“Act as if what you do makes a difference. It does.” – William James
When I started buying foreclosures, I typically closed only one out of every five deals. Today, it’s closer to four out of five. The secret is really two secrets:
- I learned all the options a seller in foreclosure has.
- I mastered the art of positioning myself as the best of those options, getting the seller out of foreclosure with minimal damage to their credit rating.
This may not seem like much for you to do, but I assure you it’s made a major difference in my bank account! My six-figure income shot up to $1,348,000 in a single year. More recently, these secrets helped me make $180,510 in a single month. Here’s how it works…
Before you meet with an owner, it’s crucial to fully understand all the ways they can get out of foreclosure. Every owner facing foreclosure has the following options:
- Reinstatement. The owner cures the default by coming up with his own cash or taking out a short-term loan. Keep in mind that the owner has to pay more than the total of his missed payments. The amount owed also includes attorney fees and other fees charged by the lender (filing fees, etc.).
- Sell the property. The owner can sell the property any time before the foreclosure sale. This is often risky, because deals can fall through or prospective buyers may not qualify for the loan.
- Refinance. The owner can refinance the property with a new loan that pays off the loan in default. This can be difficult if the owner is behind in payments.
- Deed in lieu. The owner can deed the property directly to the lender (essentially giving them the property). Then the lender doesn’t have to go through the foreclosure process.
- File bankruptcy. This will stop the foreclosure in its tracks, but only until the lender obtains a release from the court. If the owner can’t make up the back payments as part of a reorganization plan, bankruptcy just delays the inevitable. Once the stay is lifted, the foreclosure process will continue.
- Let it go and hope to get something when it sells. The owner lets the foreclosure proceed. He receives anything above the opening bid after all the junior liens are paid off. In most cases, that’s nothing.
- Walk away. The owner allows the lender to proceed with the foreclosure. This may be an economically valid alternative if he has little or no equity. But the damage to his credit rating will last for 10 years or more.
So those are the alternatives available to sellers in foreclosure. Now, let’s look at strategies to get the deal done.
First, I do my homework. I want to make sure the property’s a great deal and decide which exit strategy I’ll use if I acquire it. Next, I call the owner. I ask for permission to visit the house when all the people on the title are there.
When I arrive, I introduce myself and ask for a tour of the property. I look for pictures of children or anything else that I can talk to them about to break the ice. I also let them talk as long as they like about how they got into their current predicament. I listen. I display empathy. I tell them they are not to blame, and assure them that bad things happen to good people.
At the end of the tour, I sit down with them and ask them to restate the facts. Then comes my first crucial question: I ask what they would like to do. What the best outcome of our meeting would be for them.
In the negotiation that follows, I review the options detailed above. And I explain why selling the property is the best one. (Here’s where knowing all the options gives you a strong bargaining chip.)
Once they realize that selling is their best way out, I tell them about my company and how I might be able to help them. In most cases, they have already seen my credibility-building website. (It includes about a dozen video testimonials from people I have helped.) I also remind them that I have seen other homeowners earlier in the week, that have more appointments scheduled – and that I never take on more than four clients per month.
I work from a memorized script that continues to plant the seed that I’m their best option. I show them how I will make up the back payments on their loan and immediately improve their credit rating.
When we have agreed on the terms of the sale, I introduce the concept of acquiring the property on a “subject to” basis. This basically means that I’ll continue making payments on their loan, further increasing their credit score. This minimizes any future objection to taking over the loan while it is still in their name. It also saves me a lot of money on the deal by eliminating middlemen like banks and realtors.
Then it’s a matter of agreeing on simple things like the moving date, closing date, and so on. I review all the terms one last time. Just before I produce the purchase agreement, I say that it looks like I will be helping them… so the people I was supposed to see tomorrow are out of luck. (This helps me handle any “We’ll think it over” objections should they arise.)
After the paperwork is signed, I congratulate the owners for taking action and doing the right thing. I’m happy for them – and I show it![Ed. Note: Marko Rubel is a multimillionaire real estate investor living and investing in the Phoenix, AZ area. Tomorrow, November 14, Marko will reveal exactly how you can put $20,000…$30,000…$50,000 or more in your bank account every month using an automated system that does all the time-consuming “busy work” of foreclosure investing for you.]