objective... make a deal! Your attitude must be that this is only one of many deals that are available

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now and tomorrow. If you can't reach a profitable agreement you are ready to go to work on the next one. Be polite and business like. Expect the same in return. Just get a pleasant, but serious look on your face as you ask the banker for more than you are willing to settle for. Don't be crazy, but ask for anything that makes the deal better. Let the banker say no to some of your requests and feel like he has done a good job negotiating for the bank. You know that the banker wants to get rid of the REO. He knows that you can go on to another deal and he will still be holding a property the bank does not want.

The Price
There is an old saying you hear from negotiators, "The first person to mention a price loses!" With that in mind ask the banker for his asking price. Do not start off by stating your offer. If you are contacting the banker directly, right after the foreclosure auction, he may not have a set asking price. Even then, don't make an offer until you hear a price from the banker. He may want less than you're ready to offer. When you finally make your offer it's a good idea to talk price first. After the selling price has been agreed upon negotiate for financing and terms if the bank is willing. Terms mean nothing if you have not agreed upon a price. When dealing with small lenders, the REO manager may or may not have experience negotiating the sale of the bank's property. Just remember that

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they have no personal attachment to the property. The banker understands that you are an investor and expect to make a profit on any REO deal. Some investor's begin the negotiation by asking "What's the least amount you will take for the property if I pay all cash within 7 days?" They ask that even if they know they are going to ask the banker to finance the purchase. The objective is to get an idea of the banker's rock bottom selling price. Suppose the banker replies, "Our price for that property is $195,000." No matter what the asking price you could counter with, "Based on my evaluation of the property that figure is high. When I visited the property yesterday it was easy to see that it needs a good bit of work to get it into marketable condition. Take a look at my list of needed repairs. Here are some photos I took to show why the repairs are needed."

Discussing Instead of Negotiating

Your approach should be that you and the banker are really just DISCUSSING, not NEGOTIATING. That makes it easier to ask for everything you want and hear what the banker offers. If properties are selling slowly in that neighborhood be sure you mention that. "Slowly" can mean different things. If every property offered for sale fails to sell within the first month, you could feel reasonable in saying that properties are not selling quickly. If your agent reports that the MLS shows it is taking six months to sell a home, be sure to pass that fact onto the REO manager. He probably already is aware of that, but let him know YOU are aware of it. Point out the major repairs that are needed and then add that there are many other smaller things that need fixing.
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If at some point during the "discussion" the banker asks (after he has already stated an asking price) what you are willing to offer, be ready to give him a figure and support it with what you've learned about the property. It is not a good tactic to offer a rounded-off price, such as $130,000, $240,000, etc. Convince the banker that you have carefully calculated the amount you can pay for the property. Check your notes as you tell them that you can pay $229,795 or $231,250. Let it appear that you have carefully calculated all of your potential costs. And you have, haven't you? Offering an even amount such as $230,000 makes it too easy for the banker to automatically counter your offer. You can continue by saying something like, "$228,295 is a fair price for this property, because of all the work that's needed. I can offer that if the bank will finance the property with no points and pay all closing costs." At this point the negotiation could go in any direction. If the banker counters your offer with, "I would consider $230,200, but I would need all cash for the property, because we are not providing financing for REOs." Now you have the chance to say that you can pay all cash, but would need to buy the property for $220,500. Whenever you give the banker something make sure you ask for something in return. That is just good negotiating. Of course, the banker may do the same to you. During the discussion you are probing to see if the banker is tired of dealing with this particular REO and is ready to sell at a deep discount. When you are near a deal the banker may say that he needs to speak with a real estate agent and/or a contractor about the REO before making a

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decision. Don't worry, that's just the way they do things. If you've been honest in presenting your offer there should be no major problem.

Honesty First
Look, as with anything, honesty is always the best policy. Your goal should be to do many deals with this banker and you want trust on both sides. The banker may decide to contact a real estate agent to get a second opinion on the price you are offering for the REO. Most real estate agents will take look at the property and make a guess about the cost of needed repairs. They aren't contractors and often the agent may overestimate the cost. That could make it easier for the agent to report to the banker that your offer is reasonable. What if the banker gets a contractor to estimate the cost of needed repair work. Good. Contractors often give banks high estimates. Sometimes these negotiations lead to a purchase and sometimes they don't. If the banker can't agree to a price that fits your needs, then thank them for their efforts and ask the banker to call you if they later find the price can be adjusted. On the deals that don't work out, just put that REO on a list along with your notes. Call the banker back in two or three weeks. You never know when it will suit the bank to sell. This happens often, so always follow-up. Just like all of us you will develop your own style of dealing with bankers and REOs. Just jump in and let yourself grow into this incredible opportunity.

Flipping REOs
You can generate cash flow in real estate by flipping houses. That means when you buy a home you only hold it long enough to find a buyer. Once you have a signed contract that allows you to purchase an REO at a big discount, you can sell that contract to an investor for a quick profit. This is called "flipping a
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contract" or "flipping a house", or just plain flipping. Check your states laws on this to make sure youre complying. In some cases it only takes a small deposit when you sign a contract with a bank. That means you don't need a lot of cash if you are going to immediately flip that contract to an investor for cash. That investor's cash reimburses you for your deposit, plus gives you your profit in quick cash. In other cases you can find private lenders when you need to come up with all cash to make the deal happen with the bank. Does this sound simple? Well, it is! In most cases real estate investing means buying and renting property for long term appreciation. Many investors begin with very little cash and they need at least semi regular income to live. They generate cash flow by flipping some of their deals. The problem is that many just keep flipping and don't hold on to some of the best properties for the big money in long term increases in real estate values. There should be a place in your business plan for doing both. If you are new to the game, and have little or no money, then flipping properties is a good way to get up and running. You can put thousands of dollars in your pocket in a matter of a few months using just enough cash for a deposit on a contract. When you flip a contract to another investor that person then has the right to purchase the REO at the price that has been agreed upon in the contract. How much cash will be needed for your original deposit? It will probably be anything from $1000 to $5000. You can only flip a contract if the contract allows you to assign the deal to a third party. I am not an attorney and do not intend to give legal advice in this or any other publication. Let me just say that it is my understanding that any contract can be assigned, unless there is wording in the contract that specifically forbids assignment. Some states have laws about this that need to be addressed and abided to.

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Assigning The Contract

One tactic is to include the phrase "and/or assigns" directly after your name on the contract. That may or may not be necessary if all contracts are assignable, but it removes all doubt if the question of assignability should ever come into question. Here's something you must prepare for. When writing a contract, the banker may not agree to include a clause in the contract allowing you to assign it to someone else. You may persuade the banker to allow the assignment clause by explaining that after consulting with your tax advisor you may decide to take title to the property in your company name or in the name of your business partner. When possible specify in the contract that you have ten business days to decide on title. This will give you two weeks to flip the property to an investor. Some bankers will accept the local Board of Realtors standard purchase contract for your offer. Other banks will require you to use the bank 's contract form. They may even write the deal up on their contract according to your verbal negotiation with the REO manager. The bank's contract may have a clause that specifically forbids assignment. Read that contract to be sure there are no surprises. If the bank is financing the deal there may be no way they will agree to an assignment of the contract. After all, the bank wants to know who is going to end up owning the property and making payments on the loan. You could be trying to sell your contract to someone who is unemployed and has no money and bad credit.

If there is any question about contract assignment you can state that you've been negotiating the deal on behalf of yourself and a business partner and his name will go
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on title.

Another tactic might be to take title to the property in an LLC and then sell the LLC to an investor. Yes, it adds another layer of paper work, but LLCs are easy and inexpensive to form. You can buy a kit for a few dollars and do it yourself. Just make copies of the kit's form every time you buy another property to flip. If the bank is financing the deal they would have to accept the LLC as the payor on the loan. This is just thinking from a person who is not qualified to give legal advice. Always get the advice of an attorney before doing this.

Since contract law varies from state to state the sensible thing is to find a real estate attorney and ask for his suggestions. That should cost you about one hour of the attorney's time. A good investment if you ask me. And it's tax deductible against your real estate profits. Plus, you can use the attorney's advice on all future deals.

Cash Is King
The most efficient way to buy REOs is for all cash. There are plenty of hard money lenders that will make short term loans on properties that have the kind of protective equity found in good REO deals. Find their ads in the financial section of your newspaper or in the classified section. Also do an online search for hard money lenders.

TIP: A hard money loan is a species of real estate loan collateralized against the quick-sale value of the property for which the loan is made. Most lenders fund in the 1st-lien position, meaning that in the event of a default, they are the first creditor to receive remuneration.

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Hard money lenders structure loans based on a percentage of the quick- sale value of the subject property. This is called the Loan-to-Value or LTV ratio and typically hovers between 60-70% of the value of the property. The lender charges "points" (one point is one percent of the loan amount, usually financed into the deal), which can range from 1 to 5. For the purposes of determining an LTV, the word "value" is defined as "today's purchase price". This is the amount a lender could reasonably expect to realize from the sale of the property in the event that the loan defaults and the property must be sold in a 1-4 months' time. This 'value' differs from an appraised value.

When you are flipping you will need the hard money loan for a very short period of time. Cash deals go together quickly and leave the banker with a smile on his face.

Flipping Step by Step

Flipping simply means buying or contracting to buy a property and reselling the property or the contract quickly, as opposed to holding on to a property long term as a rental. Flipping comes in several varieties, most of which are legal and profitable, some of which are not. Recent regulations have been put into place to block the flipping of certain types of financed property. That is why you will seldom have the opportunity to flip an REO that is being financed by the bank. Flipping a purchase contract is another story and should not be a problem with REOs in many cases. Let's keep it simple: STEP 1: Find a few investors who are ready and able to close quickly on any good
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deal you get under contract.

A good way to find buyers is by going to RealEstateInvestorsLive.com

You can also check sites like Craiglist.org and Backpage.com to find real estate listings. Many investors list their properties there. Simply contact them asking if they would be interested in buying properties you find. The ones that agree can go on your buyers list. Another way to find investors is to advertise for them in the largest newspaper in your town. Run your classified ads in the "Investment Property" or "Money Wanted" section. Or...

You may find investors by calling any phone number you see on "We Buy Houses" ads. Or...

Another good source is a local real estate club. You can find a list of real estate clubs at LegalWhiz.com

Get each interested investor's name, street address, email address and telephone number. More ways to motivated home buyers can be found at CashFlowInstitute.com

Your job is to convince each investor that you will regularly be providing them with properties at a cost well below fair market value. Screen your investors and make sure that they understand that they must have their money ready when you bring them a good deal. If they can't show that they have needed cash readily available, demand that each be prequalified for a fast loan from his bank or lender. To prequalify for a loan means that the investor has had his bank declare him qualified
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for a loan before he actually needs the money. It's even better to get a pre-approval letter from a lender.

Qualifying Money Partners/Buyers

Require each investor to illustrate sincerity by providing you with a detailed letter that includes the following: Proof of Funds or a prequalification/approval letter from a lender. How many days will he need to produce the needed cash? Will he buy properties other than single family homes? Which areas of town are acceptable? What is his price limit per property? Does he plan on buying more than one property? Start a database entry on each investor you talk to. When you find a deal check your file for an interested investor. Then you can contact that investor and set the wheels in motion. Soon you will have several investors you contact at once to get the property sold quickly. STEP 2: You and the banker sign a purchase contract allowing you to buy an REO at a deep discount. The better the deal the more money you can ask from your investor. Now you can call the investor you have lined up and tell him/her that you are ready to assign the purchase contract to them. To assign the contract, create a document that goes something like: "I, YOUR NAME, hereby assign all of my rights and privileges under this contract to Ivan Investor for $ to be paid at closing." In the blank, fill in the amount of money the investor has agreed to pay you, including your contract deposit.

The Benefit Of Buying at 65% Of Value

You will find that many investors will jump at the chance to buy property for 70 or 75
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percent of market value. Your newly acquired REO knowledge will allow you to buy properties for 65% of their fair market value, or less. That means you can pocket at least 5% of a property's fair market value when flipping a contract. Over time you may run across some investors who will be happy buying properties for 80% of their fair market value. You will make a delicious 15% profit from those flips if you have a contract to buy it at 65% of value and there will still be room for the investor to make a profit. As we explained earlier, your signed contract with the bank should have the words, "and/or assigns" right after your name in the purchaser's section of the contract. This gives you the right to assign the contract to your investor. You did check the contract to be sure there was nothing in it that forbids an assignment, didn't you? Here's how the figures in a deal might add up. You found an REO with a fair market value of $200,000. You have negotiated with the bank to purchase it for a total of $130,000. That's 65% of fair market value. Your purchase price is $130,000. Your investor will buy from you at 70% of fair market value. That means the investor will pay you $140,000 for the property. Your contract with the bank is for $130,000 and the investor is paying you $140,000 - you pocket the difference of $10,000 at closing. That's when the investor will pay you the $10,000 and then he will pay the bank $130,000 for a total purchase price of $140,000. You have no other costs and no other money in the deal besides the money you gave as a contract deposit. You have previously explained all of this to the investor, plus the fact that they must reimburse you for the deposit you submitted with the purchase contract. Since the investor is actually the one taking title he or she pays all the normal closing/settlement costs. STEP 4: The last step is the settlement/close. If it is customary in your area for the
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principals to attend the settlement, you must be there with the investor. This is important because you don't want any last minute complications to kill the deal. The banker doesn't know the investor, and might get confused. At the same time, the investor doesn't know the banker, and might get confused. At this point, the banker should have no problems with you flipping the property as long as the bank gets the total amount of money that it is due at settlement according to the contract. Often, at the closing, the bank is represented by an attorney you have never met. He just wants to get the deal done and should present no problem. There should be absolutely no reason for any complications to arise. If there is something you now have an understanding of how the system works and can easily handle problems. Bank, investor, escrow personnel and you all want to get the deal done. Everyone involved wants to move on to other business. If you used a real estate agent to find the property, they are entitled to compensation. I suggest paying the agent at least one percent of the property's sale price. If there was extra work or service provided you can bump that figure up some. You want a full-out effort from the agent on your next deal. You will only get that if you pay for the service rendered.

Advantages of Buying Bank REO Properties

All liens against the property are removed once it becomes an REO, and taxes are paid. Unlike properties at foreclosure auction, REOs can be inspected prior to contract, and are listed with real estate agents. While many foreclosures are often in deplorable condition, REOs are sometimes restored to at least a readily salable condition by the lending bank. Thats not often the case in bad economies where banks are over run with properties. That can be good though as deeper discounts can often be realized.
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The bank or lending institution that owns the property will often offer financing with better deals than they would offer on traditional properties. The bank or lender that owns the property will often provide an allowance for certain repairs. You can save money in your title search if you use the same title company that the lender used during foreclosure. They will often discount the cost up to as much as 100%! REO properties are usually listed on your local MLS (multiple listing service), or can be located by going directly to your local REO banks website. REOs will often times include appliances.

While in hot markets, you may not see a difference in price between an REO and a typical property. During slower markets, you can pick up REOs at large discounts to the propertys actual value.

REOs Overview
The lender/bank has taken ownership of the property, either through an agreement with the owner during pre-foreclosure or at the public auction. The lender usually sells the property to recover the unpaid loan amount. The lender typically clears the title for any buyer, but the potential bargain is often less than a pre-foreclosure or auction property.

Contacting The Lender

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You should contact the lender directly and ask for the REO or asset management department to find out how you can view and make an offer on the property. REO means "Real Estate Owned" by the lender. It's another way to say the property has already gone through the foreclosure process and has now been repossessed by the foreclosing lender. If you have trouble contacting the bank by phone, another option is to overnight or fax a letter to the bank stating your interest in the property. Some buyers and investors include a check made out to a local escrow company to get the bank's attention. This check is usually a small percentage of the total purchase price and should be refunded if no transaction takes place, but it shows you're a serious buyer.

Make Your Offer

Although the lender usually clears out any liens on the title, you should still make any purchase offer contingent on a title search. Also, find out if the lender has made any repairs to the property or if it is being sold "as is." The lender wants to recover any money they've put into the property, but you can often make a successful offer that's still substantially under the market value. There is no set timeframe within which the banks must sell their REOs; however, banks often want to get REOs off their books rapidly. As a result, many REOs sell quickly. The only exception is if there is a "redemption period" for the owner to buy back the property after it is repossessed by the bank. State law dictates if there is any redemption period. The bank will typically wait until the end of any redemption period to sell the property. Keep in mind that sometimes contacting the lender can be frustrating, as the main purpose of a lender is to loan money, not to sell property. So even though the bank may have a department that handles bank-owned property for sale, that department may be hard to track down in some instances.

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How to Contact Lender

Your first step is to contact the lender who now holds the property to find out more details and possibly set up a viewing of the property. You or your agent should submit your purchase and sale offer to the lender directly to the listing agent who will forward it to the lender for consideration. Once it is received, they will accept it, reject it, or make a counter offer. Once you have an offer accepted, the bank or loan company may prepare a contract for you to sign. It is vital that you take a good look at the contract and have your legal representative go over it with you. The purchase and sale agreement (or contract) will serve as the letter of closing. All terms and conditions in the purchase and sale agreement will be adhered to.

3 Ways to Find Bank REO Property

Here are a few ways you can get an incoming stream of deeply discounted Bank REO property coming your way so you have good deals to cheery pick from. One way is to do a Google search for lenders. Its important to understand that not all lenders fall into the same category in terms of the investor. Youve got the big institutions, the medium size lenders, and then smaller local lenders and banks. Compile a list of these lenders with their website address. Look for pages on their sites to see if they list Bank REO property. You can contact the lender about a particular property to find the contact information for the Bank REO department and/or Bank REO manager that handles their REOs. This is valuable as you now have the beginning of the inside track on future houses they want to sell at discounts. Treat these people in a nice and friendly way. Let them know youre looking to buy properties, and that you may even be interested in bulk purchases. Since their job is to get rid of as much property in the shortest amount of time, you can become a valuable resource for them.
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Smaller lenders are even more willing to work with investors. When a relationship is built, they might even let you open up and let you see their entire Bank REO inventory. When that happens, you are in a very advantages position as you can start to not only flip these houses to other investors, you might even be able to flip bulk packages. Bulk packages can lead to bulk profits. That means youre making a whole lot more money faster. Another way to find Bank REOs is to contact Foreclosure Attorneys. You might find these attorneys mentioned in the foreclosure listings, or you can research attorneys who specialize in foreclosures. If theres very little equity in a property that goes up for auction due to foreclosure, often times there will be no bidding. That results in the property going back to the bank. You can let these foreclosure attorneys know that youre interested in properties that arent able to be sold at the auction. This can become another potential source of REO properties. Another way to find Bank REOs is through real estate agents that the bank uses to sell their REO properties. Talk about a steady supply of discounted real estate. In order to deal with these agents successfully, its important to put yourself in their shoes. What is their objective and how can you make it happen for them in an easy way. Their number one goal is to get an offer on a property fast that they know will close. Its even better if that offer has no contingencies. That means there are no stipulations that must be met in order for the transaction to proceed and close. If the buyer can show that they have the cash to close the deal, thats even better

How To Create Bank REO Offers That Get Accepted

In all successful negotiations one must put themselves in the shoes of the person theyre trying to influence. By understanding their needs, you can position yourself and your offer to meet those needs so your offer has a much better chance of being accepted. In regards to getting Bank REO offers accepted, you need to put yourself in the shoes of the Bank REO Listing agent.
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Theyre the Realtor who is handling the transaction for the lender. You want to win them over so youre not only able to put one deal together, but MANY more deals going forward on a regular basis. Just consider for a moment the types of offers theyre getting presented with for a single Bank REO listing Some will be all cash offers Some will need financing and the time to make that happen Some will have contingencies that must be met before the buyer will truly commit to buying the property Some will need extra time to close on the deal Some will be able to close very quickly. So if youre the real estate agent, youre going to perceive these offers differently and prioritize them accordingly. Generally speaking, whats the most important aspect of an offer to this agent? Generally speaking its the one who has a buyer that has the financial ability to actually follow through and close the dealand close quickly. Also, if this same buyers offer has no contingencies such as the offer is based on my partners approval, this offer is based on professional property inspection acceptable to buyer, etc. Bottom line What offer is closest to the lenders asking price, is going to close quickly with the least amount of hassles for the real estate agent. You see these agents are VERY valuable to a real estate investor because if you can show them you can close a deal quickly without contingencies, they will in turn value you. One more element to getting your Bank REO offers accepted is by creating relationships with real estate agents that handle these types of listings. Start contacting different lenders in your area to find out the names and contact information for the agents that handle their listings. Another way is to contact some of your local real estate offices and see which of their agents specialize in Bank REO LISTINGS. Youll need to know that all agents can SHOW you Bank REO listings. Thats easythey just look them up in the Multiple Listing Service (MLS).
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Thats not what Im referring to here. You want to know who the agents are that are working directly with lenders to LIST these properties for them. Why? Because these people always have a fresh stream of Bank REO listings becoming available. When you reach out to them and contact them regularly, building an open line of communication, they begin to know who you are and that youre serious. Combine that with the fact that theyll know you have the ability to present offers on properties and actually close on those deals, who do you think theyll want to know about new listings that are coming out? Do you think theyll consider your offer more positively knowing you can make their job easier? Of course! Thats why we first started this my putting ourselves in their shoes. When we know what they NEED, we can give it to them so we both win. And in this case, you have the chance to profit over and over again because these agents will have a steady stream of new Bank REO deals to provide you with on a regular basis. When youre good to them, they can VERY good to you! Start reaching out to find these agents so you begin to know who they are. Its the first step and its easy.

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Markets
Real Estate Bubble and REOs You've read a lot about how areas of the US experienced a real estate bubble. What is a real estate bubble? A real estate bubble occurs when housing prices take an unhealthy climb instead of rising gradually with the rate of inflation or the rise in median incomes. When the bubble bursts, housing prices tumble, which causes the real estate market to collapse, often followed by a recession in that area. In a real estate boom, the cycle runs its course and a market correction takes place more gradually, with prices settling down to more realistic levels. What Causes a Real Estate Bubble? There are debates that occur among experts about real estate bubbles vs. real estate booms. Either way, the rising cost of housing encourages people to take on risky debt. The bubble (or boom) we experienced in the past had been fueled by falling interest rates, which makes higher priced houses more affordable, and the willingness of homebuyers to take out second and third mortgages, variable rate loans, terms longer than 30 years (unwise), mortgages that exceed the value of the home (if you can believe it), and interest-only loans (buyer beware!). Most of these place homebuyers at extreme financial risk. Guidelines Ignored The rule of thumb that your total housing expenses, including principal, interest, property taxes, and homeowners' insurance, should not exceed 25% of your gross monthly income has been tossed aside in recent years. The Center for Housing Policy reports that in recent years the number of working families paying more than 50% of their gross income for housing has jumped by 76%. When people spend so much on housing, they are often forced to use
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credit card debt to pay other expenses. In a good economy, they may feel confident that they're okay financially because their home is appreciating in value, but in reality, they're paying often outrageous interest rates on credit card debt and stretching the payments out over many years by making minimum payments. The people most at risk are those with adjustable rate mortgages. As interest rates rise, many people with adjustable-rate mortgages and low monthly payments that allowed them to buy a home they couldn't really afford will not be able to make the rising payments. According to Foreclosures.com, four out of five U.S. subprime loan recipients can no longer afford their mortgages. That means they are heading for foreclosure.

As home prices fall, these people may owe more than their house is worth. They may be forced to sell, perhaps at a loss. Where will they get the money to pay off their mortgage if the balance is more than they'll get for the house? Some will be forced to default and walk away from their home, ruining their credit for many years. At this point if the bubble is not bursting it certainly has a dangerous leak. Foreclosure rates often spike and that means banks will end up with more REO properties in inventory. Because of past mortgage fraud, qualifying for real estate loans can become much
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stricter. That means fewer people can buy homes and banks have a harder time trying to sell REOs. More REOs - Fewer people able to by! Thats a wave of opportunity for those who understand how to buy "bank owned property". That's YOU!

How

To Get Real Estate Agents To Bring You Deals 3 Times a Day.

One great thing about real estate agents is that theyve got their finger on the pulse of whats going on in the market. Plus they have access to the Multiple Listing Service (MLS) so they can know the second a new GOOD deal hits the market. Heres how to get real estate agents to bring you deals 3 times a day. Youll want to target new agents. Ones that are hungry that will take direction. Considering the amount of turnover, finding new agents is simple. You can contact some local real estate offices in your area and simply say you would like to interview 5 new agents. Set up a time when you can talk with each one to determine how motivated they are to work with you. Believe me, new agents are motivated and youll be able to quickly realize which one is the best fit for you. Tell these agents that you want them to send you deals 3 times a day that meet your criteria. These can be sent via email very easily and the new agents will usually be happy to do this for you. Just so you know, theres no cost for this. Agents do this all the time as a course of their business to try to find good properties for people. So this isnt costing you a penny. Youre going to let them know exactly what types of properties youre interested in, the age, minimum square foot, bedrooms and bathrooms, areas based on zip code, etc. Now that the MLS is computerized and highly detailed, this is easy for agents to set up so youre alerted quickly.

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You can even have them target words like probate, fixer upper, lender owned, vacant, foreclosure, price reduction, etc. As youre putting this relationship together with your agent, let them know that youre looking to do deals, a lot of deals. So if they can do this for you, they have the potential to create a regular pay check with the deals you buy. Thats something that new agents are desperately looking forand rarely find. So youre GOLDEN and very valuable to them. Theyll be more than willing to help you find these deals. And if theyre not, find another new agent. Thats simple! Plus, theyre doing the work of finding these deals for you and it costs you nothing. Once youve built a solid relationship with an agent and you trust them, you can create a pre-signed contract they can present quickly for you. That way when you find a smokin deal, youre not wasting time getting together and writing up a contract from scratch. Of course this contract should have the appropriate clauses to get you out of the deal in case you dont like it for some reason. This is one way you automate the process of finding discounted property and making quick offers that hopefully beat the competition to the punch. If youre an agent and you dont want to buy investment property, you can work this strategy in reverse. Simply contact investors in your area. You can find them at your local real estate club meetings, or look for classified ads that say I Buy Houses. Let these investors know that you can supply them deals 3 times a day if they will commit to using you as the agent that presents the offer. In fact, you can contact several investors and multiply they strategy so you have more people that might buy properties through you. This way you can begin building an army of buyers that know they must buy quickly in order to get the deal. This is one way you build a steady and reliable income as an agent.

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PRE-FORECLOSURE INVESTING
One of the very best ways to locate distressed owners is to monitor foreclosure actions. Here is how that works: When someone borrows money to buy a home (or borrows money against the equity in their home) they must sign a promissory note, which is their promise to pay back the loan. Lenders want more than just a paper promise for their money, so they require the homeowner to pledge his property as security for the loan. This is done with a mortgage or trust deed. The note is the promise and the mortgage or trust deed pledges the property as security for the loan. In effect the property owner has told the lender that if payments arent made on the loan the lender may take the property to satisfy the debt. Each state has slightly different laws concerning these security instruments. Some states use mortgages and other use trust deeds, still others use both. From this point on we will use the words "trust deed" and "mortgage" interchangeably. If the homeowner stops making payments (defaults) on a loan the mortgage allows the lender to force the sale of the property to recoup his money. That is called a foreclosure. There are two methods of foreclosure. The first is the judicial method. This means that the lender must bring an action in a court of law and get the courts sanction for the foreclosure and sale. This is the usual means of foreclosure under a "mortgage". In some states a mortgage may contain a "power-of-sale" just like that of a trust deed, which allows non-judicial foreclosure. The other method of foreclosure is non-judicial. This is the preferred method, because the property can be brought to sale much quicker than is possible in a court action. Nonjudicial foreclosures are the rule with trust deeds and those mortgages that carrying a power-of-sale clause. Here again, details of law differ in each state, but generally a non-judicial foreclosure goes along these lines: After the homeowner has missed two or more payments the lender (through a trustee) may record a Notice Of Default with the county recorder. The Notice Of Default starts the legal clock running on the foreclosure process. From the day this notice is recorded the homeowner has three months (varies) to catch up on all payments that are due, plus the costs that have been incurred by the lender in beginning the foreclosure process. If the homeowner is able to come up with the cash during this time period the foreclosure action is lifted and everything returns to normal. If the homeowner fails to bring the loan current by the end of the three- month period a
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Notice Of Trustees Sale is recorded and published once a week for three weeks. If the homeowner has not made up missed payments and foreclosure costs during this threeweek period the property is sold at auction on the courthouse steps. That is an overview of a typical foreclosure process. Details vary in each state. You must become expert on the foreclosure laws in your state.

FLIPPING FORECLOSURE HOUSES ONLINE

If we look around right now, we see homes being sold at unbelievable discounts. These discounts equal BIG PROFITS for savvy investors who know how to control these discounted properties and sell them quickly for a profit. Fortunes are being madeMillionaires are being created as we speak doing this I want to show you how you can be cashing in too! When you know how to find, control, and sell these homes you have the chance to make anywhere from $2,000 - $12,000 per deal or more Rinse and repeat to start growing your wealth. With all the Foreclosures and Bank REOs out there right now its not hard to find deeply discounted properties. In past market cycles, thats been a big challenge for investors. So in this market youre already light years ahead of the other successful investors who have walked this path before you. Its important to realize there are discounted deals waiting for you out there right now as you read this. The amount of money you can profit with these homes as mentioned above depends how big the discount is and what type of demand there is for the property. The great thing is, you can control both The discount is determined by simple negotiating. The demand is created by your buyers list. When you get those two elements dialed in, youre on your way to profiting from these types of deals over and over!
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One source to find discounted property is dealing with motivated sellers who are in preforeclosure. That simply means theyre behind on payments and the lender has started the foreclosure process. This motivated seller has a certain amount of time to take action or lose their house. Because theyre motivated, theyre also willing to sign the deed over to you and let you take over the payments. Its known as buying the property subject-to the underlying financing. Thats one way for investors to control the property. Another is through the use of an option agreement. In this section of the Foreclosure Wholesale System I want to give you a very simple way to start profiting from these distressed properties online - even if you have NO MONEY

HOW TO PROFIT THIS WEEK WITH LITTLE OR NO MONEY FLIPPING HOMES ONLINE... Contact other investors in your area to see if theyre interested in you bringing them deals. You can find investors online in your back yard by going to sites such as Craiglist.com BackPage.com Look for ads in the real estate section that say things like We Buy Houses, Rent To Own, Lease Option. These are usually ads placed by investors. Send them an email that says something like Hi, I noticed your ad and wondered if you were looking to buy more cash-flowing properties? I come across properties that Im looking to sell quickly and wondered if youd be interested?
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If so, please let me know what areas youre most interested in, price, size, age, etc. I look forward to hearing from you soon! Name email phone (optional) Once they respond, you can also ask them if theyd like you to add them to your buyers list. This way you can alert them quickly when you have a new deal youve actually acquired down the road that you want to flip. In the beginning you can make money as a bird dog letting other investors know about potential deals. A real estate bird dog makes on average anywhere from $500 - $1000 per deal. More if the deal is really good. Its a simple way to get starting making extra money while youre getting familiar with the process. If you did just one deal a week, would that extra money make a difference in your life? Im guessing it would at least help pay off some bills, right? Once youve done some deals like that and you want to keep more of the profit, you can control and flip properties to other investors FAST for a quick pay-day. The average profit on those types of deals is $2,000 - $12,000. Those investors then turn around and sell them for more, or keep them for their own portfolio. When you create a hungry list of RETAIL buyers you can often create even higher profits than above because youre able to sell the property for a higher price than you did to the investor, while still giving the retail buyer a discount. This means theyll jump at the chance to buy your bargain, resulting in a relatively short time before you get paid the higher amount. So as you grow, you can earn money flipping these properties to Wholesale buyers, and Retail buyers.

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The bottom line is this what if you flipped only one house a month for the next year and you averaged $5,000 per dealwould an extra $60,000 make a difference in your life right now? What if you took what you learned in this System and averaged $10,000 a deal? That would be an extra $120,000 dollars. Im guessing your debt would be gone, gone, GONE! What if you did only half that, would that still be enough cash to dramatically change the course of your life? Hold on tight because were just getting started. Your future is starting to look VERY bright!

LEARNING THE FORECLOSURE PROCESS IN YOUR STATE

Start by going to the public library and finding any books that describe the process in your state. If so, learn what you can from them, then visit the law library at the county courthouse. The librarian there will help you find what you are looking for. You can also see what you can find online. In the law library you will find two types of books that will be helpful: One contains the law as written by the state legislature. Often called statutes. The other is a "how to" book written for attorneys and called something like a "practice guide". The practice guide will be the more helpful for it is written in easy to understand language. The practice guide contains the practical aspects of the law, so attorneys wont have to research and reinterpret the law every time they have a case. The law library is a public facility. Although legal professionals use it most often it should be open to everyone. It is a valuable resource for any entrepreneur. After one or two visits you will feel comfortable there and you will have access to a wealth of valuable information. You can use your computer and the Internet to find legal information. Try: www.Findlaw.com Or do this, go to www.Google.com. In the search window type "state legal statutes" From there you can find your state and the location of your state's laws. Most states now
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publish their statutes on the Internet for everyone to see. Now that you have a general understanding of the foreclosure process you may recognize the two primary opportunities for a real estate investor. One is the auction on the courthouse steps. If the property owner fails to bring the loan payments current his home may be sold to the highest bidder at a public sale. It is possible to buy property well below market value at these sales and you may occasionally be interested in bidding for a property at the auction and we will cover those situations later in this system. But beware. This is only for the most experienced and well-financed investor. The Foreclosure Wholesale System offers something far better. We will explain how buying properties before a foreclosure sale is one of the golden opportunities and it is here that you should focus some of your attention. The gold can be found in pre-foreclosures, and how to claim that treasure is one of the things youll learn here. More on that later.

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THE SIGNAL
Remember, when a property owner begins missing payments on his home loan the lender has the power to start foreclosing by recording a Notice of Default (or other notice depending on the law in your state) or starting an action in a court of law. A foreclosure becomes a public notice that a legal action has begun on a particular property. It is just as if someone began waving a flag to let you know that here is a distressed owner and there might be an opportunity to buy real estate at a bargain price. Here is where you begin building your money machine. The foreclosure process is one of the few situations in real estate investing where you can easily find people in financial distress who may be willing to sell their property at less than market value. The notice is right there in the public records and it contains the name and address of the homeowner. One of your first steps can be to gather these names and addresses on a weekly basis, so you can prepare to contact them. Since the Notice of Default must be recorded with the County Recorder (or the like) you know exactly where to find the information you need. The recorder will have some kind of index to show all documents that have been recorded and the names of the people involved in the filing. This is usually called the Grantor/Grantee index. You may find this index online, on microfiche, in large books or in most counties in computer files. The Grantor/Grantee index is a public record and is available to anyone who wishes to use it. Visit the office of your County Recorder online and you should find the files. If not you can visit the Recorders office. Many different kinds of documents are recorded every day. The Grantor/Grantee index has listings for both parties involved with any recorded document.

In the case of a Notice of Default, both the name of the lender and the name of the borrower would appear in the index. The index is arranged alphabetically by last name and each listing also shows the name of the other party involved in the action, plus an abbreviation for the type of document. For example, lets say The Nasty Bank filed a Notice of Default against Don Trumpe. Under the Ts in the index you would find something like:

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GRANTOR OTHER GRANTEE Trumpe, Don Tubor, Bob Twash, Jack PARTY Nasty Bank City of L.A. Jagger, Mic DATE 6/32/99 5/ 1/96 8/21/97 NFD JUDG DEED DOC NUM 315367 251838 174421

The first entry is Trumpe vs. Nasty Bank. Under DATE you see that the document was recorded in June. In the DOC column you find NFD, which stands for Notice of Default. In the same index under the letter N you will find a similar listing for Nasty Bank The entries following the Trumpe listing are examples of how any line might appear in the county records. Long lists of names followed by a variety of documents that have been filed for or against the parties named. Each listing shows the name of the party bringing the action, the name of the party who is the target of action, the date the document was filed, a code indicating the type of document recorded and the number the county recorder has assigned to that particular document. Often the recorder maintains the index by years or groups of years. You may find the index divided in this manner: The years 1966 through 1970 are in one section. The years 1971 through 1975 are in another section. The years 1976 through 1980 are in another section. and so forth. For documents recorded within the current year there may be monthly, weekly or daily listings. This allows you to search for anything that was recorded as recently as the day before your visit. The system you are learning here suggests one way to locate distressed homeowners is you gather all of the newly recorded Notices of Default once each week. You do this a few ways. If you can access these files from you home computer (as you can in some areas) that is one way. If you cant do that then you can visit the county office where the records can be found. Or you can find list providers online as well that will supply the information.
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What you will be sending these people will be different from what theyll be receiving form other investors, so you will STAND OUT where others will get lost. Do what others do and do nothingbut be different and you will get the attention from the distressed owner that youre going after. More on what youre sending to get this attention a little later Find the Grantor/Grantee index that lists all of the documents recorded during the past week. Look down the DOC column to find any Notices of Default. Write down the document number (NUM) of each one you find. After youve gathered all of these numbers you are ready for the next step. The document number that has been assigned to each recorded document will lead you to a copy of the original document. This will be in another file somewhere in the same office. A variety of numbering systems are used, but most go something like this: As each document is received for recording it is stamped with a number. The documents are stamped with consecutive numbers in the order in which they are received. Next they are photographed onto microfilm in the same order. Or they are scanned into a computer file. Each roll of micro film or computer file is labeled with the range of documents they contain. For example the microfilm cassette might bear the numbers 1230897 1231645. That means that all documents with numbers that fall within that range will be contained on that reel of film. There may be a similar system for computer files. In assigning numbers some county offices use a reel, book or computer file number followed by the document number. The principal is the same. Using the document numbers you found in the Grantor/Grantee index, find the copy of the document. When you have located each NOD find the name of the property owner being foreclosed upon and the address of the property. There is other information in the document that you might find useful later, if you find the owner is willing to sell. Right now, to save time, you want only the owners name and address. Yes, this sounds complicated as you see it explained on the page, but it is simple once you get in the county office website and do it. If you visit the office itself, you can ask for help the first time or two.

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Heres a recap of these first steps: 1. Search weekly Grantor/Grantee index for Notices of Default. 2. Write down the document number of each default notice. 3. Search files for copy of that notice. 4. Write down name and address of owner on the INFO SHEET. You can also get Virtual Assistants to do this for you. Simply do an online search for find virtual assistants and youll be on your way. Depending on the size of the county youre searching you may have just a few names or hundreds. This is very tedious work, but you should do it yourself while you learn exactly how the system works. After you have completed a deal or two you will want to hire someone to do it for you. Again, a virtual assistant can be a very affordable source to get this done for you. There is another, less labor intensive way to find Notices of Default. Many counties have a legal or commercial newspaper that prints information from the public records and public notices. You will usually find a section devoted to foreclosure actions. Check with the librarian in you public library or in the legal library. Each may have a copy of your countys legal newspapers. Or do a search for legal newspaper YOUR CITY online and you may find one listed that specializes in publishing legal notices. In most counties you should be able to find a private service that provides daily or weekly information on foreclosures for a fee. Do a search online for foreclosure list to find them. These publications and services make finding properties in foreclosure much easier. BUT it makes it easier for everyone! That means that you will have at least some competition. Be careful! Some of these services are selling old and outdated listings. Demand references and check them out. If you are in an area where you have to dig the information out of the public records you will have a much higher contact-to-purchase ratio, because you will have fewer
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competitors trying to buy the properties. Even if you are located in an area with a smaller population you can still produce good profits, because few people will have the determination to stick with digging out the information needed. Whatever the situation in your area, never fear! This system gives you a proven advantage over what others are doing. Youve been very patient. Weve had to plow through these nuts and bolts before you can get into the good stuff. Keep the faith and read on!

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PRE-FORECLOSURE
This chapter contains truths about distressed property owners and why you will be contacting them in the "pre-foreclosure" period. That is the period between the recording of the Notice of Default and before the sale of the property on the courthouse steps. Now, it is true that every pre-foreclosure system is based on searching out owners in default and attempting to buy the property before the sale. In other systems you must knock on the door of the distressed owner, call on the phone or send a letter or two. If you have ever tried the first two methods you know they can be very unpleasant experiences. People facing foreclosure are under a great deal of stress and often react unpleasantly towards those who make an uninvited personal contact with them. Just mailing letters has never proven to be very productive until now! We have created a system that combines pre-foreclosure knowledge with direct marketing techniques. Your task is to learn the details of your states foreclosure laws. You must become very familiar with exactly how foreclosure works. Most states have strict laws protecting those being foreclosed upon from the unscrupulous. To avoid legal hassles and to be of real service to a homeowner you must have a solid understanding of foreclosure laws. Your goal is to make a profit, but you want to do it in a legal and responsible manner. Once you plunge into your online or law library research you will find it is not at all difficult to learn what you need to know about foreclosure. You will quickly recognize what sections of the law you should study and what parts will not pertain to your pre-foreclosure activity. Direct marketing! It has been a dynamic method of building the sales of many products and services in the last decade. Here in this real estate market it is going to build fortunes in pre-foreclosure investing. This pre-foreclosure, direct marketing system is based on direct mail and audio/video recordings. It is the combination of the two that makes this so powerful. It opens the door to profits in a stress free and personal way. Best of all the system is really very simple once you have it set up and running. The nice part is that much of it can be done by near minimum wage employees after you have
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developed hands-on experience and accumulated some cash reserves. To grasp the system, put yourself into the distressed property owners shoes for a few moments. He is having financial problems. The troubles are usually the symptom of some other event in his life divorce, illness, loss of employment or just plain lack of control over his spending habits. One of the unhappy facts of today is that a large percentage of those in financial trouble got there because of drug and alcohol abuse. It is likely that the homeowner has already missed payments on his car loan and credit card bills. Utility companies are after him for over-due bills, collection companies are dunning him and all kinds of creditors are on his back. Hes been straining to keep the payments on his home current. That is the usual pattern. When money gets short they let the other debts go, but keep paying on the home loan, so the family wont be without a place to live. Finally it becomes impossible to keep making payments on the home and the debtor slips into default. Missed home payments are a sign of serious financial trouble. A persons home is sacred to him/her and usually they will struggle as long as possible to make the payments. At this point you know the person is in financial and emotional distress. When the Notice of Default is recorded the home owner becomes a target for all of those who recognize his plight and they begin moving in and attempting to contact him about buying his home. They will knock on his door, call him on the phone at all hours, send letters and generally hound him into feeling even worse. You must have a better plan if you expect to get through all of those other distractions. In most cases these owners want to keep their homes. They are sure they will be able to raise the needed money to bring the payments current somehow. They will sell something, someone will give them a loan, their relatives will come to their aid or they just unrealistically hope for a miracle. Recognize the fact that for the first few weeks after the Notice of Default has been served on them the homeowner will not face up to the fact that he is going to lose his home. He will be embarrassed by, and resentful of those who aggressively contact him. He is still in denial. He believes he can solve his problem.

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One of three things will happen to the homeowner in default: 1. He will somehow raise the money to bring his loan payments current. He may be able to do this by refinancing his home. If he has enough equity he can borrow money by placing a second mortgage on his home. A friend, relative or employer might provide a loan. He may raise the money by selling something. Even so, these people are often right back in foreclosure within three to six months. 2. He will do nothing. For some reason a certain number of people in default take no action at all. They may just sit there thinking that somehow they will be saved. Or they move out of the home thinking they are leaving all of their problems behind. They wont talk to you, or if they do they wont let you help them. When you encounter this type, dont wear yourself out wondering why. Just expect it in a certain number of cases. Nothing you can do will change them. 3. The distressed owner will sell his home. This will allow him to have enough money to pay off the existing loan, back payments and costs.

Solution number three is where you come in. In most cases selling the home is the best course of action for the owner in default. It allows them to salvage at least a portion of the equity they may have in the home. Selling also keeps a foreclosure from showing up on their credit report, a very important consideration as they rebuild their life. It is difficult to get financing for another home with a prior foreclosure appearing on a credit report. It takes about seven years before a foreclosure will be removed from credit records. In most cases people get their lives back on track before that and want to buy another home. Those are your two strongest arguments when dealing with distressed homeowners: A. "Save at least some of your equity." B. "Protect your credit record." You must explain how important these points are going to be as the owners put their lives back together and try for a new start in their financial life. The third most important point in your effort to motivate them is: C. "I can help you escape the stress and anguish you have been
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experiencing." Now you can see that your goal is to buy a property that is facing foreclosure from the distressed owner during the period before it goes to public auction. This is your period of opportunity. Please understand that you will provide a valuable service to defaulting property owners, because of your home buying skill and your understanding of the foreclosure process. The homeowner has only a limited amount of time to save himself. His best chance is to put his home on the market the moment he receives the Notice of Default. It takes time to sell a home and that is something he is short of. Look at the problems he faces with the conventional home sales process: 1. If they have enough equity for a commission, a motivated sellers best chance of selling is to list with an agent and get his home on the multiple listing service. But often the distressed owner will waste time trying to sell the home himself. 2. Then he must find an agent and get the home listed. 3. Time passes while the agent gets the word out about the home being offered for sale. 4. A buyer may be found, but the buyer then must arrange financing. This takes time! What if the buyer finds he cant qualify for a loan? More time lost! 5. Seller finds a buyer and the deal goes into escrow. Many things can happen here to delay or kill the deal. Structural damage could be revealed by the pest inspection, the financing may fall through, title problems could develop, a busy escrow company swamped with work could delay the closing, etc. If the homeowner acted quickly they might have time to sell through normal channels, but many dont. They may find themself only days away from the forced sale with an urgent need to find a buyer. Thats where you come in. You must be able to let these folks know you are ready, willing and able to solve their problem by buying the home RIGHT NOW!

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DIRECT MARKETING PLAN

Now that you understand the situation facing the homeowner in default you are introduced to your first challenge. You must not only deliver your message to the homeowners, but you must get them to take notice of it. You will do this in the most effective manner yet developed - A carefully designed program of direct marketing. You are offering a service that the distressed owner should know about. You have the ability to help him save his equity, credit history and self-respect. At some point in the foreclosure process, some of these distressed owners will need and want your help. You will market your service to these owners through the use of letters, postcards and audio/video recordings. This is a very important combination. This dynamic and effective technique is being revealed in these pages for the first time. As simple as the system may seem, using letters, postcards and audio produces a dramatic increase in the contact/response success rate. In other words, you will get better results from your efforts with this system than many others. By faithfully practicing this system it will be possible to earn a remarkable amount of money each month. Not right away, but as the system builds momentum over the months. Lets take a look at each element of the system individually. * * * LETTERS Here you can present your message in detail. You can use proven copy techniques to create a persuasive presentation of your service and its benefits. Your letters must be created with a knowledge of good copy writing and direct marketing sales techniques. The thrust of each letter must follow the guidelines that have been proven successful by other direct marketers over years of trial and error. You see, you are just like any other businessperson with a service to sell. First you must be able to target those who have a need of your service. Thats much easier for you than for other businesses, because readily available Notices of Default lead you directly to your prospects. After you identify those who may want your service, you must do an excellent job of persuading them to contact you. To do this you can draw on all of the time-tested marketing and selling techniques that have proven successful for all kinds of other businesses. Selling and marketing is not so different from one product or service to
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another. Your job is made even easier by having a good understanding of the emotional and financial condition of your prospects. Your skillfully composed letters play on all of the knowledge you have of an owner in foreclosure and that allows you to make your message especially powerful. You will fashion your message to play on the distressed owners fears and anxieties. It will be designed to hit the owner with the reality of his situation and punch home your ability to save him. For your letters to be effective they must be read. Later we will cover powerful ways to improve your chances for that, but realize that sometimes your letters will be thrown away unopened. After all, dont you throw away unread many of the unsolicited letters you receive? In some areas of the country owners in foreclosure will receive dozens of letters from people trying to buy their property. These owners have already learned to fear the delivery of mail, because it has brought nothing but overdue bills and threatening letters from creditors for the last few months. They have reached a point where they dont want to see a letter from anyone outside of their circle of friends and relatives. Mail they dont expect or recognize may go directly into the trash unopened. It is not wise to rely on letters alone. POSTCARDS No one can ignore a postcard. It is just about impossible to pull a postcard from the mailbox without glancing at it. A person just seems compelled to take at least a quick look at a postcard, so you can be sure that if your message is brief and well presented, it will be noticed by 95% of your prospects. Your postcard must not identify your prospect as a distressed property owner or someone who is facing foreclosure. Since a postcard can be read by anyone delivering or receiving mail you must not expose the owners situation to others. That will cause him embarrassment and further distress. Neighbors and even relatives may have no idea of his problems and one of your prime goals must be to protect his privacy and dignity whenever possible. The theme of your postcards should always be your willingness to buy homes quickly. "FAST CASH FOR HOMES!", "NEED TO SELL YOUR HOME FAST?". These are general messages for most people, but they have special meaning for anyone facing the
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loss of their home through foreclosure. You can deliver that message on a postcard with no fear of angering your prospect. AUDIO CD / VIDEO RECORDINGS This is the secret weapon that puts unmatched power into your marketing efforts. This is a breakthrough in pre-foreclosure investing. Audio/Video will give you a huge advantage over all others contacting distressed property owners. There is an even stronger feature of this of which you should be aware. What is the most effective way to reach and influence a prospect? The answer is personal contact! One of the most successful ways to buy this kind of property is to knock on the owners door two or three days before the foreclosure sale. You would get a lot of doors slammed in your face. You would meet a lot of angry people who will make some pointed comments about your parents BUT, some would sell you their homes. The truth is that most of us just cannot or will not follow that course of action. It is just too distasteful. Even if you start off with good intentions it is such an unpleasant experience that you will soon be finding excuses for not doing it. Very few people can do it. The next best means of contact was by telephone. But some laws say you cannot make those types of unsolicited sales calls. And thats OK because there is a better way. When you send an audio cd or video recording to a prospect you can be fairly sure that it will be listened to and or watched. It is rare that anyone receives a free CD or DVD in the mail. How can they resist listening/watching and hearing what it has to say? Heres the best part of using audio or video. Your prospect will choose a time to play the CD when he is ready to listen! Get the idea? He chooses the moment. You are not interrupting his life. He is opening his mind to your message! He is ready to listen and concentrate on your message! It is the next best thing to being invited into his home for a chat. You are not embarrassing him by knocking on his door. You are not disrupting his evening with a phone call. He now has the time, so he puts the CD or DVD into his player or computer and LISTENS! This is a magic moment. This is the moment that can make you rich! The audio or video message must center on how he can solve his problem with your help. It must be delivered in a warm, friendly manner. The voice must be pleasing and the delivery must be non-threatening.

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Here again, you will use proven sales techniques to persuade the prospect to contact you and accept your help. The message on the recording must be carefully constructed to make the most of that magic moment when the prospect opens his mind. You can also instruct them to go to your website for more information and continue your message there. You can have a way to capture their info on your website for follow up. Always include a phone number for them to call as well so if theyre ready to act, they have a way to get in touch with you ASAP to get the conversation going.

Letters, postcards, CDs and DVDs the four building blocks of a successful preforeclosure, direct marketing system. Used with skill and persistence you have an all but fail-proof program. A program that has the potential to provide you with a cash flow of exciting proportions. It is very important for you to study and learn in two areas. The first is your states foreclosure laws. We are stressing the pre-foreclosure period in this manual, but we will also touch on other opportunities that can be found in the process. To have a real chance for success you must fully understand foreclosure law. This knowledge will allow you to not only make the most of every opportunity, but will keep you out of trouble. The law is not difficult to learn. A few hours spent with a practice guide will do the trick. It is often a good idea to look in the law library for the one or two books that will be the most helpful. Then contact the publisher and see about purchasing a copy, so you will always have it available for reference. The second area where you must gain knowledge is in marketing. In this manual we will provide you with everything you need to get your system up and running profitably. You will find the complete marketing plan explained in detail with examples. All you have to do is personalize it and put it into action. The reason you need to gain marketing knowledge is that situations change and your marketing methods must change with them. For example - Because your material will produce results you will find that others may copy it EXACTLY! As distressed property owners invite you into their homes for consultation, ask them to
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show you what they have received from other investors. At some point you will start to see copies of your letters, postcards and perhaps even recordings. Most of your competition will never understand that the marketing of pre- foreclosure skills is more important than any other aspect of this business. If you stay up-to-date with new developments in marketing techniques you will be miles ahead of the others. You will never have to worry about anyone copying what you do, because you will be modifying and improving your marketing material whenever necessary. It is becoming very practical to produce and make copies of your own audio CDs and DVDs. You may consider searching for the distressed property owners e-mail address and reach him that way (be aware of anti-spam laws). Just watch for new marketing opportunities. Millions of dollars are spent on direct marketing research every year. Much of that information can be yours for just the cost of a few books or a magazine subscription. By keeping up with new developments in the field you will discover scores of ideas that will improve your marketing material and the results they produce. Search for current marketing books at Amazon.com. Do an Internet search on Google for marketing information. You'll find plenty of material to keep you on the cutting edge.

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WHEN TO DO WHAT
Lets talk about your marketing schedule. What you do and when you do it. We suggest you begin by following this schedule exactly. At some point you may wish to test some variations, but in the beginning follow the proven path. Here is the situation. You know who your prospect is - a homeowner in default on his mortgage payments. You probably know where he is located - in the property that is being foreclosed. You know his condition - distressed. With this basic information you can plot a very effective strategy. You must let him know you can solve some of his problems by purchasing his home. That sounds easy, but remember he has retreated into a shell to withdraw from his troubles and he hopes they will be gone when he comes out. You have to do your very best to have your message coax him out of that shell and notice what you have to offer. There is just no way you can be sure of having your message in his hands on the exact day that he decides to take action. To have the best chance of reaching him during that critical period you must get your message into his home again and again. You can do that by using direct mail marketing techniques. The system is based on mailing your message to him every ten days. As you learned earlier, many foreclosure actions take about four months from the time the Notice of Default is recorded to the time the home will be sold at auction. That means you have a chance to contact him as many as ten times. With that frequency you will find the system produces very profitable results. You want your system to be as simple and easy to operate as possible. You may be mailing hundreds of pieces of mail each month. If the system is cumbersome and difficult you will find you just won't stick with it. The letters, postcards and CDs / DVDs will be created so that they are appropriate for use at any point during the pre-foreclosure period. You won't have material that must be mailed in a certain sequence to any particular homeowner. Each of your mailing pieces will stand alone and be designed to motivate the prospect, whether they are received during the first month of the process or the day before the sale. This makes the system much easier to implement. If you have a series of letters that are designed to be sent at a particular time in the foreclosure period - that is, the first letter must be sent only during the first month of the period, the second letter during the second month, etc. - the system becomes very cumbersome. If you will follow the schedule described in this chapter you will find it effective and
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efficient. It is so simple that the direct mail portion can easily be turned over to a minimum wage employee or virtual assistant after you get it up and producing.

Here is the schedule. You will mail on these days each month: st 1 of the month. 10th of the month. th 20 of the month.

Three mailings per month allow you to reach your prospect about every ten days, giving you a good chance to hit him with your message near the time his mind will be open to it. Yes, it is a game of chance. You will reach some prospects at exactly the correct time. You will miss on others. Still others will save some or all of your mailings and act on them when they are ready. The prospects that you are interested in reaching usually will not take any action until late in the foreclosure process. They usually won't do anything for the first two or three weeks after the default notice is received. Plan on adding new names to your mailing list about three weeks after a default is recorded against them. This is a good idea for two reasons. First, 90% of them won't take any positive action during that period. Second, your competitors will be falling all over each other trying to contact them as soon as possible after the default is recorded. Your first message will arrive after that madness. Now you have your direct mail schedule. Gather the names of owners in default, wait three weeks, add them to your mailing list, then mail every ten-days according to the schedule above. This schedule is based on a foreclosure period of four months. You must adjust the schedule to fit the time period allowed by law in your state. The principal will be the same. Wait for a cooling off period, then mail every ten days during the foreclosure period. There is nothing wrong with mailing during the first three weeks. Do so if you wish. You may occasionally find someone who panics and wants to sell instantly. Experience shows that this seldom happens. The worst that can happen with mailings starting
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directly after the default is that your name and message may have an extra chance or two to register with the prospect. (An exception to the schedule we have described above would be in state that allows only judicial foreclosures. These can take much longer sometimes a year or more. In such states you may want to mail once each month for the first six months, twice a month for the next three months and then every ten days up until the time of the sale.)

Heres what your mailing program looks like: Month #1 st 1 of month - Postcard A th 10 of month - Letter A th 20 of month - Postcard B

Month #2 st 1 of month CD or DVD A th 10 of month - Letter B th 20 of month - Postcard C

Month #3 st 1 of month - Letter C th 10 of month - Postcard D th 20 of month - Letter D

Month #4
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st 1 of month - CD or DVD B th 10 of month - Postcard E th 20 of month - Letter E

In states where you have a foreclosure period of four months or so, you will find that seldom does the process actually workout to fall exactly into the minimum time period allowed. In other words, even though the law allows the property to be sold some four months after the Notice of Default is recorded, there is usually something that will delay the process by at least a few days. The company that actually conducts the sale may not be available on the exact day. The owner in default may have the right to ask for one postponement if applicable in their state, etc. The trustee may be lax in arranging the sale. The lender may request a postponement. Any of these things can drag out the process. This means you would like the last message you mail to arrive a few days after the strict four-month period ends. If you will delay adding newly defaulted names to your list until three weeks after the notice appears you will come very close to meeting your goal. You will have to adjust your mailing schedule to meet whatever the foreclosure period is in your state, but the object is the same. Get your message to your prospects every ten days or so. The easiest way to keep track of what message should be mailed on what day is to enter them on a calendar. Example:

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Postcard A 8 9 10 Letter A 15 16 17 18 19 20 21 11 12 13 14

CD or DVD B 22 23 24 25 and so forth. 26 27 28

Just go through the entire calendar year writing in the mailing that should be sent on any particular date. It is then a simple matter to know exactly what you should be ready to mail at any time during the year. You can add new names to your mailing list at any point in the cycle. Just follow the mailing guide you have written on the calendar. Once you get your mailing program up and running you will find it is simple to maintain. Yes, it takes work, but anyone can do it. You can start by making it a family project. After you start making money you can have an employee do it. Your objective should be to work Notices of Default in your county and all adjoining counties. Since this is a numbers game the more distressed owners you contact with your mailings the more willing sellers you will find. Once your system is in place it will just be a matter of finding someone to search the county records for default notices in each county (or buy the listings). When you reach this point the profits can be incredible.

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HOW TO DO IT
In this chapter we will offer some suggestions on the nuts and bolts of operating your direct mail program. Your objective should be to keep it as simple and practical as possible. If it isn't easy to operate you will soon find reasons for not doing it. That's just human nature. There is no reason why your mailing can't be streamlined, efficient, practical and reasonably easy. You already know that you keep track of what should be mailed and when to mail by marking a calendar. Your next decision is how you will organize and maintain your mailings. We suggest using a computer program, but we will also cover a manual system. Anyone who has ever had to work with mailing lists has to wonder how they ever survived without a computer. A computer will save you hours of time and frustration in any direct mail campaign. That goes double for this system. Things change so quickly with computers and software that we will not give you any specific suggestions along those lines. Most database programs can organize mailing lists and print address labels. The software loaded onto your computer may already feature a database program that will do the job. In general you will follow the steps listed below: 1. Defaulting homeowner's names and addresses are gathered from county records. 2. Hold the names for about three weeks from the date of the default recording before adding them to your database. 3. Names and addresses are entered into your database with the date you will first mail to them. (The next mailing date on your calendar.) Put the dates in a separate field in your database. 4. Delete all existing names that have received ten mailings (or whatever number you have decided upon) with no response. The date you entered when the name was first added to your database makes this easy. 5. Every ten days print out scheduled letters (personalize with mail merge) and labels and get them ready for mailing. 6. Mail!

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This is a simple system, but it does take work. Putting the mailings together every ten days is a chore. Keep in mind the handsome rewards that can be produced by this effort and remember you will soon have employees doing the tedious work. If you must operate within budget constraints limit the number of names you will mail to at any one time. With a computer you can produce personalized letters. Working with these distressed homeowners is done on a very personal basis using their names in your letters which is an advantage. Without a computer you will be unable to do this. Your rate of response may be somewhat lower, but if you put all of the other aspects of the system into practice you will still be successful. The computer will also produce mailing labels for your postcard and CD/DVD mailings. You will be mailing hundreds, even thousands, of pieces every month when you have the system in full operation and the profits flowing. Yes, it can be expensive, but keep in mind that compared to the money that can be earned your mailing costs will become a drop in the bucket. Even so, you will want to do everything practical to keep your cost of mailing to a minimum. Look into getting a bulk mail permit. This can save you a great deal of money in postage costs. Be sure you understand what the postal service requires when you mail in bulk. You may need special software and you may have to have your mailing list screened for address errors on a regular basis. Direct mail research shows that the best response comes from letters bearing first class postage. BUT, there is only a slight drop off in response with letters carrying bulk mail stamps. The Postal Service allows you to have your bulk mail postage printed directly onto your mailing envelopes and postcards. DON'T DO THAT! Response drops way down when the postage is printed. Buy bulk rate stamps and stick them onto your cards and envelopes. It is worth the extra effort. After you have had the system in operation for a while you will know about how many pieces you will be mailing each month. This will allow you to place large money saving orders well in advance of need. In almost all envelope and printing situations the more you order the less the cost of each individual item. This will be an important saving in your ongoing, volume mailing program. Take advantage of volume discounts whenever possible, but only after you have your
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system well established. In the beginning be more conservative in your purchasing. Conserve your cash, so you will have the staying power necessary to reach the point of positive cash flow. You will be buying printed and unprinted envelopes, letterhead stationery, postcards with your printed messages, business cards and some special printed material. Keep your eyes open for sales, special offers and low, introductory prices. If you dont have a database program try a Google search for a shareware program. If you have Microsoft Windows you can use Excel.

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DIRECT MARKETING DETAILS

What you mail to your prospect is very, very important. It must motivate him to ask for your help. It is a major challenge to move him to that point. Fortunately you know some things about him that will help you. You know he is distressed, under financial pressure and has some anxiety and embarrassment about his situation. Research shows he has other characteristics that you must be aware of. These are traits he has in common with most other people (whether or not in default) and your odds of succeeding are greatly enhanced if you design your mailings with them in mind. He is a procrastinator. It is difficult to get him to act even when it is for his own good. You must make it as easy as possible for him to respond to your mailings. Research has shown that he hates to write letters and he may have a fear of calling you on the telephone. You can boost your rate of response by including a postage paid reply postcard in some of your mailings. Check with your post office for costs and procedures. The average prospects handwriting is illegible. Ask him to print his name and address on the return postcard. He will resist completing and mailing the postcard if the space for name and address is small. Design your card so there is plenty of room to easily write in the requested information. The card should ask for name, address, phone number and what days and times would be best for you to call him. Dont ask him to provide any other information. To ask for more may just give him an excuse for not filling out the card at all.

Now here is a strange bit of information learned from test mailings. You will get a slightly better return from any response card if you give the prospect a yes/no choice. Example:

Please check one: Yes, please contact me so we can have a no obligation talk. No, Im not ready to accept your help at this time. Perhaps later.

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Why should that choice increase the number of people who will return the postcard? Who knows? But direct marketing experts spent a lot of money to uncover this bit of information, so be sure to put it to use. There are some prospects that will never complete and mail a postcard. They are the ones who are ready for quick action. They want a phone number they can call. Research shows that a toll free, 24-hour FREE RECORDED message will increase the rate of response. The message reinforces your ability to help the distressed owner out of a tight spot and gives him or her the opportunity to connect with you immediately. One such service can be found at FreedomVoice.com Having a regular cell phone is OK at first, but always answer it in a professional manner. Never allow a child to answer your phone! In all the material you mail indicate the hours you can be reached by phone. Stress this point. If you are working at a regular day job indicate the evening hours you will be by the telephone. Your best bet is to use a cell phone, so that you are always able to answer a call. As a last resort you could use an answering machine or voice mail. When distressed owners are ready to take action they will seldom leave a message on a machine, or they will try a second time to reach you.

Part of every message you send should be aimed toward telling your prospect exactly what he should do to get a hold of you. Your instructions should be clear and easy to follow "Call me this evening between 6PM and 9PM. Just dial 000-0000. I will be there to answer the phone." Then make sure you will be there to take any calls. Keep It Simple Your prospect does not want to be made to think. Make everything so simple it can be understood by a fourth-grader. He or she will not be put off by simple language and instructions. Just the opposite, they will be pleased that they understand your message with so little mental effort on their part. Simple language is one of the keys to good communication. If everything you send the prospect can be read and understood quickly and effortlessly it will have a subliminal effect.
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The prospect will tend to recall your name and message even though they may not remember actually reading your material. Whats more, your message will be recognized with little more than a quick scan of your letter or postcard.Keep It Simple Please read those last two paragraphs one more time. To understand this principal is to be armed with the most powerful secret of successful sales letters and sales copy of all kinds. Your prospect will be suspicious of your material if it is too fancy. Keep it simple and uncluttered. The prospect will be offended by a high-pressure message. You want a soft, understanding, friendly approach. Dont make promises you cant live up to. Dont offer hope unless you can deliver. Let the prospect know you have helped others in their position and you may be able to help them. The homeowner really wants to find a friend. He wants to trust you and allow you to help him out of the financial mess he finds himself in. He may feel alone and under siege. He wants someone who can lift the load from his shoulders. Just say, "Lets talk and see if I can solve some of your problems just as I have done for others." Then, when you have gathered the facts and found that there is some financial room for maneuvering you can say, "Yes, here is what I can do for you. If you can agree to my offer you can then just sit back and relax. Ill take care of everything." Thats what the distressed homeowner is looking for. He or she wants someone they can pass their troubles to. Someone they can believe in and trust. Someone who will step in, do the work and allow them to retreat back into as near a normal life as possible. These points should be kept in mind whenever you are creating mailing pieces or talking with prospects. They are basic, but vital to your success. To ignore them is to make a simple task almost impossible. You must recognize these human traits as being present in all of us. They do not change, but they may be intensified in those individuals who are experiencing the stress of foreclosure and personal financial disaster. Knowledge of these truths gives you a powerful tool in your efforts to gain a prospects confidence. Dont get so caught up in the other elements of your system that you lose sight of this. Just remember that these points are based on human understanding and kindness. You will spend time, money and effort to place yourself in a position where you can really help this distressed homeowner. You have thought through the mental and emotional state
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of a person facing loss of his home. You are aware of and sensitive to his fears and anxieties. You have prepared yourself through study, business organization and financial preparedness to provide a needed service to the homeowner. Most of the people you help will be grateful that you were there to come to their rescue. You deserve to be rewarded for your foresight. It is easy to understand that what you mail to a prospect is extremely important. The success of your entire system starts with an effective direct mailing program. You are firm in your belief that you can help at least some of those facing foreclosure. You must do everything possible to break through their habit of ignoring advertising, so they will be aware of what you have to offer. Your direct mailing system is a method of advertising. You are trying to sell your service, just like every other merchant or manufacturer is trying to sell their product or service. In most areas there will be others who recognize the opportunity and are contacting the distressed homeowners. Yes, you will be competing with them. But think about it, you are really competing with anyone who is trying to get an advertising message through to your prospect. We are all bombarded with thousands of sales messages every day. TV, radio, newspapers, billboards, telephone sales and direct mail. They all cry out for our attention. That is what you are up against. You must create and deliver your message so that it will be one of the few that capture your prospects attention. Even for a few seconds. And yes, you can do that! A basic rule in direct marketing is the rule of seven. It says that you must get your message in front of your prospect at least seven times before it will have an effect. That is why you see the same ads running again and again on television. Whether seven is really the magic number is not important. What you must learn from the rule is that you have to get your message to your prospect a number of times to have any chance for him/her to take notice of it. That is why this system is based on sending a message to the prospect about every ten days for a total of ten impressions. Remember that you are composing these messages in very simple language, so they will have a subliminal effect on the homeowner. Understanding this concept greatly increases your chances of having your message remembered and acted upon. It is a good bet that none of your competitors will be utilizing this plan.

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You will find that others who are attempting to contact the distressed parties during the preforeclosure period make two mistakes. They fail to contact the prospects often enough and they all send the same type of letter. In addition to mailing up to ten times, you are going to be mailing a variety of materials. You will alter the vehicle that carries the message, so it wont be easily recognized and automatically rejected. That is what happens to a lot of direct marketing mail. Think about your own habits. Dont you often thumb through your mail and discard what is obviously "junk mail", without opening or reading it? Sure, we all do that. Your challenge is to design your mailing so it will escape rejection. It is no secret that we all fall into certain groups when it comes to communication. Some people have grown up watching television and are programmed to receive their information accompanied by pictures. Others are not well educated and reading has never become a habit with them. Still others are detail oriented and must have things in depth explanations. With this knowledge you can plan on including in your mailings something that will appeal to everyone. If you send just one style of message over and over again you risk losing every person whom does not respond to that type of message. One of the key points in this system is that you change the form of your message, while following all of the principals that you have learned to this point: 1. 2. 3. 4. 5. Multiple mailings. Simple language. Variety of form. Warm, friendly tone. Attention grabbers.

Number five in the list means that in some of your mailing pieces you will want to use strong, attention getting devices. Your primary job is to get the prospects attention. You have to do that before you have a chance of getting him/her to notice your message. You must use anything ANYTHING that will get the homeowners attention! If your message fails to get noticed, even for a few seconds, your efforts are wasted. Your message is simple, so you just need his attention for a moment. In that moment his mind opens and in pops your offer!

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Some of your material will use slightly outlandish devices to gain attention. Not all of them, because not every person will respond to that tactic. Some will, so be sure and use them. Now lets get into exactly what you will be mailing. What follows are examples of the variety of materials you will want to mail. Use them exactly as presented or alter them to suit your tastes. In these pages we have attempted to give you an understanding of not only what you will be doing, but also why you are doing it. As you study the examples you will see how the concepts are put into practice. With this knowledge you will be able to create your own material if you desire to do that. Others may blindly copy what you are doing, but it is doubtful they will understand why you are doing it. You will be equipped to create effective new mailings whenever they are needed. Your material will always be based on solid, proven creative principals. Keep your mind open for new marketing ideas. Jump on hot topics and trends. Work them into your mailings. They will help you capture your prospects attention. If you are in an area where there is plenty of competition stay abreast of what others are doing. When you make friends with a homeowner ask him to show you what other material he is receiving. Ask him to save all these mailings for you. This will allow you to stay ahead of the others and keep your mailings unique and attention getting. Your chances for success will increase with the effectiveness of your mailings. You can never afford to stop working to improve them. Let me mention here foreclosure seminars. Every so often a good promoter will travel the country teaching a miracle method for getting rich through foreclosure investing. For a few weeks after those seminars, distressed homeowners are flooded with the same letter from dozens of seminar students. This lasts only a short while. 99% of these people give up when they see how much effort it takes to get rich. Dont worry about them. Just keep working what you know is a proven system.

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THE LETTER
Here you will find examples of carefully composed letters. They are very basic in appeal. Written in a warm and friendly manner. Each is an offer of help presented in an easy to understand manner. They will be effective when mailed at any time during the foreclosure period. You will alternate these letters with the mailing of postcards and CDs/DVDs. Its that mix that gives your system turbo power. After the letters you will find instruction on how they should be mailed. This strategy is very important. Be sure you read and understand it. The letters are short and easy to read. They will look and read like a letter from a friend, not a business offer. Each letter contains all the elements necessary to convince the prospect that he has finally found a new friend who can really give him some help.

Letter A

Your Name
123 Ouch Street Cactus Shorts, AZ 90000 1-800-123-4567 June 32, 2015 Wanda Woeful 456 Grim Street Bad News, AZ 80000 Dear Wanda, I can help you! I've heard about the financial problems you're having and that your home is facing foreclosure. Stop Worrying! I want you to know that you can call on me for help. Have you already found a solution to your problems? I hope so! Just be sure you have a real, solid, will-not-fail-you solution. So many people I talk with are counting on promised help from a friend, relative or lender that falls through at the last minute! Don't you be caught by surprise. Don't lose your home in a foreclosure sale. Have a back-up plan in case someone lets you down.

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Did you know a foreclosure stays on your credit record for SEVEN YEARS? I've helped others avoid that and I'm here for you. Even if you don't think you'll need my help, please call! We can talk about your situation. I will tell you exactly how I may be able to help and explain why I make this offer. Of course, this will be a private conversation and you'll be under no obligation. I have the cash and the knowledge. I can act quickly. I know exactly what to do to help you. Please call my toll free number at any time: 1-800-123-4567. I will be the one who answers. You can ask me anything. Wishing you all the best, Your Name P.S. You never, at any time, pay me a cent for helping solve your foreclosure problem.

Letter B Your Name

123 Ouch Street Cactus Shorts, AZ 90000 1-800-123-4567 June 35, 2014 Ned Nervous 789 0ops Ave., Trapdoor, AZ 8000 Hi Ned, You must be feeling terrible right now. I read about the foreclosure against your home. I know that it isn't really your fault. I want you to know that I may be able to help you. I specialize in helping people who've been trapped in these financial situations. Can I help you? Just call me to find out! It's that simple. We can have a private; no obligation discussion and I will explain exactly how I may be able to help. Then it's up to you. You decide if you want my help. Please do something! Take action while there's still time! Did you know that many people with their homes in foreclosure do nothing? They not only lose their homes, but the foreclosure will appear on their credit report for SEVEN YEARS! That's awful. It makes it very difficult to get a fresh start. The clock is running! You only have a limited amount of time to get things straightened out. I won't hound you. If you want to hear what I have to offer you'll have to call me. I will tell you
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how I've helped others and we will see if I can do something good for you. The ball is in your court.

I will explain everything and answer any question when you call. My phone is always with me. Ring me at any time - but please call while there is still time! 1-800-123-4567 Waiting to help, Your Name P.S. I have the knowledge to help most people facing foreclosure and you never pay me a cent!

Letter C Your Name

123 Ouch Street Cactus Shorts, AZ 90000 1-800-123-4567 Peter Pobre 1000 Broke St Deephole, AZ 8000 Dear Peter, I want to help you, because bad things can happen to good people. It looks like you're having some troubles now. I read that your home is being foreclosed upon. If you haven't already found a way to get out of this mess I may be able to help you? You certainly don't want to let things drift along and lose your home. As soon as the foreclosure action was started the clock was running. Powerful laws were set in motion that could result in your home being sold at auction. This would be a disaster for your credit rating and a real embarrassment for your family. I may be able to help you as I have helped others in the same fix. Your main concern should be to put a stop to the foreclosure. It will be much easier to get a fresh start if you can get that problem off your back. That's where I may be able to help you. Please call me, so that we can have a private chat. You can ask any questions and I will explain exactly what I can do and why it may be perfect for both of us. I know you're not feeling great right now, but there's no obligation when you call me and you don't even have to give me your name during our first conversation. It's just a talk that will let each of us know if we want to work together.
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My phone is always with me so you can call me any time: 1-800-123-4567. I'm the only one who will answer. Oh, in case you were wondering you never pay me a cent. I'll explain when we talk. Waiting for your call, Your Name P.S. A foreclosure stays on your credit record for SEVEN YEARS. Let's stop that right now!

Letter D Your Name

123 Ouch Street Cactus Shorts, AZ 90000 1-800-123-4567 June 35, 2034 Jack Goldgone 123 Whimper Rd Granola, AZ 8000 Dear Jack, You need someone you can count on right now! That's why I'm writing. I've heard about the foreclosure problem you are facing. From helping others in the same fix I know it's probably not your fault. Stuff happens! Even to good people! The important thing is to DO SOMETHING right now, before time runs out! That's where many make a mistake. They think they're going to get the needed money or find a buyer for their home. and at the last minute everything falls through! I've seen it happen over and over again. People will let you down. Even friends and relatives. Right now you need the help that I specialize in - bailing folks out of foreclosure problems. Keep my name and phone number handy. I have the knowledge and cash to get things doneeven at the last minute! But please don't wait that long. I keep my phone with me at all times, so don't hesitate to call me. We can talk and I will explain how working together may be good for both of us. There's no obligation and you never pay me a cent. Heres my number: 1800-123-1234. Call me now, while there is still time! Waiting to help,
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Your Name P.S. A foreclosure will stay on your credit record for Seven years. Let me help you prevent that!

Those four letters are designed to be non-threatening. To make the homeowner feel there is a friendly expert who really can help him. Most everyone facing foreclosure feels they will get out of the mess somehow (and some do). You want to impress upon them that you will be there, even at the last minute, if other plans dont work out. As we have stressed, it is vital to your system to do everything you can to insure that your letters are opened. Using a variety of envelope styles will help you reach that goal. The following suggestions describe envelopes available from many envelope companies. Letter "A" could be mailed in a yellow, #10 window envelope. Using a window envelope will save you the trouble of addressing the envelope either by hand or with a stick-on label. Letter "B" could be mailed in a 13lb, lightweight, airmail, window envelope. Letter "C" could be mailed in a pink, #10 envelope. It will be used with self- sticking address labels that can be computer generated. Letter "D" could be mailed in a # 6 , yellow envelope. You can use address labels here. A more powerful technique would be to hand-address them. That is time consuming and only practical if you can pay someone to do it at minimum wage. Must you do exactly as above? Of course not! The point is you dont want the homeowner to recognize your envelope and toss it away unopened. Letters A, B and D can be printed or rubber-stamped with your return address. It is a good idea to use a different name, a different form of your name or no name with each return address on the different envelopes. For example you could use your initials on one, your first name and last initial on another, a business name (Guardian Projects) on still another, and maybe just an address with no name on another. It is also a good idea to use more than one return address if that is practical. A post office box on some and a street address (home or office) on others.
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Why are you doing all of this? To make your mailing pieces appear unique, so they will be opened. You dont want them to look like anything that is being mailed to the masses. If the homeowner sees an envelope and thinks it is just another in a series, she is apt to throw it away unopened. You want to emphatically identify yourself in the content of the letter, but not on the envelope. The mailing suggestions above are easy to put into practice. The envelopes are readily obtainable and the cost is modest. You can go a step further and do things like having a printer prepare wedding-like material. That is, he will use the same format, paper and envelope he uses to print wedding invitations, but instead of an invitation the card will carry your message. The recipient will just have to open that! The only limit on this sort of thing is your imagination. Using personalized letters created by your computer pack more punch than a standard printed letter. Plus, you can just slip the personalized letter into a window envelope and solve the envelope-addressing problem. You kill two birds with the same stone. Research shows that mailings get the best response if envelopes are addressed by hand using pen and ink. If that is practical order envelopes without the windows and address them by hand. Keep in mind that when your system is up and running you will be sending hundreds, perhaps thousands, of letters every month. For most of us hand addressing just wont work. Your response rate will be a little less using computer generated letters, or mailing labels on letters, but you will make up for it in volume. Hand addressing is one of those tedious tasks that you will soon find a reason for not doing. Keep your system as easy as possible so you can stick with it. The only way for this system to fail is pretty much if you dont keep it going long enough for it to start producing. One of the problems you will encounter with your mailing program is owners that have just up and moved from their home. These people are prime prospects, because most of them have given up any thought of being able to save their homes. They think they can just move out and solve their problem, not realizing that the foreclosure will be on their credit record for seven long years. Under ordinary circumstances when people move they usually will file a change of address form with the post office. Then their mail will be forwarded. This is not always the case with distressed homeowners. For the last few months the postman has brought nothing but bills and other bad news.
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They are now trying to escape from their troubles and may not be interested in having anyone know their current whereabouts. If you will stamp your envelopes with "Address Correction Requested" you will learn of the ones who have given notice to the post office. You will be charged a small fee for each new address you receive. Often you will get your letter returned with the new address affixed to the envelope and no one will collect the few cents due. Other letters will be returned and stamped "Moved, No Forward", or something similar.

With this information you can "clean" your mailing list. Delete the names with no new address and up-date the ones for whom you have a new address. It is important to keep your mailing list as current as possible. It allows you to reach more prospects and also saves postage on those you cant reach. Should you spend time trying to locate the people who have moved and left no forwarding address. These are prime prospects, so it might be worth a try, if you can do it quickly and easily. You just cant afford to spend much time chasing people who might not ever be interested in talking to you. You may be able to find their phone number or new address through some online computer searching. Do a Google search for find people and a number of sites will come up that may be of help.

Telephone the next door neighbors. Maybe they know where the prospect is living. You do that by first going to the online county records and finding the name of the neighbors living at the next door addresses. Then you use that name to search for a phone number on the Internet at a site like WhitePages.com. If the prospect has an unusual name you can check the telephone directory for others with the same name. They may be related. There are many other "skip tracing" techniques you could use, but maybe you just cant afford to waste the time. In fact, if you are in an area with a large population you might not want to do any chasing at all.
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The following are alternate letters. Use them if your state has a longer foreclosure period or if you prefer them to the other letters we have presented. Dont hesitate to build your own letters by using the letters included in this chapter as inspiration.

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Letter E

Your Name
123 Ouch Street Cactus Shorts, AZ 90000 1-800-123-4567 June 35, 2004 Betty Latepay 456 Nobucks Way Doubleydown, AZ 8000 Dear Betty, How are you holding up? I saw that your home is going into foreclosure. You must feel terrible? Could you use some help? First, it's important that you take action while you still have the time to make some choices. The clock is running on the foreclosure. There are just one or two ways to stop it. Whatever you do don't let time run out without doing everything you can to save your home. I have the money and experience to help you. I won't tell you any fancy stories. If I can help you I will tell you exactly how. You'll hear what's in it for both of us. No secrets and no tricks. Then you decide if my plan is something that you want. What I usually do is bring the payments current and buy the home from you. This keeps a foreclosure from appearing on your credit report (it would remain there for SEVEN YEARS) and lets you get on with your life. Lets talk. Just call me anytime at 1-800-123-1234. My phone is always by my side. Our talk will be private. You don't even have to use your name during this get acquainted call. You will have no obligation to do or say anything. Honestly, what do you have to lose? Let's talk today: 1800-123-1234. Waiting to help, Your Name P.S. Just in case you're wondering, you never pay me a centnow or later.
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POSTCARD POWER
An important element of your direct marketing system is the postcard. You have done your very best to create letters and envelopes that will be opened, read and acted upon. You increase your chances of having your name and message register with homeowners when you use postcards. Have you ever received any kind of a postcard that you did not at least quickly scan? Probably not! A person just seems to be compelled to glance at a postcard almost without thinking. That gives you a very good chance of getting through to your prospect. It is the power of the postcard. You can go one step further. You can create postcards with some attention getting device that will force the homeowner to take a moment to read them. Maybe even keep the card, because it is unusual. You must be careful with your postcards message. A postcard can be read by anyone, including the letter carrier, neighbors and family members. You must do nothing to embarrass or offend the prospect. You must not mention foreclosure in the postcard. Those around the homeowner may not be aware of the problem. Be sure they dont learn of it from you or you are a dead duck. Your postcard message must be a general one that comes close to the prospects needs. He is groping around for some way to save himself, so your message must appeal to that need. As you look over the sample postcards that follow realize that they should be printed on various colored card stock. You may want to hold down your cost of doing business as much as possible. If so, have a supply of just two of the postcards printed. Alternate them with your other mailings. Ask your printer if there is any extra charge for printing each postcard on two colors of card stock. This will add variety to your postcards even though you are using just the two cards. Yellow with black print is the best one to start with. Use self-sticking mailing labels to address your postcards. It is not necessary to have anything printed on the address side of the card. Cards printed on just one side are less expensive. You can rubber stamp a message on the address side if you wish. Something attention getting like, "Heres Your Cash Card!" or "Need Money, Honey?"

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Rubber stamps are a nice, inexpensive attention getting device. You can stamp letters, cards and envelopes with messages like, "The Sooner You Call, The Sooner You Get Your Cash!"; "Call This Number For Dollars!"; "Heres The Money Youve Been Waiting For!"; etc.

On the next page are two of the postcards we've created.

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AUDIO / VIDEO RECORDINGS

If you were to limit your direct marketing to just the methods, letters and postcards that have been described to this point, you would have a very powerful profit producing system. When you add a secret weapon like audio and/or video recordings you smash through to a new level of results. You leave any competition with mouths agape, at a loss to explain their own sudden decline in responses. Getting your CD/DVD into a prospects hands is the next best thing to being invited into his home for a chat. Your chances of success are much greater if you can get your prospect to just talk with you for a few minutes. Then they can hear what you have to offer and why it may be in their best interest to accept your help. The truth is they are very reluctant to let you do that. Audio/video presentations can bridge that gap. With audio/video you can make a very persuasive presentation, uninterrupted! Your prospect can select a time to listen that is convenient for himwhen he is really ready to listen. You can deliver your message without the distractions you might encounter in his home telephone, children, pets, etc. He can listen again to any part he didnt catch the first time. He can stop and continue listening later. Sending an audio/video recording to your prospect makes your message rise above any material he might receive from others. It is seldom that any of us get something as novel as a recorded message. They cant help but take special notice of it. This increases your chance of name recognition and can lead to a face to face meeting. Audio/video gives you a giant advantage over all others that may be trying to contact the prospect. Others might use mailings to reach the homeowner, but they come nowhere near being as effective as your well coordinated, creative, direct mail attack. Add the audio/video recordings and you will find yourself alone in the winners circle. Your audio/video message should be limited in length. Most prospects will have a very short attention span. If it drones on and on you will quickly lose them. Five minutes would be the maximum length of your message. Two minutes is better. Whatever its length, always proclaim that it is just two minutes long. No one will resist listening to a message that will take only two minutes of their time. Put two minutes on the label, and begin your presentation by indicating that you will be talking for, "about two minutes." If you limit your talk to two minutes, so much the better. Remember that one of the keys to your entire system is a warm, friendly, helpful, non121

threatening identity. All of your messages should reflect this approach. The homeowner wants to be told that his plight is not his fault. That his troubles are due to circumstances beyond his control. That everyone goes through bad times and that you know he is a good person and that you can help. Be sure your audio/video messages stress those themes. On the following pages you will find a pair of scripts that you can modify to fit your personality and delivery, if necessary. They are general in nature and will work for anyone. These days you can record MP3 audio and video using a cell phone. If you dont have that, a simple digital recorder, and or a Flip Video should do the trick. The just burn the audio and video onto a disk you can duplicate and send outsimple but effective! The label on the CD/DVD might read as follows:

A Special 2-minute Message for Peter Prospect from (your name) 123-4567

The label adds even more power to your message. It appears to be especially created just for the prospect. How can they not listen? The below transcripts can be audio or video. Just choose which and make it happen

SCRIPT A Thanks for taking the time to listen to this. It's only about two minutes long, but it will show you a way out of your current troubles. I know that you're going through some hard times now, andit's important that you know there's help available. I understand that sometimes unexpected things happen that you just don't have any control over. It isn't your fault that they happen. It's not because of anything that you've done. Its just one of the tricks life can play on any of us. I've learned this from helping many people with money problems. I've helped others; I may be able to help you. My guess is you're finding that most other people don't understand how these things can happen, or don't want to give you any help now that you need it. To be fair, we have to understand that it's just a job for some people. They have to do everything they can to try and get you to pay what you owe. I understand what you're going through and I may have an answer.
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Your biggest problem appears to be that your home is in foreclosure. This is the most serious kind of financial troublefor a number of reasons. Once you start missing mortgage payments it gets very hard to catch-up. You may be late with other payments and your credit is in bad shape. That makes it almost impossible to borrow money. Here's your main problem- you're running out of time. The foreclosure process is relentless. Once it starts you're in a race against time. Either you find the money to catch upon the payments or your home will be sold at auction and you will be forced out. Those are harsh words, but you have to face facts. Let me assure you that as bad as things seem right now, you will get them straightened out and get your life back on track. I may be able to help. You must get the foreclosure cleared up as soon as possible. Experience shows that many of your other debts can be postponed or negotiated. You can make deals on car loans and credit card debt. The one debt that is a real problem is your mortgage payment. The lender knows they can get their money by forcing the sale of your home. I've come to the rescue of others by buying their homes before they lose them. I know how to handle foreclosures. I have the cash and the experience to help you. I may be able to keep a foreclosure off your credit record and save some of your equity. I want to help because there may be something in this for both of us. Yes, I do this for a profit, but it will only work if we can both benefit. I am asking you to call me so we can have a private talk about your situation. I'll ask some questions and you can ask some questions. I will give you straight answers. After that I can explain how I may be able to help you out of this situation. There's no obligation when we talk and I never, ever ask you for money. You never pay me a cent. You'll find my phone number on the label on this CD. My phone is always with me so call me any time. It's never too late to call, but time is running out. Call me today and let me see if I can help. a Here's my number 8003-123-1234.

SCRIPT B Please find a quiet moment to listen to this. It will only take about two quick minutes, but it could be one of the most important messages you've ever heard. I read that your home is in foreclosure. I know that is your private matter, but it has been published as a matter of public record.
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I've helped others who have been facing foreclosure. I really hope that you've found the money you need, but if not please listen to my offer. I am a foreclosure investor. I help people facing the loss of their home in a way that can be good for both of us. That's the key. I won't be able to help you if it's not a good deal for both of us. Remember that once foreclosure begins you are on a strict timetable. The foreclosure laws are very clear about the time you have to make up back payments and other costs. So many others keep hoping that they will find a magic way out of the mess, and they wait and wait until it's too late. Please call me while theres still time. We can talk about your particular situation. I'll gather some information from you. You can ask me any questions you like. After a few minutes I'll be able to give you a good idea of exactly what I may be able to do to help you. This will be a private conversation and I will share the information with no one. After we talk you'll be better equipped to do some thinking about your situation and see if my offer is your best chance. Even if you choose not to call me, please do something now, while theres still time. You must keep a foreclosure off your credit report. It will stay there for seven long years and that makes it very hard to get a fresh start. If you think you already have a way to get the money, that's great. But dont take chances! Let me be your back-up plan. You may have equity that we can save and you certainly don't want the sheriff to knock on your front door and demand you and your family to leave your home. Please understand that you will never be asked to pay me one cent. You will be under no obligation after we talk. This will just be our chance to lay our cards on the table and see if we can find a mutually profitable agreement. My phone is with me at all times, so you can call day or night. Honestly, don't you agree there is no harm in talking? Let me see if I can offer the help you need. My number is 800-123-1234. Thats 800-123-1234.

As in most things, the more copies of a CD/DVD you order from a duplicator the less the cost per item. Even so, you must be sensible in the beginning and order just a few hundred. You dont want to find yourself dropping out of the system with thousands of audios stored in your garage.

You may feel that using audio recordings as part of your marketing attack is
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just too expensive in the beginning. That is a very reasonable attitude. Just using the other material described in this manual will provide you with a powerful, money-making program. Later you can consider adding audio/video to your system.

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INSERTS
Direct marketing research has shown that response to your mailings improves when there is more than one item contained in an envelope. Never send just a letter alone no matter how good it is. You have a number of choices when it comes to envelope inserts. Always start with the most powerful letter you can create. Then include a business size card with your name, phone number and a message like: "When You Need Someone You Can Count On!" or "Fast, Expert Help Is Just A Phone Call Away", etc. The letter and the card should always be part of your envelope mailings. Next you can include a postage paid, business reply postcard. This postcard may appeal to the people who just dont like using a telephone. This type of person does exist and you dont want to exclude them from your program. Still others just might find the postcard a less painful way of getting in touch with you. A second letter, a "lift letter" (it lifts the rate of response) has proven effective. The lift letter could be on note size paper of a different color than your primary letter. If you are using a computer your lift letter could also be personalized, but that is not necessary. It should be short and just restate the most important points of your message or stress one benefit of your offer. How about a guarantee? Yes! A guarantee makes it much easier for the homeowner to accept your offer and it will increase your rate of response. What kind of guarantee? Just offering a guarantee is the most important point. The actual guarantee can take many different forms. The example below gives the prospect five days to change his mind after signing a sales contract. You could guarantee that you would tear-up the contract if the prospect were able to find the money to cure the default at anytime before the close of escrow (if you have an escrow). A guarantee is good for a couple of reasons. First, you really should want the best for your prospect. If he finds a way to save his home you should wish him well and move on. Experience shows that often that person will be back in foreclosure within three to six months. Since you treated him fair and square previously, whom will he turn to again? Plus,
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he may tell his friends that you really are someone who can be counted upon. A guarantee is a strong selling point. You can explain to the homeowner that they take no risk when they deal with you. The transaction only closes if they are unable to find a way to bring the payments and costs current. If the person theyre counting on for cash lets them down they still have you to fall back upon. The truth is that seldom will you have to make good on your guarantee. That is just a fact of life. If you do have to make good on that offer you have a strong reference to use with other prospects. What about a brochure? Maybe! You may prepare a brochure as an insert. It could explain the foreclosure process in your state, for example. Usually the prospect does not have a clear understanding of the details of foreclosure. Your brochure can stress the limited time periods, where the sale will be held, what notices he will receive and what they mean, etc. This will help establish you as an expert in the mind of the homeowner. Chances are he will keep the brochure to use as a reference, so be sure to liberally sprinkle your sales message throughout the brochure copy. Testimonials? Oh yes! Testimonials can be very persuasive and you should strive to get them from everyone you successfully help. Some people will be very grateful for your help and they will tell you so. Those are the ones you should ask for a recommendation. Write up the testimonial letter yourself based on how they expressed their gratitude or satisfaction. Listen for phrases that you can include in the letter, "I dont know what we would have done without you", etc. Ask them to sign the letter if they agree with what you have written and then ask them to sign another letter that gives you permission to use the first letter and their name in your promotional material. Keep this on file in case you ever have to prove that you have the subjects permission. Here is a powerful testimonial idea. Using a simple recorder, ask the subject to explain just how you helped them and what your help has meant to them. Have them keep it simple and just talk as if they were telling their story to another person. Use this testimonial in the audio recording you are sending to new prospects. You just cant create a more effective marketing tool. Watch for a chance to get this kind of endorsement. It is a real winner! Of course you should also be doing this with video in the same way. You should be posting these audio/video testimonials on your website as well.
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Watch for newspaper and magazine articles concerning foreclosure. If the article explains that foreclosures are on the rise, make copies onto which you attach small Post-It notes with a hand written message like, "Youre not the only one with problems." Study the direct mail material that is sent to you. Examine these mailings for any effective inserts or other ideas. Borrow anything good and adapt it for your own mailings. Vary the contents of each mailing. Use different sizes and colors. It is important to repeat something distinctive in each of your mailings. Heres one we found effective:

Since you are varying the look, character and style of your mailings it is important to have at least one feature that remains constant that identifies you as you. In marketing this is called "branding". It could be your name prominently displayed, a logo, your photo, a special insert or anything that reminds the prospect that he has seen it before and it stands for an offer of help. Every item in your envelope must carry your name and phone number and the one identifying feature as discussed above. If the prospect saves just one item from a mailing you want to be very sure it bears your name and phone number. Be careful! You dont want your mailings to look like another piece of junk mail. You want letters that look personal and not massed produced. Dont load any one mailing with too many pieces. Opening an envelope that is stuffed with inserts immediately screams "JUNK MAIL" and gets tossed aside unread. If you include more than one insert per mailing consider putting them into a smaller envelope and then slip it into your mailing envelope. When you main envelope is opened it will look different and interesting. It will have a better chance of being read. Inserts have proven to be very effective in all kinds of direct mail programs. You can have some fun testing a variety of them. You may just hit pay dirt when you least expect it.
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Here is a sample insert:

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Lift Letter Next is an example of a lift letter that can be an insert in one of your mailings. It works well on yellow paper folded in half. It is even better if it is put into a small envelope and then inserted into your mailing envelope. It is not necessary to personalize the lift letter.

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Sorry, these do not reproduce well. The originals look clean and sharp.

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MANAGING RESPONSE
Once your direct marketing program is well under way you must be ready for that eventful day when you will receive a call or postcard from a prospect. Keep in mind that it is unlikely that your telephone will ever be ringing off the hook. Even though you are sending out a high volume of mail you will be receiving a low volume of response in comparison. Most homeowners will find a way to bring their payments current. Few properties actually go to sale on the courthouse steps. Unless you are in an area of extreme economic distress, seldom will more than 10% or 12% of the homes in default end up with a completed foreclosure. In some counties the sales rate is just 1% or 2%.

Not to worry, buying properties in the pre-foreclosure period can be so profitable that you dont need to find dozens of deals. Your first rule should be to determine the minimum profit you will accept from any deal. This will vary from area to area. If you are living in a section of the country where the median home price is $200,000 you will expect to make more profit on each deal than in an area where the median priced home is $80,000. As a starting point consider a minimum profit of $10,000 for upper end areas and $5,000 for the lower range. Based on these numbers learn the median price for homes in your area. It will appear from time to time in your newspaper or you can contact the Board of Realtors in your area for the figure. The median price will give you just a general profit target. Your average profit is likely to be much higher than the minimum you establish. It may run closer to $15,000 to $20,000. Every once in a while you will scoop up a super buy that will net you a profit of $50,000 or more. How many deals of that size do you need before you dance all the way to the bank? Yes, you want each deal to be lucrative, but dont be greedy. Remember you are in a numbers game. Your direct mail marketing program will be working to supply you with a steady flow of leads. Your cost per lead will be the same for the good ones and the bad ones. The more deals you can do the better. Once all of your systems and procedures are in place it is just as good to do ten $8,000 deals as it is to make one $80,000 deal. Of course, not all of that will be pure profit. You have the cost of overhead just as in any business and that must include the cost of your direct mail campaign. The costs of your mailing will be your primary expense. If you have a home office about your only other
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ongoing expense will be for telephone service and online services. RING, RING! Finally the phone rings and it is a homeowner calling to ask about the material he has been receiving from you. Be prepared! This is the moment you have been waiting for. Have you carefully planned just how you will react? Remember this person is under a great deal of stress. His financial problems have probably created friction in his personal relationships and it may be that he really hasnt had anyone to talk to until he encounters you. Be a good listener. Much of what he says may have no bearing on your interest in buying his home, but to build rapport you must be a patient and understanding listener. The more you listen and sympathize the better your chance of making a personal connection with the caller and winning his confidence. It helps to pause for a second when the phone rings and put yourself into the right frame of mind. Remind yourself that this call might be from a prospect. Take a deep breath, relax, smile and answer with a gentle, friendly voice. Speak slowly and clearly. This is your first personal contact with the homeowner and you want them to form a very positive image of you through the sound of your voice. Never allow a child to answer! Dont try and present yourself as something you are not. Dont risk sounding false or insincere. Be yourself, but be your warm, friendly self. Remember that this could be a $10,000 phone call! In your letters and audios/videos you have told prospects that it will be you who answers the phone when they call, so be sure to do so "Hello, this is Lloyd." These may seem like small points, but personal relationships under these circumstances can be a very delicate matter. It is very important to get off to a good start with a prospect. It makes it so much easier to build the rapport you will need later as you guide the homeowner into a deal that works for both of you. Even if you are using a company name in your letters always give the name of an individual (you) the caller should expect to talk with. If there is more than one person handling these calls instruct the homeowner to "Ask for Lloyd or Mark." The homeowner will indicate why he is calling, "I got a letter from you." Or, "Ive been getting your letters and CDs/DVDs." Or, "Are you the guy who buys houses?" Or, "Ive
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been having some problems and I got a letter that says you can help me." Start the conversation by asking for his name. Just his first name will do (Sam?). Be sure he knows your name, "Please call me Mark. May I call you Sam?" He may not want to give his name and at this point that's OK. Start him talking by asking; "Tell me about your situation, Sam?" The caller will often pour out his troubles in much more detail than you want to know. You will pick up some valuable information here, so listen and take notes while he talks. After he has gone on for a while you move in and start getting the information you need. Some will be tight-lipped and say something like, "Well, youre the one who sent the letters asking me to call!" Then you can go right into your questions, but be ready to listen if he starts to volunteer information about his troubles. Next you say, "Sam, Im an investor who works with people who are in foreclosure situations. I do it for profit and I try to make it a good deal for both of us. If youre interested I may be able to help you, but I need to ask you some questions. Is that OK?"

Be Honest & Truthful

Right up front you have let him know what you are about. You do this for profit. There can be no surprise about that later. The other thing you have done is to ask his permission to gather information from him. He should object to very few questions after he has given you his OK. If he does object to something explain that you will be risking a great deal of your money to help him and you can only do so if you have the answers to these questions. He doesnt want to sell his home! That is what you will often learn in this conversation. He is only going to sell as a last resort and maybe not even then. You must lead him towards a sale very slowly and carefully. Explain, as you have done in your letters, why it can be his best course of action. That he may save some of his equity to help with a new start. That he will avoid the stigma of a foreclosure on his credit history. That for the sake of his health he needs to put an end to the stress and anxiety he has been experiencing.

Even if you can bend him towards your way of thinking you must be aware that most homeowners are still going to be suspicious and maybe even a little hostile. Maintain your warm and friendly manner no matter what they say or how they say it. Being an
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understanding friend to all is just part of the job. You will find that after you get to know the prospects that most are very nice people, but taking a bit of abuse now and again is all in a days work. It wont happen often. If you will train yourself to always be warm and friendly you will be rewarded at the rate of thousands of dollars for every phone call. Once they find you really can help them many will become very grateful and friendly. Try to get the prospect to the point where he will at least consider the sale of his home. Explain that he should have selling his home planned as an option if other efforts at finding money fail. Explain that you are ready to buy right now and selling would put a quick end to many of his troubles. Will every prospect accept this line of reasoning? No. Some will want nothing from you other than a loan. Leave the door open for those prospects to contact you later. Some will, if you have done a good job of building rapport. The trick is to get as much information as you can without sounding like you are pumping the prospect. This comes with practice, but you will find it is much easier if you just show real concern and interest in the homeowners predicament. Do your best to ask leading questions. Ask questions that get him talking and keep him talking. Ask, "How do you feel about that?" "When did that start?" "How long ago was that?" And so forth. Ask and listen - ask and listen! The old saying that you have one mouth and two ears, so listen twice as much as you speak is certainly the rule here. It is not necessary to gather your information in the exact order indicated on your Property Information Sheet (sample just ahead), but do use the sheet as a guide. Always have a supply handy by the telephone. You will soon train yourself to reach for an Information Sheet every time the phone rings. Dont ask the caller to wait while you get paper and pen. When the time is right in your conversation start asking the questions that will help you determine if this might be a profitable situation. Explain that you wont know if you can help until youve done some research and have checked with his lenders to learn the exact amounts owed, so will he please be as accurate as possible with his answers. Do not trust the information you receive from the prospect. He may try to make the situation look as attractive as possible. At this point he may actually be considering selling to you and, like any seller, may be trying to get the best deal possible. As in any deal use what he tells you as a guide to see if you should proceed.
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With what you have learned from the prospect, the value of the home and the amount of the loans against the home, you can determine if this could be a profitable situation - one that you should investigate further. Remember you have established a minimum profit figure that you will use to qualify each property for possible purchase. To reach a valid conclusion you must have an idea of the loan amounts outstanding against the property. Here is an example:

Market value of home 1st mortgage balance 2nd mortgage balance Total 1st & 2nd mortgages Other liens

$130,000 50,000 15,000 65,000 000.000

$130,000 - $65,000 = $65,000 Equity

The information you have gathered from the homeowner indicates that he has equity of some $65,000. This would easily make it a candidate for further investigation. Equity! Lets stop here for a moment and talk about equity. Equity in a home is the difference between the amount owed on mortgage loans and the fair market value of the property. If the home is valued at $100,000 and there is a mortgage debt outstanding of $50,000, then the homeowner has equity of $50,000.

$100,000 Value - $50,000 Mortgage debit = $50,000 Owners equity.

Theoretically the $50,000 is what the owner would receive if he had the time to sell the property through normal means, in an average real-estate market, less selling expenses. Equity can be transformed into hard dollars under normal conditions. When you are prospecting for pre-foreclosure property you are really looking for EQUITY! You want to buy equity and you want to buy it at a discount. It is important to understand this. Yes, you are buying houses, but only because that is where you find the equity and
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you can turn that equity into real cash. You dont buy a gold mine because you want to own a hole in the ground. You buy a gold mine, because that is where the gold is! The same holds true with real estate and equity. In the example above you want to buy the owners $50,000 equity, but you only want to pay $25,000 for it. Why would he sell his equity for just half of its value? Because he stands to lose all of it if he doesnt! That is why you are searching for these foreclosure situations. You must find the prospect that has his back to the wall and is facing the loss of his entire equity created through years of payment. He should be thankful that you have gone to the effort of being there, so he can save half his equity and you will find that many are. You must carefully determine the real value of the equity. This is crucial to your success. With a property facing foreclosure it is not uncommon to find liens and debts against the home other than mortgages. There could be an IRS lien for unpaid taxes. The owner may have lost a court case that resulted in a judgment lien against his property. Property taxes could be past due and the county has placed a tax lien on the home. These are all debts against the property that must be paid before you would be able to take title. The money to pay them must come from the prospects equity. Here is an amended version of the example we used earlier: Market value of home st 1 Mortgage balance nd 2 Mortgage balance IRS Tax lien Judgment lien Property Tax lien Total Debts $130,000 50,000 15,000 5,000 2,000 3,000 $75,000

$130,000 Home value - $75,000 Debts = $55,000 Equity The cost of fix-up must be factored into the purchase price. You will have to pay
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to have the house brought up to neighborhood standards. You must treat this expense as another debt against the property just like mortgages and liens. This added expense would be subtracted from the equity when it comes time to calculate what you will pay the prospect. Lets say fix-up costs will be $3,000: $55,000 Equity - $3,000 Fix-up = $52,000 Equity The cost of buying must also come out of the owners equity. If escrow, title insurance, inspections, late charges, pre-payment penalties and foreclosure attorneys fees amount to another $3,000, the equity is now down to $49,000. After you have determined the amount of all debts and costs you must subtract them from the owners equity. The result is the Adjusted Equity. That is the true value of what you are buying. That is how you determine whether this is a property worth pursuing.

"Sam we arent going to reach an agreement unless there is something in it for both of us, right? If you will give me some information about your home I can give you an idea of just what I can do to help. Does that sound OK?" Then you can turn to your Property Info Sheet and start asking questions: 1. Where is your home located? 2. Have other homes like yours sold recently? 3. For how much? Would yours sell for the same price? 4. How long was the other home for sale? Are others for sale now? 5. Does your home need some repair? 6. How much do you still owe on the first mortgage? nd 7. How much is the monthly payment? Is there a 2 mortgage? 8. How much are the payments on it? 9. Are there any other payments? 10. Are property taxes paid up? 11. Are there any IRS liens on the property? 12. Are there any judgment liens? 13. Are there any other liens or payments? 14. On what date did you receive the notice of foreclosure? 15. When was the last time your home was appraised? What value? 16. When was the roof last replaced? 17. When was the last time you had a termite inspection? 18. Have you tried to sell? Why do you think you couldnt find a buyer?
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19. Do you have anyone who may lend you money to bring payments current? 20. Have you arranged somewhere else to live? 21. Do you own other property? Use the Property Info Sheet as a guide and fill it out as you talk with the prospect. If you are a good listener you will get some of this information without asking. You will just pick it up from what the homeowner is saying. They may volunteer other tid-bits of information that arent asked for on the Info Sheet where they work, name of a local relative, that theyre planning on moving next week, etc. Make a note of any such information on the back of the sheet. You never know when it might become valuable in the course of your negotiations.

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PROPERTY INFO SHEET

Date of 1st contact We called him Owner's Name Other name(s) on deed Property Address . He called us . .

Now living at

Phone (work) What was starting date of foreclosure?

(home)

Have you received notice of sale date?

Attorney/Trustee handling foreclosure Address __________________________ Phone ________________

What have nearby homes sold for? How long for sale? How many other homes now for sale?

What is average price? $ Would yours sell for same price $ Bedrms Baths Garage Pool Why? Fireplace Near school

Landscaped front & back

Type of foundation

Termites?

Type of roof

AC

What home repairs needed

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Have you tried to sell?

For what price? $

Why no buyer?

When was last appraisal?

What value?

Are you now working?

Is your spouse?

What are you planning to do if you sell the home?

Have you tried to get a loan?

Are car payments current? NOTES: 1st loan lender Balance due $ Payment $ 2nd loan lender Payment $ 3rd loan lender Payment $ Other loans, liens, debts Number of payments behind Balance due $ Number of payments behind Balance due $ Number of payments behind

Property tax lien $ $ Estimated late charges due $ Prepayment penalty Estimated fix-up $

IRS liens $

Judgment liens

Foreclosure fees $ ____________________ Total debts/costs $ Purchase costs $ ____ (Escrow, etc)
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Quick sale discount $ Estimated property value $ ADJUSTED EQUITY $

TOTAL $

_______________ =

minus TOTAL $

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The information you gather from the homeowner will have to be revised when you have a chance to study the prospects loan documents and other papers. You will revise again when you get current figures from lenders, contractors, etc. Explain this to the prospect. He/she will not have an immediate answer for every question. Come right out and ask the prospect if you bought the home today what would be his best price. He may surprise you by saying something like, "Just give me $4,000, so I can get out of here." You now have two choices. Based on the information you have just compiled you can make a preliminary offer right there on the telephone. Or you can tell the homeowner that, yes, it looks like you may be able to help, but you need to visit his home, examine his loan documents and do some research. Making a preliminary offer on the phone allows you to save time, because you wont waste a visit to someone who wont even consider your offer. If he seems interested in the offer you can arrange the meeting. On the other hand, if you visit the prospect without telling him the nature of your purchase offer you may be able to influence a reluctant prospect to agree to the type of offer he might have rejected on the telephone. In either case if you have done a good job of connecting with the homeowner you will find that he often comes back to discuss your offer even though he rejected it the first time he heard it. Always leave the door open for further negotiation. The prospect may be shopping your offer around to others who are trying to buy from him. If you have done a good job of presenting a friendly and competent image, and you learned what the homeowners real needs are there is a good chance you will hear from him again. The foreclosure process costs money. As soon as the first document is recorded the homeowner becomes responsible for all of those costs. Real estate attorneys usually handle foreclosure actions. There is his fee, the cost of document preparation and recording costs. Costs vary from area to area, but the default cannot be cured until all outstanding monies due are paid and that includes the cost of the foreclosure.
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Until you know how the costs run in your area, estimate that the total will be about $1,500. Or better yet, talk to a real estate attorney or an escrow officer and get their estimate. Back where we were calculating various costs to deduct from the owners equity we indicated this fee as "foreclosure attorneys fees". When negotiations get serious you can contact a title company or title attorney and ask them to run a preliminary title check. This should uncover all liens or mortgages against the property. These checks are nominal in cost and after you have built a relationship with a title company they probably will do them at no charge. Gather all of the information you can from the homeowner, but double check it very carefully.

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FACE TO FACE
Your face to face visit with the homeowner, in his home, is another chance for you to make a favorable impression. Bring forth your kind, gentle, understanding self for the visit. Show an interest in the prospect and his family. You want them to like and trust you. Because of what you learned from the homeowner during your telephone conversation you have arranged a visit. You have asked the prospect to have all papers concerning, mortgage loans, deeds, liens, payment books and the foreclosure notices ready for your inspection. You will want to read key portions of these documents to get a true picture of the situation. After you have your program in full swing you may want to buy a small, portable copy machine to have with you on these visits. Then you can make copies of all documents to study later. Or ask for permission to take them with you. That way you can not only study them, but youve blocked any other investor from stealing your deal. This will free you from sitting at the prospects kitchen table for a couple of hours going through the papers. Instead you can concentrate on determining loan balances, amounts due on other debts and fees. Then you and the homeowner will have an idea of what the equity figure is. The owner may not have a true picture of his financial condition. Get him involved with calculating amounts due on the various debts, how far he is behind on payments, what he feels is the value of his home. Let it become a team effort. Say things like, "How much do we owe on this one?" Once you have done your best to determine what he owes, subtract it from what you have both decided is the fair market value of the home. You can use your computer to get a free property valuation report online by searching for property values. These are rough estimates but something to consider. Then you can explain that the figure at which you have arrived is his ball park equity before other necessary costs are deducted. Explain about, selling costs, foreclosure fees, fix-up costs, etc. Show him what you estimate to be the Adjusted Equity. Impress on him that this figure is what he really owns. That this is the true "after all costs" dollar value of his equity. Deduct a real estate agents commission and explain that this is what he might realize if he had the
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time to sell his home through normal channels. At this point you are ready to make your offer. Let him know that you will help save at least a portion of his adjusted equity. You might offer to split his equity with him half for him and half for you, or whatever deal you feel will work best. Half of the adjusted equity, if it is a large figure, can be a good and fair offer. Explain to the seller just why he has less equity then he thought. Prospects do not understand all of the costs involved in mortgage default. He may not realize the amount of debt and fees that have become attached to the property. Will you always explain every detail to the homeowner? Will you always split equity 50/50? No! You will judge each situation as you get into it and then formulate an offer. Your first offer does not have to be your best offer. You are in the process of negotiation linked to motivation. At times there may be just enough equity to cover your minimum profit goal. In that case you would have to explain to the prospect that although he will receive little or no cash it is still his best choice, so there will be no foreclosure on his record. Dont be ashamed to make a profit. Dont try to conceal your profit from the homeowner. You will work hard to find these deals and you will earn every penny you receive. Plus, there is always an element of risk in every property. Have you made the correct calculations? Will an unknown debt or title problem pop-up unexpectedly? Will you really be able to sell the property for what you estimated, etc? From the very beginning, in your direct mail program, you have been telling the homeowner that this is your business. You say that you can only make a deal if it is good for both of you. It takes, time effort and money for you to be there when a prospect needs you. You are entitled to be well rewarded for your specialized knowledge and skill. There is no exact procedure you can follow in discussing the deal with your prospect. You must play it by ear and be ready to counter any objections. The dialogue might go something like this:

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Prospect:

I dont think you should get so much of the equity.

I understand what youre saying but I do this for profit. This is the way I You: make my living. I would not be here to help you and others if I couldnt make money at it. Yes, you are giving me half, but that allows you to save half. Otherwise you will probably lose it all. Prospect: I think Ill wait before I decide.

You: Theres no time to wait. I have to get to work contacting lien holders to find out actual amounts of money I have to come up with. If we are going to save anything for you we have to act now. Prospect: My Uncle Buck says he might be able to loan me the money I need. I dont want to do anything until I hear from him. You: Sam, youre running out of time. What if he doesnt come through? Youll be stuck. Look, OK my offer and if youre able to come up with the cash you need before the close of escrow you can pay me for my out of pocket costs and Ill cancel the deal. Prospect: I think Ill try listing my home with a real estate agent.

You: Theres no time for that. Youre down to just a few days before you lose your property. It takes time to find a buyer and for the buyer to find a loan. And even then the deal can fall through at the last second and youll be lost. Besides, look at what it will cost you to sell: (Alter numbers to fit.)

$100,000 -6,000 -3,000 -1,000 -3,000 -2,000 - 500

Selling Price 6% Agents Commission 3% Closing Costs 1% Loan Prepayment Penalty FHA/VA Loan Points Fix-up Costs Transfer Tax
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- 250 $ 84,250 $ 84,250 -73,500 - 1,500 $ 9,259

Prospect:

Inspection Fees Net Sale Proceeds

Loans, Back Payments, Taxes Foreclosure Fees

Homeowners Total Equity

I want to think it over.

Sam, Im not a bank. I cant help everyone. Right now I am contacting You: other families that have money troubles. If you dont accept my help now please understand I may not have the cash necessary to come back and help you. Prospect: I want my attorney to checkout this offer.

You: Is your attorney your financial advisor? If so, he sure hasnt done a very good job. Look, if you want to pay an expensive attorney fee its OK with me. Just be sure you make it plain that you are asking for his opinion only on the legality of the contract and not the financial arrangement. Attorneys are not trained to be financial advisors even though many act like it. Sam, because I have other people who are asking for my help I must have your answer within 24-hours. I have explained how I can help. Now its up to you. I wont contact you again.

Always be sure that everyone whose name is on the title of the property will be there when you visit. You want to explain the situation and your offer just once. You want to be able to answer the objections of any owner (usually a spouse) right then and there. You dont want them to be able to say, "Ill have to talk this over with my wife." When you make the appointment insist that they all be there. Let them know that you wont stay if anyone is missing. Also ask if they will need the advice or approval of anyone before they can agree to a deal. Say, "Time is running out on you. If we can find a solution to your problem tomorrow evening can you OK it right there or will you
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need to get someones approval?" If they need someones approval insist that person be there, too. When you visit the home you must inspect the house and make notes on an Inspection Sheet. This will help you determine if any work needs to be done and then you can make an estimate of the costs. Have the owner walk through the house with you, so you can make him aware of defects or damage that will have to be corrected. This is an important part of your negotiating strategy. In most cases the fix-up work will consist of clean-up, painting, replacing carpet and other cosmetic work. It's a simple matter to learn prices for this kind of work. Check with carpet stores for the per-square foot price of installed carpet. Economy grade, of course or good used carpet. Some stores have it. Talk to a painter about the cost of painting an average size room, bath and kitchen. These simple steps will prepare you to quickly pace off room dimensions and make estimates. There could be more serious defects in the home, like foundation problems evidenced by sloping floors or large cracks at the corners of rooms and window frames. Plumbing problems may reveal themselves in slow draining sinks or tubs, rusty water coming from taps, damp spots on walls or floors. There are two schools of thought when it comes to fixer properties. One says that you should buy only if the repairs needed are cosmetic - painting, cleaning. Semiskilled workers can do these repairs quickly and inexpensively. A very few investors look upon certain major flaws as rare opportunities. If you find a home with an obvious foundation problem there will be few, if any, buyers interested in that property. So you can make killer deals on such properties. Often an experienced contractor can easily correct what seems to be a monster problem. The cost may be reasonable when compared to the profit the investor might chalk up. What level of fixer are you comfortable with? Do you have a contractor you can rely on to do the job quickly for the estimated cost? If so, you might want to tackle all but the worst properties and reap the rewards. Just remember that there must be enough equity to cover repairs and still give you your profit. You must demand more profit on a major fixer, because you are taking on more risk.

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Your general business plan will be to buy homes below market value and then quickly sell them to collect your profit. Once you have been working pre- foreclosures for a couple of years you will have acquired some "keepers". Keepers are homes that you hold as rentals. Since rental homes require some degree of regular maintenance you will build a relationship with a handyman or two. You may be able to use them when you find a fixer property. It is important to realize your limitations. If you are a handy person you may be very good at doing your own estimating of fixer repair work. If not, or when in doubt, call in an expert. Fixer properties can be money pits if you make a mistake. Do you really need them? Only you can answer that question. You should use a property inspection checklist when you checkout property. Make generous allowances for fix-up work. If you have an estimate from a contractor always add on 10% to 20% to be on the safe side. If you plan on selling the property as quickly a possible after purchase (flipping) you will have to price it a little below market value. Enter how much under fair market value in the space marked "Quick Sale Discount" on the Property Info Sheet. You will learn what that discount should be with experience. In a hot real estate market it can be a small discount - larger in a slow market. In some cases you wont have time for contractor inspections. You will have to do your own estimates of repair costs. Should you take the risk? Sure, you can prepare yourself for these kinds of opportunities. Spend some time learning how to properly inspect a house and estimate repair costs. You will find these "under the gun" deals can be very profitable. Be sure there is plenty of adjusted equity in the property to cover the costs of any surprises and still leave a reasonable profit. Very few people are in a position to step in and handle this kind of deal, especial at the last minute. It is a great chance for large profits, but it is only for the strong and experienced. After you have visited with the homeowner take the time to make some notes. Write down your impressions of the prospect and the property. Log what you offered and how you made the offer. Note anything you might have done differently. Jot down any information that might be helpful later. Do this immediately after your visit, while everything is still fresh in your mind. If you will go back and review these notes from time to time you will find ways to sharpen
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your skills in dealing with owners facing foreclosure. Your invitation to visit with the homeowner is a rare and valuable opportunity. There may have been many others who were trying to get such a meeting. Even if you were not able to close a deal on this visit you still had the chance to make such a good impression that the prospect will contact you a few days later. Make a file of your notes so they will be easy to find if you will be dealing with this owner again. A visit allows you to size up the condition of the property. This is a tremendous advantage if the prospect wont sell and you later want to bid on the property at the foreclosure sale. You may be the only bidder who really knows the condition of the home and has detailed information about the structure and the liens against it. Keeping the information on file is also a good idea if the prospect is able to find the money to cure the default. Experience shows that often the homeowner will be right back in foreclosure within a few months. If you have done a good job of connecting with him you will have the inside track and the information to go with it. Here are a couple of tips to help you keep control of the situation when you are in the prospects home. Children will often want everyones attention while you are there and this can be very disruptive to your negotiations. Keep a hand full of bubble gum in your briefcase for such occasions. The larger the pieces the better. Give each child two or three pieces, after asking the parents permission. The family dog may want to spend the evening sitting on your lap. Take along a couple of rawhide chew-toys to keep Fido busy.

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QUICK INSPECTION CHECK-LIST Owner' s Name Address Date Built Sq Ft Bdrms Baths Date

Exterior Front Yard Walks/Drive way Windows/Doors Roof

Back Yard Trees/Shrubs

Walls Pool/Spa

Foundation Garage Dr Paint

Window Screens Lot Drainage Street/Curbs/Sidewalk

Gutters/Downspouts Interior Walls/Ceilings Entrance: Flooring

Living Rm: Family Rm Dining Rm: Bdrm #1: Bdrm #2: Bdrm #3: Bdrm #4: Bath #1: Bath #2:
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Bath #3: Kitchen: Appliances: Range/Oven Dishwasher Disposal Sink

NOTES:

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STRUCTURING THE DEAL

The homeowner has contacted you. You have met with him and inspected the home. You have convinced him that selling to you is his best course of action. Now it is time to frame the offer and create the contract. Once you have determined the value of the adjusted equity you must agree on how it is to be divided. On a basic deal with a reasonably sized equity a 50/50 split is a good offer. If there is more than average risk you should expect a greater reward. If there is little equity you should receive at least your minimum profit figure and whatever is left over (if anything) can go to the seller. Those are just general guidelines. Every deal will be different. Sometimes all the seller requires is some "get away" money to pay for the moving van and a few expenses. If you have done a good job of explaining the alternatives (forced sale) and costs (liens, fix-up, etc.) to the seller some will be willing to accept your purchase offer. Remind them that time is running out and their options are few. Will all prospects go for your offer? Of course not. But some will if you write enough offers if you will just put this system into practice and stick with it. Once you have a prospect who agrees to sell you must formulate an acceptable deal. Actually the presentation of the deal may be part of your effort to persuade the prospect that selling to you is their best course of action. Your offer will probably be put together piece by piece while talking to the prospect and making them aware of their real, immediate needs. Things like, where are they going to live, where will they get the money needed to move. Perhaps their car has been repossessed and they need another one to get to work. It will be necessary for you to organize the sellers needs, so they can understand how you can help meet some of them. Sit down with them and ask, "If you lose your home where will you and your family live?" "How will you get the money to move?" Often the prospect is so depressed and confused they have not thought out what they will do and how they will do it. This is your chance to explain how selling the home will remove the stress, keep a foreclosure from their credit history and allow them to take the first step towards getting their life back together. Lets look at what sort of deal you can offer the seller. For example, suppose the home has an adjusted equity of $24,000. The most basic deal would be a 50/50 split. At closing the
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seller would get about $12,000. They could do whatever they wanted with the money. Would that be best for the seller and you? Maybe not! Remember that the prospect is not good at managing money. If they were they wouldnt be in this mess. You can make a strong case for giving them a portion of their half now and the remainder later. You could give them $6,000 at the close and the other $6,000 in twelve months. This would be spelled out in the purchase agreement. There could be no promissory note or mortgage for their creditors to find and collect on. Suppose you gave them $6,000 at the close and the $6,000 would be paid at the rate of $250 per month for 24 months. This plan would remove the temptation to spend the $6,000 on non-essentials and guarantee them a monthly income during a time when they could most use a flow of cash. Your offer of monthly payments would be included in the purchase agreement. There would not have to be a promissory note created and no mortgage placed against the property to secure your $6,000 debt to them. If the seller raises an objection to that arrangement offer to give them your unsecured, personal note for the 24 payments. This would be your personal debt with no securing document and no mortgage against the property. Dont make a big deal out of this; just say, This is how we will do it. Or, if you must, have the note secured by the property. Interest on the note? Keep in mind that you are dealing with a distressed seller. Dont offer to pay interest and they probably wont ask for it. If they do ask just tell them you will pay the same rate that they would get on a bank savings accountassuming those rates are low at the time. Having the note unsecured by the property means that you can sell the property and use part of the profit to make payments on the note. If you plan on holding onto the property and renting it, at least part of the payments can come from the monthly rent you will be receiving. This is an example of always trying to have the asset pay for its self. Of course, you could structure the deal with the second $6,000 paid in a lump sum at the end of 12 months. Or $3,000 at the end of six months and another $3,000 at the end of 12 months. Any deferred payment makes the deal more attractive to you based on the time value of money. Whenever you are receiving money you want it now. When you are paying money you want to delay payment as long as possible. The sooner you get money the sooner you can get it invested and earning. When you pay a debt over time you have the use of the money during that time period and you can keep it invested and earning.
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Deferred payment is probably good for the seller. It is money they can count on receiving during a period when it is important for them not to squander it. Your imagination and experience are the only limit on the deals you create. Suppose your offer included some cash and a years free rent in the home she is selling to you? This would allow her to save face by remaining in the home, kids staying in their school, etc. If the home had a monthly rental value of $650.00 that would add up to $7,800.00 for the year. If your payments on the home loan were less than $650.00 it would be like getting a discount on what you owed the seller. You wouldnt have to offer a full year of free rent. You could offer six months or whatever number would match the equity owed to the seller. This can be a very attractive offer for the seller and good for you if your mortgage payments are less than the rental value of the home, as they should be if this is a good property to hold for your portfolio of rental homes. Dont offer to rent the home with an option to purchase. If you became entangled in a legal dispute with your new tenant a court could rule your rent- with-option was actually a financing device for the purchase of the home. Not good for you! What if you offered the seller some cash, two days use of a U-Haul truck and some months of free rent on another house you own. If you did not have a vacant property you could contact another landlord and offer to pay a years rent in advance for the family, if the landlord would give you a twenty-percent discount. We have had this kind of "discount for prepaid rent" offer accepted by a landlord. If the seller has had his car repossessed you could offer to give him a used car as part of the deal. Since you are a good negotiator you should be able to buy a car from a private seller at a good price. These are just examples meant to get you thinking about identifying and solving some of the prospects immediate problems as part of your offer. This approach can often be more effective than just a cash deal. Homeowners who have moved out of the house that is being foreclosed upon are a special case. Usually they have moved because they have given up any hope of saving their home. They think that by getting out of the house they can leave their troubles behind.
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They just dont realize that the foreclosure will be part of their credit history and that some of their creditors may go to court and get a judgment against them. That judgment will follow them around for a number of years unless it is paid. It can sometimes be a problem finding these distressed homeowners. You will get some of your direct mail returned marked "Vacant" or "Not At This Address", etc. You will have to do a little detective work to find them. Talk to neighbors, etc. Search on the Internet. You will often find distressed owners who have chewed up all the home' s equity. Can you do deals when you find a property that has no equity? Maybe. Here is an aggressive technique. When they find a home that is mortgaged up to near 100% or more of its value, you can offer to buy the property "subject to" the existing loans. "Subject to" means you will buy the property, pay any arrears and costs, and take over the loan payments. The owner deeds the property to the investor, but the owner's name stays on the loans. This tactic allows you to buy the home with no new financing. The loans probably have due on sale clauses in them, but lenders very seldom call them due if the payments are brought current and remain current. For an investor this is a quick and inexpensive way to buy. If the lenders do call the loans due the investor could refinance or arrange to assume the loan for a fee paid to the lender. If the monthly rental income is comfortably greater than the loan payments, you might rent the property for cash flow. Usually the home is mortgaged to 100% or more of its market value. That means that you would have to sell quickly for above market value to make a profit. That's too risky. It could take months to find a buyer and all the while you must be making those monthly loan payments. There are two ways to have a better shot at a quick sale. Price it above market, but not too much above. Run a "rent to own" classified ad. In the ad state that bad credit and recent bankruptcy is OK. This attracts a buyer who has been turned down by most home sellers and loan companies. These buyers understand they must pay more to overcome their bad financial history. You can sell for above market value and you can require monthly payments above the going rental rate. Be right up front about all of this. Explain you're willing to take a chance on them, but you have to be compensated for the increased risk.
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Collect as much cash as you can as option consideration and security deposit before the move in. Often these people have good jobs and cash. Its just their credit that is a disaster. "Rent to Own" is just a lease with option to purchase. If they have not learned their lesson they will default on either the lease or the option and you will reclaim the property and collect more cash from your next lessee. Another technique is to sell the home on a "Contract for Deed". In this case the investor holds the deed to the property and only passes it to the buyer after the buyer has completely paid (monthly payment just like a mortgage) for the home. CashFlowInstitute.com has a book on land contracts that explains how this nifty plan works. Either method you choose starts with an ad like the following:

"$6,000 Down, No Qualifying, Bad Credit, Bankruptcy OK. 3 bed, 2 bath, Nice Home 222-2222"
There are plenty of people who make good money, but because of past financial problems they can't qualify for conventional financing. The down payment is often enough to cover your out of pocket expenses in buying the house and bringing the loans current. You can then charge the buyer/lessee a higher than normal monthly payment that will cover the loan payments, plus one or two hundred dollars he can put into his pocket each month. THE PURCHASE AGREEMENT Some investors create, and have printed, their own "standard" purchase contract with all of the fine print slanted in their favor. You may wish to follow that course after you have gained some experience. In the beginning a standard contract is your best course. A standard "Residential Purchase Agreement and Deposit Receipt" that can be used in most states is available from business supply stores like Staples or Office Max. When you use any standard contract be sure and add all of the clauses and addendum
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you need to create a sound deal for yourself. What clauses you use depends upon the details of the deal. The goal of any contract is to carefully spell out the exact terms of the deal and exactly what is expected of all parties to the deal. When in doubt, write it into the contract. Most of the clauses that follow can be selected for use in any purchase agreement you create. Each of the clauses should be read and initialed by the seller. Better yet, read them aloud to the seller and have him/her initial each. That makes it hard for the seller to say he didnt know what he was signing. You can even go one step further and openly place a video recorder on the table as you read the agreement. Have the seller respond after you read each clause.

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SAMPLE CONTRACT CLAUSES

A. Seller represents that the following are the mortgages, liens, encumbrances, judgments, bonds assessments (hereinafter "Encumbrances") st 1 $ taxes/insurance nd 2 $ date rd 3 $ date Payable $ Monthly % including

Payable $

Monthly

% Due

Payable $

Monthly

% Due

b. Seller represents that said Encumbrances each have the following amounts, which are now due or past due: st 1 $ rd 3 $ All payments on existing encumbrances due through 20 ,
nd

and any taxes, judgments, assessment bonds, prepayment penalties and other liens may be deducted from the net amount due Seller. *** Buyer shall have the right to rescind this agreement and to receive a refund of all consideration paid to Seller if within five (5) days after receiving a Grant/Warranty Deed for the Property Buyer notifies Seller in writing that the principal amounts of, and/or the amounts due or past due on, one or more of the encumbrances are greater than as represented herein, or that there are one or more easements, zoning or land use restrictions, or covenants, conditions and restrictions concerning the Property which adversely affect the continued use of the Property for its present use. Said notice shall demand rescission and shall specify the Encumbrance(s) which are not in compliance with the representations made by Seller or the easements, etc. which interfere with the continued use of the Property for its present use. Upon receipt of said notice Seller shall immediately cooperate with Buyer to execute all documents and do all things necessary to fully rescind the sale and return the full amount of money and/or other property transferred to Seller in connection with this sale. If Seller shall fail or refuse to so cooperate, Seller shall be liable for all loss or harm caused by said failure or refusal.
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*** Seller is aware that buyer is an investor who buys and sells real estate for profit. Seller understands that the purchase price in this agreement is less than full market value. Seller acknowledges that this agreement was entered into under the threat of foreclosure by a third party and in the Sellers judgment was the best possible agreement available at the time. *** Seller agrees that this agreement may be assigned by the buyer with no notice or additional compensation. *** Seller hereby represents that there is no licensed real estate salesperson or broker representing Seller in any way in connection with this purchase and sale, and Seller agrees to hold Buyer harmless and defend Buyer from any claim to commission in connection with this purchase and sale. *** days of the signing of this Seller agrees to vacate the property within agreement. Seller agrees that he will be entitled to receive no proceeds from the sale until after he has vacated the property. *** Seller agrees to allow representatives of the buyer reasonable access to the property upon notice prior to the closing. *** This offer is contingent upon representatives of the Buyer inspecting the property and the Buyers approval of those inspections. *** Seller hereby represents that all negotiations and dealings with Buyer have been and are at arms length and that no duress or undue influence has been exerted by Buyer over Seller or Sellers family in connection with this purchase and sale. *** Buyer agrees to accept the property "as is". *** Buyer to execute in favor of the seller a Straight Promissory Note due in full on (date of payoff) together with % interest per annum simple.
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*** Purchaser shall execute and deliver to the Seller a note in the amount of $ calling for quarterly interest payments of $ years. full principal balance due in

, with the

Purchaser to execute a note secured by a mortgage on the property, in favor of the Seller, in the principal amount of $ , payable at per month, or more, including interest at % per $ annum, until paid. *** The note executed by the Buyer shall call for a moratorium as to payments and interest for a period of , at which time payments shall commence in the amount of $ payable together with interest in the amount of % per annum until paid. *** The maker of the note reserves the right to miss one such periodic payment per loan year and failure to make such periodic payment shall not be a default of the said note. *** The maker of the note reserves the right of first refusal if the note is ever offered for sale and or trade, and expressly reserves the right to match any offer acceptable to the holder of the note. *** The Seller agrees to subordinate this note and mortgage to any new financing the Buyer might secure with the property at some time in the future. Furthermore the Seller agrees to execute any forms necessary to effect such subordination. *** The Buyer reserves the right to substitute other collateral for the note, from time to time. The Seller herein agrees to execute whatever documents are necessary to effect said substitution. *** The property shall be the sole security for the note, and there is no personal liability on the part of the maker. The maker reserves the right to extend the due date of the note for an additional year with
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the payment of $ days prior to the due date. ***

to the holder of the note 30

The payment of the earnest money deposit herein is consideration for the Buyer to have the option of extending the closing by days. *** The Buyer reserves the right to pay the Sellers real estate brokerage fees with any such payment to be deducted from the NET amount due Seller.

The authors are not qualified to give legal advice, but you may find some of the above clauses to be helpful as you draft a purchase agreement. On any pre-printed purchase agreement form you may cross out and initial anything you dont wish to agree to, or that conflicts with the clauses you write in an addendum. Typed or handwritten additions to any contract have priority over printed passages, but it is always best to keep things as simple and clear as possible. Any blank piece of paper can become an addendum to your agreement. Just write or type "Addendum" at the top of the page, write in your clauses and then attach the pages(s) to the agreement. Most of your agreements will be similar. You may consult a real estate attorney on any clauses that you dont completely understand. You must research the foreclosure laws in your state to fully understand any special requirements the law imposes on someone contracting with distressed sellers.

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NOW THAT YOUVE BOUGHT IT?

You should have a plan for every property before you buy it. What are your choices? 1. Keep The Property. If it is a good property in a good neighborhood you may want to add it to your own portfolio. Real estate appreciation and tax shelter are great wealth building opportunities. You should be watching for the very best properties to keep after youve built a cash reserve. You want homes that will produce some monthly positive cash flow and are in areas where they will grow in value. There will be points in the business cycle when interest rates are quite low. These periods present great opportunities for putting affordable financing on property and holding it. 2. Sell The Property. Sell the property as quickly as possible after the purchase. You will want to sell to a buyer with down payment money and the ability to get new financing. This will allow you to quickly pull out any cash you have put into the property, plus your profit from the adjusted equity. You wont find many assumable mortgages anymore and when you do there is usually so much equity built up that you cant afford to put up the amount of cash needed to keep the mortgage in place. You will need new financing. 3. Trade The Property. You could trade the property for another that presents more profit opportunity. With a 1031 exchange there should be no tax consequences when trading up. 4. Sell The Contract. You could sell the purchase contract. This is how you can profit from pre-foreclosure deals with no cash of your own. Be sure and check the laws in your state first before doing this. This is a very powerful technique that can remove the financial limitations that would normally slow your wealth building efforts. You can use it if you are starting with very little cash. Or after you have your system humming along and you uncover more deals than you have the money to handle. What do you do? You do all of the negotiating and contracting and then sell the purchase agreement to an investor. There are many people with money who would love to earn the kind of profits available with foreclosure property, but they dont have the time or expertise to hunt out the good deals. You can capitalize on this situation by being the finder/deal-maker.
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Your direct marketing program will produce a steady stream of prospects. You contact the prospects, make the deals, get the sales agreement signed and then sell the agreement to an investor. This allows you to potentially get to profit quickly. The investor takes over the purchase agreement, arranges financing, takes title at the close of escrow and does the fixup. He either sells the property or rents it for the income, appreciation and tax shelter. You give up some profit, but you save time and can move on to other deals. No real estate license is needed for this activity, because you are not working for a commission or on a contingent basis. You are a principal who is making the deal in your own name and then assigning the purchase contract to an investor. This is possible because you put the words "and/or assigns" after your name in the purchase contract. You will find a clause in the previous chapter that can be added to the contract, so that there can be no misunderstanding about your right to assign the contract. Now you know it is absolutely true that you can profit from foreclosures using no purchase money of your own! After you have a signed agreement with a seller you contact an already identified investor. Put together a well-organized package of paper work that includes the purchase contract, a description of the home with photo, your estimate of the cost of any repair work that needs to be done and the monthly rental income the home should produce. Go through the numbers with the investor and explain exactly how much adjusted equity is in the property and how much he will be paying for it. Then what his profit would be if he offered it for sale. There has been so much written about the great deals that can be found in foreclosures that you should have no trouble finding interested investors. Your challenge is to find serious people who can be counted on to buy the deals when you have them ready to go. That can be accomplished by going to RealEstateInvestorsLive.com There you will find MANY investors. Let the potential investor know that time is of the essence and you will never offer them another opportunity if they refuse to act when you bring them a good deal. Advertise in your local newspaper under Money Wanted, Real Estate Offers, Investments, Partners Wanted, etc. If there are any investment clubs in your area you might be able to find people with money to invest who will jump at the chance to work with you. Contact the real estate editor of your local newspaper and ask him about any investment groups meeting in your area. Or do a Google search for real estate investor clubs and youll find plenty.
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A personal interview with each potential investor allows you to size each other up. You can explain what you are doing and why you are sharing the opportunity with others. Let them know that there are just more good deals than you can handle alone. Explain that each deal will provide the investor with a minimum net profit of a certain figure ($5,000)? Assure them that you will provide them with numbers and documents to examine and check out before he puts up any money. Let him know that you do business with all parties in an open and honest manner. Prepare a sample deal to show each potential investor. Have it well laid out on a few pages of good quality paper. Show the fair market value of the typical home that you will be offering. Explain how you will be determining the adjusted equity and the types of deals you are putting together delayed payments to the seller, etc. Let him know he will have to arrange financing for the property either from his own resources or with a mortgage lender. Then detail how buying the purchase agreement from you can provide him with a quick and easy profit. Do all of this just as you would make any important sales presentation. Let him know that there are no guarantees. You will do the very best you can to be sure there are no mistakes made, but there will always be at least a small risk. Urge the investor to always get title insurance on the property. That will protect him from title errors. His other primary concern would be the cost of any fix-up work that needed to be done. Your purchase agreement must have the clause that allows for inspections, so the investor or his contractor can double check your estimates. You will find that after you explain the profit opportunities many investors will say they are interested in doing a deal with you. Then, when you call them, they always have a reason why they just cant do a deal right now. You must have investors you can count on! You are promising to help people in distress and these investors become part of your plan. If they arent willing to act the moment you need them they can cause serious problems for you and the distressed homeowner. In the beginning you may find just one or two investors interested in your plan. Get them into the act early by telling them that a profitable deal may be taking shape.

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When possible, let them know how negotiations are progressing and what the numbers appear to be. Get one to reaffirm his willingness to buy the deal when it is ready. This will reduce the chance of him backing out at the last minute. Let him know that you wont give him another chance if he lets you down when you are ready for him to buy. After you are well established and have made money for a number of investors you can require any new investor to put up a deposit to show their good faith. This deposit would be applied to the first deal the investor found acceptable. At this point you should have two or three reliable investors on your list so you always have someone ready to step in and do the deal. Instead of selling the sales agreement you can just have the investor put up any needed cash. Then sell the home quickly and split the profit with the investor. In the beginning, when you have little money and no track record you will have to find deals that dont take a great deal of cash. Yes, this is possible. Some prospects have just given up and will sell their equity for very little quick cash. True, you have to sift through more prospects to find them, but they are out there. The foreclosure clock is running. You need a little more time. Contact the mortgage holder and explain you are purchasing the property. Ask for some time to get the home cleaned up, sold and the mortgage loan paid off. Let the lender know you plan on having it sold within three to six weeks. The mortgage holders prime concern is to get the money he is owed. He doesnt really want to own the property through the foreclosure. That just means more time and expense to him. If you tell him that you need just a few days to get the property cleaned and sold, he may be willing to delay the foreclosure. In most cases you will have to bring some of the loans current to stop a foreclosure. Since you plan on selling the property quickly you will recover this money in a short period of time. That means you may be able to borrow the needed funds on credit cards, a short-term personal loan or a willing investor. Quickly clean-up and fix-up, put the home up for sale at slightly below its market value, sell fast, all mortgage and foreclosure debts will be paid in escrow, pay back your short term loans and pocket your profit. You will work hard and fast, but it only takes a couple of deals to get started and
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establish a winning record that will attract investors. After you have your system up and rolling you will find that using investors lets you tackle most any situation that comes your way. For example: If you need all cash to save a great deal that otherwise will be sold at auction tomorrow, you will have an investor with the cash ready to go. Eventually you will have enough of your own cash to do most deals.

You build a track record by keeping careful records of the details of every deal that you do. Take before and after photos of the property. Make up a "case history" album. You can show this album to interested investors to prove you know how to find good deals and turn them into very lucrative experiences for all concerned. Be prepared to persevere! It is easy to get discouraged when you are trying to get started. Nothing that can make this much money is easy to start. After a time you may be earning more than a successful doctor or lawyer. They had to go to school for close to ten years to prepare themselves to earn that kind of money. This system is your money machine. It is your determination that will fuel the machine. The more deals you do the more you learn, the better you get at what you do, the more money you make. More people hear about your success and what you are able to do for others, both homeowners and investors. Success breeds more success. Work hard to get your program rolling and then be ready to enjoy the ride.

(Example)

ASSIGNMENT OF REAL ESTATE PURCHASE AGREEMENT

For valuable consideration in hand paid, receipt whereof is hereby acknowledged, (Your Name and Address) Hereinafter, "assignor", does hereby set over, transfer, and assign unto, (Investor' s Name and Address) hereinafter, "assignee", his/their heirs, executors, administrators or assigns all of its right, title and interest in and to that certain attached contract entitled "Residential Purchase Agreement
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and Deposit Receipt" dated , hereinafter the "contract", executed by one (Name of Seller) as seller and assignor (Your Name) as buyer, for the purchase of said property knows as: (Address, City and County), and legally described as: (Legal description as found on the deed)

a. By accepting this assignment, assignee agrees to undertake and perform the obligations imposed on assignor as buyer under the aforementioned contract. Assignee accepts this assignment subject to all terms and conditions contained in the contract or imposed by law. A copy of the contact is attached hereto as Exhibit "A" and incorporated herein as if fully set forth herein. b. It is hereby agreed that the obligations of both assignors and assignee hereunder are not contingent upon the property closing or recordation of a deed or other completion of the purchase of the property under the contract. It is the sole responsibility of assignee to comply with the terms of the contract, and it is the sole responsibility of the assignee to seek legal or other relief in the vent that the contract is not performed as a result of the act or omission of the other party to the contract. Assignor Assignee Date Date

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TITLE SEARCH
When purchasing any real estate you must be sure that you understand exactly what you are buying. What is the condition of the title? Can it be freely transferred? Who must sign the deed to transfer title to the property? And, equally as important, are there liens against the property? In the normal course of a real estate transaction you would have a title search done by a title insurance company or an attorney who specializes in real estate closings. The search would show who the legal owner(s) of the property is and exactly what liens (and who holds them) are encumbering the property. The report you would receive after this search is called an "abstract of title." If you approved the results of this search you would purchase a policy of title insurance that would compensate you if there was an error made in the title search. Whenever possible you should follow normal procedures and have a title search, check the abstract and arrange for title insurance. A title search done by an escrow company or attorney takes time. Thats something you dont always have when buying properties facing foreclosure. Yet, some of the very best bargains can be found just a few days before the scheduled forced sale. The homeowner has truly run out of time and may be desperate to sell and salvage what he can. You can profit from these situations if you can get a quick and inexpensive title search. You could go directly to a title company or a title attorney and pay them to do the search for you. Could they do it quickly? Probably. Would they do it inexpensively? Maybe? Cost is a factor here, because many of the properties you search wont be worth buying. You will find there is just no equity. You would be paying for searches where no deal would be possible. But, there is another solution. If you are taking all of your business to one title company they may be willing to do a preliminary search for you at no cost. That usually only happens after they know you will be a profitable and continuing customer. You have two other choices. Make an arrangement with a freelance title searcher or by doing the search yourself. Now many counties put all of their property records into computer files and often you can access those files from your computer or smart phone. Otherwise you will have to visit the recorders office at your county's government center to search title.
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Talk to the people at the title company you plan on using and ask if they know of a title searcher who would be interested in teaching you how to search. Explain that you would be willing to pay for the lessons. Here is a basic guide to researching real property titles. THE DEED is the document that transfers title to a parcel of real estate. It might be a Grant Deed; a Warranty Deed or a deed of another name (not a trust deed). Learn what document is most commonly used in your state. After you see one or two they all will look very familiar. A MORTGAGE OR TRUST DEED is a lien against the property. It secures a loan, debt or some other promise made by the homeowner. Other types of liens include IRS liens, property tax liens, judgment liens, mechanics liens, etc. They do not transfer ownership. A "Les Pendens" recorded against a property indicates that there is a legal action pending against the owner. When you search title on property you are considering buying you want to know exactly what liens are against the property, so that you can determine how much money is owed by the prospect. All of the liens will become your obligations if they are not paid off or settled before you take title. If you buy a property with a market value of $100,000 and it has $110,000 worth of liens and mortgages against it, you are in trouble. You wont know if a property is worth buying until you know the total amount of debt represented by all mortgages and liens. You also want to know if anything unusual has been recorded concerning the property. Has someone recorded an option or a lease notice? That means a third party may have some interest in the property that could complicate your purchase. You will find all valid liens and notices that have been recorded against the property listed in the County Recorders index as we discussed earlier. Your starting point will be the deed conveying title to the property where the documentary transfer tax paid was on the full value of the property. For example: Whenever a deed transferring title is recorded in California a documentary transfer tax must be paid. The tax is computed upon the lesser of either the "full value of property conveyed" or "full value less value of liens and encumbrances remaining at the time of sale" (that means assumed loans and liens).
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If that tax is on the full value, then the property was free and clear at the moment the deed was recorded. Heres why If that deed was recorded by a title insurance company as part of a conventional escrow for an institutional lender (bank, insurance company, pension fund, etc.), then you can be reasonably sure that the tax information is accurate. What is a conventional escrow? Most property title transfers take place in an escrow that also processes any new financing. Here is what happens. Your prospect is buying the property. He reaches an agreement with the seller on price. He then must put up cash for the down payment and find a new loan for the balance of the purchase price. As the escrow closes all existing mortgages, trust deeds and liens are paid off and for an instant the property is free and clear of any and all encumbrances. The Grant Deed or Warranty Deed is then immediately recorded. That transfers ownership from the seller to the buyer. Then, in the next instant, a mortgage is recorded to secure the buyers new loan. You can determine if the transfer was a conventional transaction by looking at the upper left hand side of the deed for an "Escrow No.", "Order No. or "Title Order No." This is very important, because in this normal, conventional process conducted by trained professionals, you can be reasonably sure that the new institutional lender insisted that all loans, debts and liens encumbering the property had to be cleared before the institutions mortgage was recorded. The institution would insist that its mortgage be recorded in the number one position. It would then become the "first mortgage". When you find a recorded entry that meets the above requirements (or the equivalent in your state) it means you do not have to search any further back in time. This can be your starting point. From this point you can begin moving forward in time in the index to check for any liens or encumbrances that have been recorded since that date. If you find that the deed is stamped "Accommodation" or "Accommodation Recording", or if the deed is hand-written with no indication on the face that it was created through a title insurance, escrow company or real estate attorney, then you will have to go further back in the index until you can find a proper deed as your starting point. From the starting point you can start working your way forward in the index looking for your prospects name to see if you find any other liens that have been recorded against the property. If you find one, write down the type of lien and its number, so you can later find a
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copy of the document in the countys files and examine it. In many cases you may find that a lien has been recorded against the property and then months or years later you will find, in the index, another document that cancels or lifts that lien. With a trust deed the document that clears the lien is a "reconveyance." With a judgment lien it is a "satisfaction." A Notice of Default is usually canceled by a "recession". On your list of liens you can cross off those that have been lifted. If your starting point was August 1, 1989 you would have to search from that date to the present date in the index looking for recorded liens. You would make a list of all the liens you found in the index, crossing out the ones that had been closed. In the language of title searching a lien is considered "open" when it is recorded against a property and "closed" when a document that is required to lift the lien is recorded. Your next step would be to learn how much was still owed on the liens remaining open. You can find totals for some of the money stilled owed by examining copies of the documents. For example: Judgment liens will show the amount owed on the original judgment. But there may be some cost and interest that must be added to that. Most judgments earn interest. For example: In California an unpaid judgment earns interest at the rate of 10% per year. A one thousand- dollar judgment that was three years old would cost at least $1,300 to pay off. In most cases the recorded document will not indicate the amount due. The homeowner should have documents (promissory notes, payment books, etc.) from which you can calculate how much money will be required to clear title of those encumbrances. If the debt amount is not indicated there should be an address on the documents where you can contact someone for that information. You should have the cooperation of the homeowner, so prepare a letter to the lien holders asking for the amounts due and have it signed by the owner. Sometimes in the Recorders index you may find documents that have been filed against people with the same or similar name. For example, your prospects name may be Robert Randall. You may run across a listing in the index for Randall, R. How can you be sure if that is your Robert Randall or someone named Randy Randall? Start by finding the document in the files and seeing if the full name is listed there. Or there may be an address that will give you a clue as to whether this is your man or not.
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Take the address for R. Randal to the assessors office and look in that index to see if there is some other R. Randal living at that location. Then you know it is not your man or maybe it is your man? You will find some index listings that may require some detective workeven going so far as to compare signatures on various documents. Tracking these things down can be a bit of fun, if you have the time. Remember you are only going to expend the effort of a title search when you have found a homeowner who is willing to sell his property at a bargain price. He has provided you with information about the deed and liens on the property. You are checking to confirm what he has told you. You must always confirm any information you get from a homeowner. If he has done as you have asked he had all of his documents and notes available for your inspection when you first visited him. From these you get dates that will help you find your starting point for the title search. If he has been honest with you (not everyone will be) the search should go rather quickly. If you find anything recorded against the property that you dont understand, either find someone you trust to explain it or dont buy the property. Get copies of all documents that have been recorded against the property or the homeowner and read them! You are playing with real money and you cant afford to overlook any detail. Knowing how to do title searching is valuable knowledge for any real estate investor. That goes triple for the foreclosure buyer. You may be able to find an experienced title searcher who will give you some tutoring and be available for advice when you need it. If, because of time constraints, you have made a mistake and purchased a property without a conventional escrow and title search you will want to get title insurance as soon as possible. This will be the test, because they will search title and you must pray they dont find any unexpected "gotchas". Look, if you are starting out flat broke you may have to do your own title searching. But!it is always best to have a title company or attorney do a low cost preliminary title search. However, now you know what's involved in a search and why it must be done! A title company may provide you with a "preliminary title report" for a nominal fee, or even free after you have done some business with
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them. Binder When you are buying a property and plan on flipping it quickly it is wise to get a title insurance "binder". A binder is a title insurance companys commitment to issue a title policy within a certain period of time. For many title companies that period is two years. You pay extra for the binder, usually 110% of the normal cost of a title policy for that particular property. Why a binder? Because it saves you money! The binder allows you to resell the property during that two-year period and get a refund on your title insurance costs, if the buyer purchases title insurance from the same company. If the normal cost of title insurance would be $400 it would cost you $440 for a binder (110% of normal cost). Heres the good part. In your purchase agreement with the new buyer require him to buy the title insurance from the company that issued the binder. Then, at the close of escrow, you will get a refund of 100% of the normal cost of the title policy. In this case your refund would be $400. Your binder policy insuring your good title while you held the property really cost you only $40. By having this knowledge you have saved $400, which goes right into your pocket. Is that not a sweet thing? Always shop for title insurance companies that offer you the most service at the best price. A binder policy will play a profitable part in your investment program. Remember you can negotiate fees and services with a title company, especially if you are a regular customer.

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DUE-ON-SALE
When buying foreclosure property it may be to your advantage to keep any existing mortgages that can be assumed without qualifying. However, the truth is you probably wont find one as lenders stopped originating them many years ago. If you do find one it will have been in place for so many years that the homeowner should have a huge amount of equity. Distressed owners, in most cases, have used up any equity in their property by refinancing or taking out second or third loans. If you do find an assumable with a large equity the homeowner doesnt really need you because he can borrow against that equity. If you do find one where the owner wants to sell you will have to either come up with a lot of cash or do a creative deal where you pay him for his equity over a period of years. Almost all mortgages placed by conventional lenders over the last decades contain very strong due-on-sale clauses. This clause allows the lender to call for full payment of the loan if the property is sold. In some cases the buyer may be allowed to take over the loan after submitting an application and meeting credit qualifications and formally assuming the loan. At that time the lender can adjust the interest rate and other aspects of the loan if it would be in the lenders best interest to do so. You will seldom, if ever, assume a conventional loan. Aggressive investors often buy the property "subject to" the mortgage. Thats mean you would be buying and leaving the mortgage in place. Then you would bring the payments current (plus, payoff all foreclosure costs) and keep them current with monthly payments. You are hoping the lender will be content to have the default cured and be getting payments on time and not be inclined to investigate any further. Understand that if there is a due-on-sale clause (alienation clause) in the mortgage the lender can demand that you pay off the loan if they learn of a title transfer. If you dont pay in a timely manner they can begin a foreclosure action against you. If your original plan was just to hold the property long enough to sell it you may be willing to risk a demand for full payment . W h e n i n t e r e s t r a t e s a r e l o w , l enders seldom ask. Look at it this way. You buy the property during the pre-foreclosure period. You bring the loan current. That stops the foreclosure. You begin your fix-up and search for a buyer. The lender discovers that you have bought the property and writes you a letter demanding you pay off the loan. You stall them and hurry on with your plan.
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If you have planned correctly the chances are you will have the place sold before the lender takes any action. By that time you should be very close to closing escrow. Then the lender will be paid and you will get your profit. In reality the lender seldom discovers someone new is making the payments, or if they do they don't acknowledge the change. The late syndicated real estate columnist Robert Bruss, an old friend of ours wrote in his weekly column that he regularly bought investment homes "subject to" the existing financing. There is also a technique you may hear about where you have the seller transfer title into a trust and then you take over the trust. That way there is no title change when you buy. The trust is still the titleholder and the financing stays in place. Always consult an attorney before doing this. Yes, these tactics are for the aggressive investor. Your alternative is to: (a.) Have enough of your own cash to pay off the lender; (b.) Have an investor who has the cash; (c.) Have a line of short-term credit, so you can borrow the money for a few weeks while you get the house sold. Talk to mortgage brokers about short-term loans. They are called bridge loans in home construction and you might get something similar for your deals. In most cases you are going to flip the property for a quick profit. In your purchase agreement you can require that the escrow not close until you have a ready buyer for the property. We mentioned buying the property "subject to" the existing mortgage. Be careful here. It means you buy the property, but the seller still has responsibility for the mortgage loan. If you did not make payments the seller would become responsible. The lender could take foreclosure action against the seller even though the seller believed he was out from under the property. If you do this to an owner that had been facing foreclosure and the owner later sues you - any judge would probably turn you into dog meat. Be careful how you deal with owners in distress. It is OK to strike a profitable deal with them, but dont leave their bones bleaching in the sun. If you do, you become vulnerable to some future legal action that wont be pretty.
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Here is something else you should remember. As an investor you never want to have personal liability on any debt. That means the only security for any real estate loan will be the property and the property alone. If you fall on hard times and default on the loan the lender can take the property, but he cant come after any of your other assets. You dont plan on defaulting, I know. Just play it safe and never sign anything where you have personal liability if you can help it. Here in Arizona we had a governor who was a big time real estate developer before entering politics. He had given a personal guarantee on some multimillion dollar loans for a couple of his projects. One of the projects was a plush Ritz Carleton Hotel. In the real estate crash of the late 1980s he defaulted on those loans. Legal action was taken against him while he was in office and he was indicted on some of the charges. Since they were felony charges he was forced to resign from office. He later worked as a chef in an area restaurant. Never give a personal guarantee unless you love to saut. The truth is the only time you can avoid giving a personal guarantee for traditional investment real estate money is when the seller is willing to carry back all or part of the financing. When dealing with mortgage companies and institutional lenders they will usually demand a personal guarantee or you won't get the money. Back in the good old days nearly all home loans were assumable, thereby making the purchase of real estate fast and reasonably uncomplicated. No more! A loan assumption is an agreement by a buyer to assume the liability and terms of an existing note secured by a mortgage or deed of trust. Depending upon the type of assumption the seller may or may not be released from future liability. Federal Housing Administration (FHA), Veterans Administration (VA) loans and most conventional adjustable rate mortgages (ARMS) allowed assumptions by fully qualified buyers. "Due-on-sale" is the opposite of "assumable". One means you must pay off the loan when you sell. The other term meant you may have been able to assume the loan if you had the same qualifications that were required for a new loan origination. Lets talk about FHA insured loans. In an effort to combat defaults of FHA
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loans HUD has increased the enforceability of their due-on-sale clause. Before Dec. 1, 1986 FHA insured loans contained no restrictions on the transfer of the property. The lender had no right to call the loan due, nor did he have the right to charge an assumption fee, if you were to buy "subject-to" the loan. The seller could just demand a beneficiary statement (statement of the amount still due on the loan) from the lender. The lender was required to deliver it within 21 days and couldn't charge more than $50 for it. We have called these loans "assumable loans". That is not quite correct. You didn't have to formally assume the loan. You could buy the property "subject to" the loan and have nothing to fear from the lender. But look, you arent going to find any of these loans on profitable deals. If a miracle happens you now know the basics. Under any circumstance the action that usually tips off the lender that there has been a transfer of ownership is the change in the fire insurance policy beneficiary. When you buy a property and ask the insurance company to put your name on the policy the lender will be notified. Lenders are always co-beneficiaries on the policy and receive notice of any change of beneficiary. Whether they will do anything about it is another question. Taking over existing financing can be a powerful strategy. The truth is you will seldom find loans that can be assumed. They were the basis for all of those old "No Money Down" and "Get Rich Tomorrow In Real Estate" books. It was wonderful while it lasted. If you cant take over existing loans you must come up with the cash, get a new loan, bring in an investor, buy subject to or work a lease/option deal. Thats what you will be doing most of the time. You still make lots of money you just use different tactics. The tools for winning are in this system. This chapter does not advise you to take over any property without paying off loans if the mortgage has a due on sale clause. We are simply pointing out some options that some aggressive investors sometimes use. At CashFlowInstitute.com you will find additional learning material on Subject to & Lease/Options. Do only those things that allow you to dream beautiful dreams during blissful slumber.

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LEFT-OVERS
When you are reviewing the Notices of Default you will be looking for the names of the individuals who have the power to sell the property to you. The Notice of Default will list the name of the Trustor or Mortgagor. This is usually the person who owns the property and probably is currently living there. What if the Trustor/Mortgagor does not live at the property and is not the owner? This does not happen as often as it once did, but there is still a chance you occasionally might run into the situation. Heres why: The person who buys a home and finances the purchase with a loan secured by a trust deed or mortgage is the Trustor or Mortgagor. If he later sells the property and allows the new buyer to assume the loan, or buy the property "subject to" the existing loan, his name will remain on the records as the Trustor/Mortgagor. The only way the seller would be released from the loan is if the buyer were to formally assume the loan after qualifying to the lenders satisfaction. Then the seller could ask to be released from all further responsibility and the buyers name would appear in the records as the Mortgagor. If the formal assumption procedure is not followed, the original Trustor/Mortgagors name remains on the loan and in the records. If the new homeowner stops making payments the lender will file a notice of default against the original Trustor/Mortgagor, not the current owner. All this means is that a letter sent to a name you find on a Notice of Default may be returned, because that person is no longer the owner of the home and does not live there. As we said, this does not happen often anymore, but if it does you must find the name of the current owner. He is the one who is not making the mortgage payments and he is the one who can sell the home. It is a simple matter to check the records in the County Tax Assessors office to learn the name of the current owner. The Assessor automatically gets the new owners name every time there is a change of title. He must have that information so that the property tax bill
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can be sent to the proper person.

These records may be available online. Another way to find the owners name online is to go to one of the directory services. Since you have the address of the property you may be able to use that to find the name of the current resident and that probably is the owner. There is seldom a need to contact the original Trustor/Mortgagor. He cant sell you the property. He no longer owns it. If you are have trouble finding the current owner you might contact the Mortgagor and ask if knows the whereabouts of the owner. You usually will have so many names of people in default that you wont want to waste time looking for the occasional owner who is not easy to find. ### After you have gathered information from the prospect in foreclosure you may find that it is a property that you would like to buy. Your research has shown that there is enough equity in the property to produce a good profit, but the prospect has decided not to sell to you. You may now have knowledge about the property that no one else has. This knowledge can allow you to confidently bid at the foreclosure sale. We will not go into detail on buying property at the sale. Just remember that all liens junior to the foreclosing lien (those that were recorded later in time) will be wiped out by the sale. Any liens that are senior to the foreclosing lien will become the obligation of the successful bidder. Buying at the sale is not for the inexperienced. ### You have another alternative when a prospect refuses to sell after you have determined that the property is worth buying. You can seek out the holder of a lien that is junior to the foreclosing lien. For example: Suppose the homeowner purchased the home with a new first mortgage. Later he received a loan from a private party that was secured by a second mortgage. If the first lender is foreclosing you can go to the private lender and ask if he will sell his note and securing mortgage to you. If so, you can bring the first lenders payment current and start your own foreclosing action against the prospect.
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Your best chance of buying this second position note is if a private party holds it. If a commercial lender holds the note it is still possible they may sell to you just to get a bad debt off their books. You will always try to buy these notes at a discount. To learn more about promissory notes check one of the CashFlowInsitute.com publications on paper investing. # # #

Whenever you are buying a pre-foreclosure property always contact all of the junior lien holders and ask if you can pay-off their liens at a discount. This is often possible with judgment liens, mechanics liens and any lender, especially private lenders. These lien holders may not understand the details of the foreclosure. They might fear they would lose everything and be glad to get at least some cash for their debts. When you calculated the adjusted equity in the property and what you could pay for it you subtracted the full value of any junior lien. When you are able to buy them at a discount you are giving yourself a very nice increase in profit. These are not profits you share with the distressed seller. This is money you have fairly earned through your knowledge and effort. # # #

There will be times when the distressed homeowner contacts you so late in the foreclosure period that you just dont have enough time to comfortably gather all of the information you need to make a purchase decision. What to do? Stop the foreclosure! There are a number of ways that this can be done. The first thing is to contact the foreclosing lender and ask them to delay the sale. It is surprising to learn how few homeowners in foreclosure ever contact the lender and try to work out a plan for bringing the payments current. If you contact an executive at the lending company you can explain that you plan on buying the property and paying off the loan. Ask them to give you a few days to arrange new financing. They may be willing to cooperative with you. Dont be afraid to ask them if they would discount the amount owed if you could pay it off within thirty days. Be prepared to show the lender exactly why you need the extra time, how much time you
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will need and how soon you will bring the loan current or cash them out. It is usually in their best interest to accept this proposal. The most it can cost them is a delay of a few days. This delay will give you time to get a full-fledged title search and take care of other details, like getting your investor prepared to put up money for the deal. Keep the delay as short as possible to make it sensible for the lender. Be sure you have a purchase agreement signed by the prospect before the foreclosure is stopped. You dont want to encourage him to use the extra time to go around you to get to some other deal. When you find a prospect that has enough equity in his home to make for a profitable purchase, but he wont sell, you can bid for the home at the forced sale. If you dont want to take the chance of being out-bid at the sale you may try arranging a loan for the prospect. Just enough money to cure the default with a loan of one or two years. Money is what the homeowner really wants. He wants anything that will allow him to keep his home. A cash loan will certainly do that. Only enough cash is needed to bring any loans current and pay for the foreclosure costs that have accumulated to that point. When the prospect falls back into default in a few months (as he probably will) he should be eager to get in touch with you to discuss the sale of his home. Stay in touch with him to make sure he does. If you make the loan yourself be sure and check state law to be sure you dont need a license for that kind of lending. You will also have to understand the usury laws in your state. Always consult an attorney before doing this so you know youre acting within the law. If you are not interested in lending you can still profit from the situation by acting as a finder for someone who would like to make loans. You may be able to collect a finders fee. Usually the prospects credit history is so poor that traditional lenders wont touch him. However, there are loan companies and private individuals that are very interested in this type of loan. Get on the phone. Go right down the list of lenders in the Yellow Pages or online search you do and ask each lender if they will make a loan to a homeowner in default. These types of loans are called "D" paper. "D" is the rating given to the very worst credit risk that most lenders will consider. Bankruptcies and foreclosures on a credit history are often OK when it comes to "D" paper. They require that the prospect have a comfortable equity in his home and/or steady
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income. That makes a secure loan. Learn the lenders requirements so you can refer those who will qualify. Once you find one or two of these lenders you can arrange to refer your loan prospects to them for a finders fee. If this is prohibited in your state or if you need some kind of license to accept fees, limit your referrals to private lenders. Consult an attorney to make sure whats lawful. Even if your states laws prevent you from collecting a finders fee from the private lender you are still in the position of having done a favor for both parties. Ask the lender to call you if ever the prospect misses a payment. Then you can call the homeowner and see if he is ready to sell. This may allow you to make a deal with them before another foreclosure action is brought against them. That is a great situation for you. The prospect knows you have helped him in the past and he should trust you. If he is ready to sell, you will be the first and only one they need to know. # # #

Be aware of pre-payment penalties. Some mortgages have a clause that requires a penalty be paid if the loan is paid off early. The penalty is often six months interest. That can be a lot of money. Read the mortgage documents carefully before purchasing, so you arent caught by surprise. If you are aware of the penalties you can calculate their cost into the deal. Some pre-payment penalties are in effect only for a limited period of time, like the first five years of the loan. Read and learn. # # #

The direct mail strategy described in this manual is powerful and effective. If you wish to be even more aggressive in your prospecting you can telephone the distressed owners on your list during the last 30 days of the foreclosure period. It can be difficult to get them to talk to you, but you will uncover a few who may be ready to sell right away. # # #

The VA and HUD are usually very slow to file a Notice of Default. When you learn from a prospect that it is one of those government insured loans, be aware that the homeowner may have stopped making payments months ago. Be sure there is plenty of equity in the
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home to cover all of those back payments and penalties. Practically, a lender cannot start a foreclosure action until two payments have been missed. Most wait longer than that. The government does not want to see foreclosures on the loans it insures. They have "workout" plans to help homeowners get their finances straightened out. You can contact the homeowner's lender and see what they will allow. This buys you time to get your deal set. Get the homeowner's permission to talk to the lender. Youll find a manual explaining Short Sales at CashFlowInstitute.com # # #

Have a plan for every property that you buy, before you buy! It is not wise to make the buy and then try to figure out what you are going to do with the property. Will you keep, sell or pass the property to an investor? Make that choice early in the evaluation of the property. # # #

You will sometimes find apartments and commercial properties in foreclosure. Unless you have experience with such properties, be careful! Buying nice, single family homes carries much less risk and still offers very attractive profits. # # #

Always deal honestly with the homeowner in foreclosure! Do not buy his property and give him an option to buy it back. Dont put him into a position where he is worse off than when you found him. Be sincere in two things. Your desire to give the homeowner some help and your desire to make some profit. Never do anything that you would not enjoy explaining to a judge. The more defaults you find and add to your mailing list the better your chances of finding prospects ready to sell. If you want to get the very most out of the system plan on expanding your efforts beyond your immediate community as soon as possible. Explore the practicality of working the most populated areas of your state.
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Foreclosure real estate has long been a source of remarkable profits. With this well organized and innovative system there is no reason why you cannot reach whatever financial goal you choose. The system lacks only your commitment.

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SEVEN SECRETS
1. Live your own life. Take responsibility for your life and your actions. Dont blame others. Dont blame circumstances. There may be things you cant change, but you can choose how to respond to them. 2. Begin with the end in mind. Knowing that you determine the course of your life gives you the power to become anything you wish. Create vision. Write it out. By keeping the end in mind you make certain that each day of your life contributes in a meaningful way to that vision. 3. Put first things first. Once you have defined your vision, start living it, day by day, moment to moment. Develop discipline. Set priorities. Say "no" to the unimportant. Dont let trivial rob you of momentum. 4. Be positive in all you do. Every obstacle is just an opportunity for triumph. There can be no negatives in your life or thinking, if you do not allow them. All circumstances are a matter of perspective. Accept the challenge of ignoring that which would impede your progress, while you travel the road paved smooth with solutions that flow from a positive mental attitude. 5. Seek first to understand. You must listen to others with the intent to understand. Dont listen with intent to reply, because this prevents you from understanding the message within the message. You must listen so that you fully and deeply understand the person speaking, emotionally as well as intellectually. Only then will you truly hear what they are saying. In return, be sure you are understood. Present your ideas clearly, specifically, and most importantly, in the context of a deep understanding of their concerns. Understanding this gives you incalculable power in all things human. 6. Do not fear to fail. The only people who dont make mistakes are those who do nothing. Your vision includes the understanding that risk is the price of opportunity. Every mistake is a lesson learned and a step closer to your ultimate success. If there are a thousand errors on the road to your triumph you can smile every time you make one, knowing that your journey grows ever shorter. 7. Sharpen the saw. A woodcutter is exhausted from spending hours trying to cut down a tree. When he is asked, "Why dont you sharpen your saw?", he answers, "I cant. I am too busy sawing."
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Part of your vision must be rest and recreation - time away from the task at hand. This allows you to remain fresh and alert. This keeps your life in balance. You must not live only for what "will be", but enjoy each day for what it is and what you can make of it. Success is not something that will happen in the future. Real happiness is the skill to make each day a success. Those are the Seven Secrets of Success!

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CALIFORNIA ONLY?
(We are NOT giving legal advice here. Please consult a good real estate attorney with your questions before doing anything.) Californias legislature has drafted law that gives some protection to homeowners facing foreclosure. This was done because of investors who took advantage of the homeowners. That is a nice way of saying some investors acted like pirates and fleeced these distressed people. Your state may have similar laws, but even if they dont it will be prudent to operate within the guidelines of these laws. In this manual we have stressed that your goal should be to provide some help for the homeowner whenever you can. You can make money and sleep at night if you always try to frame a deal that gives some benefit to all parties. Sometimes that "help" is just to let the distressed homeowner get on with his life. The California laws are called "equity purchase" laws. An "equity purchase" is any purchase made for profit of an owner-occupied property consisting of one- tofour residential units that is already in foreclosure. If you were buying a property to become an owner/occupant you would be exempt from these laws. The law says the equity purchase agreement must be specially written in letters of a size and style equal to 10-point bold type. The agreement must be signed and dated by all parties before the signing and delivery of any deed transferring the real estate.

The purchase agreement must include the following: 1. The names, addresses and telephone numbers of both buyer and seller. 2. The total consideration to be given by the buyer in connection with the sale. 3. The complete terms of payment of money or other consideration by the buyer. Plus, a description of any services the buyer is to perform for the seller either before or after the sale. 4. The time the seller will deliver possession of the property to the buyer. 5. The terms of any rental agreement between buyer and seller.
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6. The statutory notices concerning the sellers right to cancel the sales agreement. 7. Duplicate copies of a separate "Notice of Cancellation" must be attached to the contract. * * *

When the investor/buyer receives the sellers notice of cancellation, he must return to the seller, "without condition", any original contract documents bearing the sellers signature. The buyer can take no action to close the deal until the sellers five-day cancellation period has expired. After the deal closes the seller has a two year right of rescission. Under no circumstance can the seller waive this two-year right to rescind. The seller may rescind if he can prove the sales agreement was "unconscionable." These laws can be found in the Calif. Civil Code beginning with Section 1695. Laws are amended from time to time, so if you are a California foreclosure investor you should stop into your countys law library from time to time and check for changes. Another important part of California law is that which governs a "Foreclosure Consultant". You will find it in the Civil Code, Section 2945. Dont let these laws discourage you from investing in California properties. Just take the time to read and understand them. Once you digest them you will see that they arent excessively restrictive for an honest investor.

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CREATING A CASH BUYERS FEEDING FRENZY

Alright, lets say youve taken what youve learned in this system on all the ways you can build your buyers list. No youve got a very nice size list of wholesale buyers, as well as retail buyers. You know that your list of retail buyers are seriously looking for a house to buy in the near future. You also know that your list of wholesale buyers are investors who are ACTIVELY buying property and always ready to buy the next good deal you have for them. You do this because you know that areas theyre actively buying in. You know the types of properties theyre buying and the prices ranges theyre interested in. So now they know you are a good source for deals and theyre always happy to hear about your next deal. Thats great! But how can we improve on the scenario even more? Lets say youve got a really good deala KILLER deal! You got it at a great price and you know its a property you can sell quickly. Lets also say youve got 2 types of wholesale buyers listsone thats your general list, and once thats your V.I.P. list. Whats the difference? The V.I.P. wholesale buyers list only has people you KNOW have the cash and desire to close quickly on deals. Maybe theyve already bought properties from you before so youve built a good track record with them as a real player. Heres some psychology to use to get you V.I.P. buyer VERY excited about this killer deal You let them know you APPRECIATE them and thats why youre giving them first crack at your new KILLER deal. Let them know you cant play favorites though and that youre letting your entire V.I.P. buyers list know about this. You can do this via email or text. Text is better as it almost always gets read immediately.
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You can say something like this I just got this great deal. I dont want to play favorites but I REALLY value you! Youre on my VIP buyers list and this message is going out to other VIPs. If this doesnt sell by 5pm today, Im going to blast this out to all the other people on my buyers list. Because youre on my VIP list, I want YOU to get first crack at it. THIS WONT LAST! If you want it make an offer ASAP! Your VIPs will like this because youre giving them special treatment. Plus theyre excited because this is a great deal. Let them know that you will let them know the next time a killer deal like this comes along. But that they must act FAST because it wont last. It can only go to one person. Youre not only getting them excited about this one deal, youre TRAINING them for the next time you do this so that they take action!

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CO-WHOLESALING FOR INSTANT DEALS

In this system we go into great detail showing you ways to create and grow your buyers list. These are the people who will buy your deals FAST so you get paid FAST! One of the great things about having a good buyers list is they are ready and motivated to buy properties. Thats why they got on your buyers list in the first place. Heres a way you can profit from your buyers list very quickly BEFORE you buy your first house to flip You can market OTHER investors properties to your buyers list! This is perfect to do to create income right away as youre setting everything else up. This is known as Co-Wholesaling and its SIMPLE to do. Plus, other investors are usually happy to do it because it helps get their properties sold quickly so they too can profit fast. Heres how its done. Reach out to other wholesale investors and say Hi, My name is _______ and Im a real estate investor. Ive got a HUNGRY cash buyers list thats eagerly waiting for the next deal I can show them. Would you be interested in me letting them know about your deals and we could each profit when they bought one? Please let me know quickly as Im reaching out to others as well Talk Soon, Your Name Average splits you can negotiate with them ranges from 30%-50% of net profits.

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You can reach out to several investors to do this with so you always have a steady supply of deals to promote to your buyers.

PROFITS YOU CAN EXPECT

Many of these properties should have a profit range averaging from $3,000 - $15,000. Lets just say on one deal the profit was $5,000 and you will be paid half that when the deal closes. Thats $2,500 youll receive for just ONE deal! What did you do to get that? First, you invested in the Foreclosure Wholesale System and learned how to create a MASSIVE buyers list. Once you created that list, you contacted active wholesale investors to market their deals to your list. Someone on your list bought the property from the other investor and they paid you once the deal closed. Theyre happy because their property was sold, they got paid and they no longer had any holding costs. Youre happy because you made money on a deal you spent no time or money finding, buying, and holding onto until you sold it. In this one example you made $2,500. What if you made even more on this deal? Would that make you happy? Would it affect your finances this month? What if you did 2 deals like this in a month? Would an extra $5,000 put a smile on your face? What about 4 deals like thisjust one deal a week? Now youre up to $10,000 in one month. Maybe its a little less, maybe its a little more. The beauty of Co-Wholesaling is the OTHER investor is doing most all of the work and taking all the risk.

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Youre simply sending out an email or text to your buyers list letting them know about them property. If they buy it, you get paid. Now you might be thinking, what if the other investor sells the property to your buyer and doesnt tell you about it. Well that would be bad business for them because you are valuable and need to be rewarded for your efforts so you continue to help them move their inventory quickly. That being said, not everyone is ethical. So we must have some trust in this situation. Another way to help identify to the other investor that the lead is coming from you is to have your buyer let them investor know you are the one referring them. Heres a great way to get them to do that Arrange with the investor that when a potential buyer lets them know they heard about the property from you, theyll receive an additional $500 discount off the price of the house. You can bet most people will remember to mention your name when calling the investor about the property. You can have this $500 be deducted from your percentage, or if you have a good relationship with the investor they may just add it to the costs and you still split the profits as usual. Either way you win.

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You now have 2 ways to make your money going into a deal by finding discounted properties by focusing on distressed property, and distressed sellers. This is the key to being able to sell properties fast for quick cash. Its also the way to collect instant equity for the cash flowing properties you decide to keep for your own portfolio. We hope you will use what you found here to create a strong financial fortress for yourself and family. Please share your knowledge with others who are looking to improve their lives. One final thought YOU CAN DO IT!

There are many opportunities for profit in any cycle of the real estate market. Don't limit yourself to just one money-maker. For more good ways to invest in real estate, be sure and visit www.CashFlowInstitute.com

NOTICE! The authors and publishers of this manuscript are not attorneys and so are not qualified to give legal advice. All information is based on their research and is presented in good faith. They are not responsible for errors and omissions. Contracts and agreements are exhibits only and should not be used until approved by your real estate attorney. No legal advice is being given in any of our material. Laws and real estate practices change from time to time. The reader is advised to keep up to date on activities in their locale by consulting with a real estate attorney before doing any investing.

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