Cashing in on Pre-foreclosures and Short Sales E-Book

Chip Cummings

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 410

Veröffentlichungsjahr: 2009

Beschreibung

Cashing in on Pre-foreclosures and Short Sales shows investors exactly how to take advantage of what many are calling the best upcoming investment real estate market we have experienced in decades! Chip distinguishes the difference between good deals and bad deals, reveals just how easy it is to find, evaluate, and obtain foreclosure properties, tells how to negotiate a profitable transaction, and unveils the power of using short sales and other strategies to create a win-win situation for the investor, the seller, and the bank. Even first-time buyers looking to score a bargain on purchasing their own home will be armed with all the tools they need to confidently evaluate and pursue a profitable deal - and save thousands in the process. Cashing In on Pre-foreclosures and Short Sales incorporates quotes and advice from top industry professionals, as well as a healthy appendix packed with state and national foreclosure guidelines, including valuable contacts and websites, sample forms, checklists, and all the necessary tools you need to find, evaluate, secure and profit from foreclosure properties.

Leseprobe

Table of Contents

Praise

Title Page

Copyright Page

Dedication

DOWNLOADABLE LETTERS, FORMS, AND CHECKLISTS

ABOUT THE AUTHOR

Foreword

Acknowledgements

Introduction

IMPORTANT DISCLOSURE NOTICE

PART I - WHERE TO START

CHAPTER 1 - A Crash Course in Pre-foreclosures and Short Sales

What Are Foreclosures?

What Are Pre-foreclosures?

What Are Short Sales?

The Best Market Is Now

Reasons Foreclosures Are Increasing

Getting Started in Foreclosures

What You Need for Success

Self-Analysis Worksheet

Want to Succeed? Set Goals

Make Your Goals Happen

Making Contact

CHAPTER 2 - Why Most Foreclosure Strategies Don’t Work

Why Doesn’t Everyone Do This?

A Note to the Skeptics

Why People Fail

Seventeen Steps to Success

Three Phases of Foreclosure

Pre-foreclosure Is the Best Stage to Invest

CHAPTER 3 - Down Markets: The Easiest Time to Capitalize and Make Money

Good Markets Versus Bad Markets

Why a Down Market Is Better

Understanding Foreclosure Statistics

Understanding the Market and Market Trends Is Important

CHAPTER 4 - Everything You Need to Know about the Foreclosure Process

Security Instruments

Two Types of Lenders

Types of Real Estate Loans

Senior Lien Versus Junior Liens

Mortgage Lender Versus Mortgage Broker

Controlling Loan Covenants

Types of Foreclosure Actions

Identifying Your State Process

How the Process Is Stopped

CHAPTER 5 - Everything You Need to Know about Foreclosure Properties

Determining the Stage of Foreclosure

Make a Quick First Assessment from the Curb

Assess the Neighborhood

Evaluate the Investment Potential

Conducting Thorough Research

CHAPTER 6 - Navigating State Foreclosure Laws and Regulations

Finding State Statutes Online

State-by-State Foreclosure Guidelines

State-by-State Process Timelines

Your Legal Responsibilities

CHAPTER 7 - How to Avoid Foreclosure Fraud Scams

Common Foreclosure Scams

Avoid Equity Skimming

Use a Licensed Servicing Company

Reputation Is Everything

CHAPTER 8 - Financing Solutions for Foreclosure Properties

Show Me the Money

Fannie Mae and Freddie Mac

Raising Cash

Assuming a Loan

Taking Title “Subject to”

Violating the Due-on-Sale Clause

Working with Other Investors and Partners

Planning for Contingencies

Where to Start

CHAPTER 9 - Getting Serious about Being a Foreclosure Investor

Foreclosure Investing Is a Business

Becoming a Professional

Setting Up Your Office

To Hire or Not to Hire?

Forming a Legal Business Entity

Shaking Off “First Time Jitters”

CHAPTER 10 - Build Your Foreclosure Dream Team

Recruiting the Players

PART II - FINDING AND INVESTING IN FORECLOSURES

CHAPTER 11 - The 17-Step Process

Declaring a Loan in Default

Foreclosure Notices

Notice of Lis Pendens

Notice of Default

Foreclosure Tracking Worksheet

Publishing Foreclosure Notices

Accessing Foreclosure Notices

Foreclosure Reporting Services

How Lenders Handle Delinquent Loans

The Real Key to Success

CHAPTER 12 - Locating the Right Pre-foreclosure Properties

Finding Pre-foreclosure Opportunities

How to Find Foreclosure Notices

The Best Types of Property to Buy

Finding the Sellers

Letting Sellers Find You

CHAPTER 13 - How to Properly Contact and Interact with Homeowners

Why Direct Mail Works Best

Six Letter Approach

When the Phone Rings

First, Try to Help

CHAPTER 14 - Verifying Critical Property Information

Getting the Facts

Calculating Equity

CHAPTER 15 - Doing Your Homework

Starting with Basic Research

Due Diligence Checklist

Using Title Companies

CHAPTER 16 - How to Conduct a Complete Property Inspection

Before You Arrive

Arriving at the Property

The Walk-through

Environmental Inspection

Using a Professional

CHAPTER 17 - Accurately Estimating the Current Market Value

What’s It Worth?

Equity Value

Appraisal Versus Assessment

Defining and Estimating the Current Market Value

CHAPTER 18 - Analyzing Your Costs and Profits

Estimating Repairs and Renovations

Estimating Holding Costs

Assessing the Homeowner’s Options

CHAPTER 19 - Negotiating with Property Owners

Six Rules of Negotiation

Before You Start

Striking a Deal

Negotiating Uphill

CHAPTER 20 - Negotiating with Lenders and Lienholders

Understanding State Lien Laws

Senior Versus Junior Lienholders

Types of Liens

Common Types of Subordinate Liens

Verifying Liens

Removing a Federal Lien

Fraudulent Liens

Contesting a Lien

Finding Nonexistent Lienholders

Discounting Liens

Lienholder Worksheets

Contacting Lienholders

CHAPTER 21 - Negotiating with Attorneys and Trustees

Loan Loss Mitigation

Negotiating with Lenders

When the Numbers Don’t Work

CHAPTER 22 - Negotiating and Securing Short Sale Transactions

What Does “Upside-Down” Mean?

Understanding a Short Sale and a Short Pay

The Four Parties Involved

Who to Talk to

Key Factors for Approval

Private Mortgage Insurance Factor

Steps in a Short Sale Transaction

Short Sale Package Checklist

Determining the Short Sale Offer

Tackling FHA Short Sales

Navigating VA Short Sales

CHAPTER 23 - Nailing Down the Purchase Agreement

Key Mandatory Elements of the Purchase Agreement

Seller Disclosures

Presenting the Offer

CHAPTER 24 - Protect Your New Assets, Immediately

Three Things You Never Do!

Three Things You Need to Do Now!

Additional Security

CHAPTER 25 - Closing the Deal

Before You Close

Closing Time

After the Closing

PART III - CASHING OUT!

CHAPTER 26 - Flipping Out—Quick Profits through Wholesaling

Selling Your Position

Assigning Your Interest

CHAPTER 27 - Fixing Up Your New Investment

Eight-Step Repair Plan

CHAPTER 28 - Renting Your New Property

Becoming a Landlord

What to Do First

Finding Tenants

CHAPTER 29 - Staging, Marketing, and Selling Properties for Maximum Profit

What’s It Worth?

Get Ready, Get Set

Marketing with a Realtor

Marketing It Yourself

Finding Qualified Buyers

Negotiating Offers

Seller Financing

Don’t Forget Taxes

Final Thoughts

10 AMATEUR MISTAKES THAT WILL COST YOU THOUSANDS

STATE-BY-STATE FORECLOSURE GUIDELINES

101 FORECLOSURE AND INVESTOR RESOURCES

GLOSSARY

INDEX

Praise forCashing In on Pre-foreclosures and Short Sales

“I’ve traveled the globe with Chip Cummings and consider him a great friend. Chip’s expertise, insight, and success in the real estate vertical market is unparalleled. If you’re interested in cashing in on pre-foreclosure properties—Get this book!”

—Ralph Roberts, author of Flipping Houses for Dummies, Foreclosure Investing for Dummies, and Foreclosure Self-Defense for Dummies

“Another home run from Chip Cummings! If you want to learn how to buy smart when everyone else is running scared, read this book. Real estate is still the only investment you can buy with the bank’s money and pay for with the tenant’s income. Twenty years from now, you’ll wish you owned more!”

—Robert Helms and Russell Gray, hosts of The Real Estate Guys radio and TV shows

“Foreclosures are an unfortunate consequence of our economic times. Fortunately, Chip shows anyone how they can position themselves to create long-term wealth while helping people along the way. Cashing In is a great read, with practical easy-to-follow steps!”

—Sig Anderman, CEO, Ellie Mae, Inc.

“We are entering into one of the greatest periods for real estate investment in our lifetimes. Cashing In on Pre-foreclosures and Short Sales will show you exactly how to take advantage of the investment opportunities available, and develop long-term profits in these challenging times.”

—Mitch Freifeld, investor and Branch Marketing expert

“The real estate ‘crash of 2008’ may go down in history as one of the greatest opportunities to acquire properties at bargain basement prices. Don’t miss out! Chip teaches you the why and how to get in on the action.”

—Tim Kleyla, President, The Mortgage House; past President, MMBA

“Cashing In on Pre-foreclosures and Short Sales provides practical, actionable education to help the bold and savvy investor get in on the greatest buyers market we’ve seen in decades. I’ve already purchased six new properties this year!”

—Aaron Metaj, real estate investor

Copyright © 2009 by Chip Cummings, CMC. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, [phone], fax [phone], or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone], fax [phone], or online at http://www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at [phone], outside the United States at [phone] or fax [phone].

Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com.

Library of Congress Cataloging-in-Publication Data:

Cummings, Chip. Cashing in on pre-foreclosures and short sales : a real estate investor’s guide to making a fortune - even in a down market / by Chip Cummings. p. cm. Includes bibliographical references and index.

eISBN : 978-0-470-46375-8

1. Real estate investment—United States. 2. Foreclosure—United States. 3. Mortgage loans—United States. 4. House buying—United States. 5. Residential real estate—Purchasing—United States. I. Title. HD255.C857 2009 332.63’24—dc22 2008042921 2008042921

.

To my wife Lisa—my number one fan, best friend, and life partner

DOWNLOADABLE LETTERS, FORMS, AND CHECKLISTS

Throughout the book, you will see many forms, letters, and worksheets that I and other investors have used in pursuing foreclosure deals. You are welcome to use them for your business, and to make it easier, you can access all of these forms electronically in Microsoft Word format at www.ChipCummings.com/CashingIn.

Once downloaded, you can modify, reword, or even add your logo and customize them a bit. Here is a list of materials that are available for electronic download. (Additional versions of these documents are available for download as well.)

ABOUT THE AUTHOR

Chip Cummings is a recognized expert in the areas of real estate lending and e-Marketing, and a Certified Mortgage Consultant (CMC) with over 26 years in the mortgage industry and over a billion dollars in real estate volume. Having purchased his first foreclosure property at the age of 19, Chip is an experienced real estate investor of both residential and commercial properties.

Chip has written hundreds of articles and appeared numerous times on radio and television with FOX News, NBC, ABC, and the Neil Cavuto Show, and in various magazines including Entrepreneur, Mortgage Originator, Real Estate Banker/ Broker, and The Mortgage Press. He is experienced in all areas of real estate financing and investing, including residential and commercial mortgages, government lending, regulatory and compliance issues, is the past president of the MMBA, and is a licensed broker and mortgage lender in Michigan.

As an international speaker, he has addressed groups and organizations of all types, and trains thousands of mortgage and real estate professionals each year. Chip is a certified trainer of continuing education in over 40 states and has served as an expert witness in state and federal courts. He is also the author of Foreclosure Myths: 77 Secrets to Making Money on Distressed Properties (Hoboken, NJ: John Wiley & Sons, 2008), Mortgage Myths: 77 Secrets to Saving Thousands on Home Financing (Hoboken, NJ: John Wiley & Sons, 2008) and Financing Real Estate Investments for Dummies (John Wiley & Sons, 2009) with Ralph Roberts, ABC’s of FHA Lending (Northwind: 2008), and Stop Selling and Start Listening! Marketing Strategies That Create Top Producers (Northwind, 2005).

To learn more about Chip Cummings, his many success products, or how he can help your organization as a speaker or business consultant, visit www.ChipCummings.com.

To receive a complimentary subscription to his multimedia e-newsletter “The Marketing Minute,” check out www.TheMarketingMinute.com, or www.eCoaching-Club.com. You can also reach Chip by emailing him at [email protected] or by calling 616-977-7900.

Chip lives in Rockford, Michigan, with his wife Lisa and three children, Katelyn, CJ, and Joe.

FOREWORD

If you are thinking about buying property (and you should be), now is the time to act and this is the book you will want to read. Whether you want to begin (or add to) your property investments or whether you want to buy a home, it is unlikely that you will again witness the opportunities that are available today.

In the investment classic, The Intelligent Investor (even though originally published in 1948, the latest revised edition still sits near the top of bestselling business titles), the legendary stock market analyst, Ben Graham, created the true-to-life story of “Mr. Market.” Mr. Market represents that chameleon mass character whose moods persistently shift from irrational exuberance to pessimistic confusion. Which market mood gives us the best time to buy? You know the answer. When Mr. Market holes up in a cave, when fear triumphs over greed, when journalists write never-ending stories of gloom and despair.

In fact, for my book, The Beginner’s Guide to Real Estate Investing, 2nd edition (Wiley, 2008), I researched back 60 years and showed how each downturn of the property cycle has brought forth a journalistic chorus (often quoting supposedly expert economists) who declared the “end of real estate” as we know it. As far back as 1947 (with average homes selling for around $8,500), Time Magazine warned that housing prices were too high and buyers could no longer expect to profit from appreciation.

During the intermittent property recessions of the 1970s, the 1980s, and the 1990s, media stories time and again put forth the notion that “real estate is no longer a good investment.” In fact, in 1996, on the brink of one of the biggest booms in property prices in U.S. history, a major California newspaper proclaimed, “A home is where the bad investment is.” Aren’t you seeing similar stories today?

Now think: Who today enjoys the highest net worth? Those buyers/investors who understand the psychological moods of Mr. Market? Those buyers/investors who jumped into the market during those earlier downturns? Or those who watched opportunity pass them by—or maybe those who waited and finally bought at or near the cyclical peak? You know the answer. After each previous property recession, property prices recovered their losses and continued upwards to set ever-higher price records. Experience leaves no doubts. Investors who buy when “blood is running in the streets,” profit big.

Fortunately, with the know-how you’ll achieve from Cashing In on Pre-foreclosures and Short Sales, you won’t even have to wait for market recovery to start banking the gains that you’ll earn when you buy now. In Cashing In, Chip Cummings—an outstanding real estate pro, I might add—guides you to below-market deals. When you invest below-market in a down cycle, you can rocket blast your profit potential.

However, unlike so many foreclosure books, seminars, and CDs, Cashing In does not feed you pie-in-the sky. Chip does not promise that you can buy for dimes on the dollar. He does not mislead you into believing that you can suit up for the game without preparation—or by merely following five easy steps. He does, though, illustrate how with preparation, with dedication, and most importantly, with action even beginners can outperform those investors who are more experienced.

In other words, Chip guides you through the real world of profiting from foreclosures—and he does it from an ethical, win-win perspective. Chip gives you a full set of checklists, questions, sample letters, and helpful forms that are sure to lead you to a rewarding—and risk-avoiding—property investment. I urge you to read through the chapter contents. You will find that Cashing In leaves nothing out.

My editor at Wiley knows that I do not recommend many books, but I am pleased to recommend Cashing In on Pre-foreclosures and Short Sales. In fact, this is a book I wish I had written. Indeed, I would make only one change. The super title says, “A Real Estate Investor’s Guide to Making a Fortune—Even in a Down Market.” I would say, Especially in a Down Market. You are now living quite possibly a once in a lifetime opportunity. Do not let this chance to earn big profits pass you by.

—Gary W. Eldred, PhD

ACKNOWLEDGMENTS

As with any project of this magnitude, it takes a great number of people to help pull it off, but I want to offer special thanks to my dedicated staff at Northwind Financial Corporation and Chip Cummings Unlimited!, especially my personal assistant Debbie Forth and production assistant Lindsay Pate.

Special thanks goes to my fearless acquisitions editor Shannon Vargo, and the rest of the John Wiley & Sons team who made things happen, kept the project on track, and ensured a great finished product. Jessica Langan-Peck, Kate Lindsay, Brian Neill, Beth Zipko, and Kim Dayman deserve a special round of applause for making it fun and making me look good. Thanks also go to my agents Cynthia Zigmund and John Willig for their hard work and enthusiasm. Separately, my chief editor Dennis Ross deserves a great deal of praise for spending a lot of extra hours and long nights poring over the text to make me look and sound good!

Over the years, I have been fortunate to work with some incredible associations and organizations, who graciously offered technical assistance and support for this book, including:

Fannie Mae

Freddie Mac

U.S. Department of Housing and Urban Development

Federal Housing Administration

U.S. Department of Veterans Affairs

Realty Trac

National Association of Mortgage Brokers

Mortgage Bankers Association

Rental Property Owners Association

National Association of Realtors

Michigan Association of Realtors

Michigan Association of Mortgage Brokers

WriteInvestment.com

In addition, there were some key individuals that I have had the pleasure of working with that donated their time, talent, and experiences with stories and practical tips to help readers understand key points. My sincere thanks go out to Russell Gray and Robert Helms—“The Real Estate Guys,” Terri Murphy with US Learning, Mark Baragar with ReMax of Grand Rapids, Tim Kearns of First Priority Financial, Giff Cummings with Creative Property Services, and Nate Martinez, who rules the Phoenix area with Re/Max Professionals.

And last, but not least, thanks to my family who puts up with some long days and even longer nights, and still seem to smile and laugh through it all. Their patience and willingness to allow me to do what I do on a daily basis gives me the ability and energy to make a difference in the lives of so many people out there—I love you all very much!

INTRODUCTION

In just one month, 272,171 properties were touched by foreclosures—a 55 percent increase from just one year ago. This is a new record that means one out of every 464 U.S. households received a foreclosure notice. Worse yet, one out of every five homes with a mortgage is “upside-down.”1

Many say it’s a sign of the times caused by a tough economic climate, loss of manufacturing jobs to overseas, over extended homeowners, over zealous lending programs, or even investor speculation. It’s probably a combination of at least a dozen such factors. But it happens, it’s real, and for some—it’s an opportunity.

Foreclosures happen every day and, at this pace, over 3.2 million homes will be affected in some way over the next 12 months. Will all of these homeowners end up losing their home? No, of course not, but many of them will need help. They will need help understanding what they’re going through, help with their finances, help picking up the pieces—and help to keep the dream of homeownership from turning into a nightmare.

Investing in real estate is not a new concept, nor is investing in foreclosure properties. There has always been good money to be made for those who had the time and cash to jump on the deals. But the rules have changed, the players have changed, and the opportunities for investors have never been better.

My first foreclosure purchase actually happened by mistake. I was young and “green.” I didn’t have a clue about what I was doing. But there were some great real estate pros who believed in me, were willing to show me the ropes, and who taught me how to play the game without losing my ass along the way. I promised that when the time came, I’d share my strategies so others didn’t have to learn the “secrets” to creating wealth the hard way—through the expensive school of hard knocks. I wrote this book for you, so that you could discover the opportunities that are out there and to provide a road map of how to navigate the sometimes turbulent and stressful waters of purchasing foreclosure properties.

Here’s your opportunity to dive in and help others and the opportunity to help yourself. An opportunity to solve problems for distressed homeowners and lenders, and an opportunity to build a future for you and your family—your opportunity for Cashing In on Pre-Foreclosures and Short Sales!

—Chip Cummings