Shoestring to Millions

Mark’s Experience- First Deal Structure and SitDown– Part VI

Posted on: July 20, 2009

Mark comes to his first homeowners excited but nervous. Excited to the fact that he is taking steps to achieving his dream of becoming a real estate investors but nervous on the fact that he is scared of messing up.

WORDS OF WISDOM: When you are involved in preforeclosure residential real estate transaction you are truly a transaction engineer as you have the trust and the housing future of your clients in your hands. Proceed with caution and setup reasonable expectations.

Mark walks into the house with all his paper work in a file (comparative market analysis, his notes from the telephone conversation, a print out of the assessment value), which he brings into the house with him. Sam is immediately thinks internally that “what are all the documents that Mark has in his hands? Is he trying to buy my house  from me? I am not going to give it to this guy; the audacity of him thinking he can steal my house which me and my wife put our 5 years from underneath me.”

TIP: Do not walk into a house with any paperwork in hand as the seller psychology immediately becomes to the defensive that the investor is trying to steal my house away from me. Rather you need to built rapport in the first hour of meeting a homeowner. So leave all the paperwork in your car and just come into the person’s house with nothing in your hands for the first meeting.

Mark unaware of the thought patterns of Sam, he walks into the house and tries to rush to the deal table but remembers from his readings that he needs to build rapport. So Mark kindly asks Sam to give him a tour of the residence and as he walks through the property Mark makes mental notes of the property and the hobbies of Sam. While walking through the property, Mark notices that Sam was into fishing and joy oh joy Mark had just gone fishing with his best friend last summer. After Mark finishes going through the property, he sits down with Sam and they start to talk about fishing. This lasts about 20 minutes and during this time, Sam begins to soften up thinking “hey this guy is great, he has not even asked once if I want to sell my property and he likes fishing!!”

TIP: Always build rapport based on the hobbies of your prospective seller or buyer as that is an easy way to get someone to like and trust you.

When time came, Mark started talking to speak to Sam about the property and what happened to bring him to his current financial distress. Sam explained that he has cancer and that caused him to fall behind on bills due to the mounting financial pressure. Mark feels award about discussing a person’s illness with him but he tries to relate and empathize with what happened. Then Mark  asks to the most critically important question about the conversation: “How can I help you with your current situation?”

TIP: You are always in the mode of trying to help the homeowner and that is how you should approach the options you present to the homeowner.

Sam advises him that he needs to get $20,000 to pay down his other costs. Mark gets a little confused as he knows that this deal is a short sale as the debt on this property is more than the market value. So he asks the question, what do you need the $20,000 for? Sam explains that it is for the medical debts and moving expenses after he sells this property.

LAW FACT: Sellers are not allowed to get anything in terms of monetary compensation at the closing table when the property is being closed as a short sale.

Mark now tries to start negotiating with Sam, explaining to him that the value of the property is only  $490,000 and that Sam owes atleast $800,000. Mark will need to have his attorney short sale the property so that Mark can buy it below current market value.  He tells Sam that he is an investor and can only help him out if he can buy the property at a discount from the bank. Mark then explains to Sam the entire short sale process:

1.      Gathering the necessary paperwork i.e. mortgage statements, 2 years of tax returns, 2 months of banks statements, hardship letter, paystubs

2.      Authorization to Release must be signed and send in to the letter

3.      Submission of complete package to the lender

4.      Request order of BPO

5.      Negotiate with Lender

6.      Close the short sale with the buyer

TIP: As an investor always negotiate off the quick sale price of the house and not the true market value when speaking with a seller. Always negotiate of the highest comparative property when negotiating with a buyer.

As the process is explained, Mark reassures Sam that he is here to handle all the problems and not have any burdens on Sam. Mark also explains to Sam that he would assist Mark with Moving Costs to a new apartment when he buys the property from Sam and in addition, he told Sam that he would refer him to a great bankruptcy attorney to help discharge his medical collection debt.  Sam told him that he needed to think about it  and that he will get back to him.

Will Sam take Mark’s proposed deal? Was Mark offer a good offer? How should Mark work on Sam to close the deal? Tune into next week’s blog to find out more.

MARKS NET WORTH as of July 20th , 2009:  $72,100

Equity in home: $57,000

Savings: $3,100

401K: $12,000

Written by Ankit Duggal

Investment Director: www.rernj.com

RER is a boutique real estate investment company based in Clifton, NJ

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  • 2: Great City Mortgage Literature Sources ... Our foreclosure listin [...]...
  • Dennis's mortgage market guide: Great tips and info. namely on tax assessments.
  • krishna: Hey thanks a lot for posing this topic. I was preparing a paper presentation about this topic and i got many points about a real estate investor.

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