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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
Pre-foreclosure real estate is one of the hottest investment opportunities on the market. The Pre-Foreclosure Property Investor?s Kit offers step-by-step instruction and no-nonsense advice on how to find great deals, estimate fair market value, negotiate with sellers, sell your property on your own, and win big in real estate. You?ll learn how to get the best deals on foreclosure properties before they go to auction and utilize simple ready-made worksheets, checklists, forms, and agreements that make getting started easy. Even people of modest means can get into pre-foreclosure investing--all it takes is a little hard work, persistence, and the tools you?ll find in this handy guide.
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Veröffentlichungsjahr: 2005
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CONTENTS
Title
Copyright
Dedication
List of Downloadable Forms
Part I: Getting Started as a Profitable Pre-Foreclosure Investor
Chapter 1: How you can make $60,000 a Year Investing in Pre-Foreclosure Properties Part-Time
The Definition of Pre-Foreclosure
Why the Pre-Foreclosure Stage is the Time to Buy during the Foreclosure Process
The First Step to Making $60,000 a Year Investing in Pre-Foreclosures Part-Time
Why now is one of the Best Times ever to Invest in Pre-Foreclosure Properties
Six Factors Contributing to the Skyrocketing Number of Foreclosures Nationwide
The National Delinquency Survey
Nothing Illegal or Unethical about Buying Property from Owners in Foreclosure
It Takes Knowledge and Persistence to be a Profitable Pre-Foreclosure Investor
How I got Started Buying Pre-Foreclosure Properties 20 Years Ago
How I made a $14,000 Profit on My First Pre-Foreclosure Property
A One-on-One Graduate Level Seminar that is not available at Any College
It is hard to Succeed when you are Unemployed, Broke, and have Lousy Credit
How to Invest without a Large Income, Big Bank Account, and High Credit Score
Learn How to Use My 14-Step Process for Investing in Pre-Foreclosures
Some Sage Advice for all of the Overly Skeptical People Reading this Book
No Foreclosure Investment Strategy will Work unless you do
How to Contact the Author Directly
Chapter 2: Why Most Foreclosure Investment Strategies Being Taught Today are too Risky, too Expensive, and not Worth Doing
Properties in Foreclosure can be Bought before, during, and after the Sale
Why the Pre-Foreclosure Stage is the Time to Buy during the Foreclosure Process
No One ever got Rich Buying Foreclosures at Full Market Value
Most Foreclosure Investment Strategies are Based on Hype and Misinformation
Twelve Things Most People are never Told about Public Foreclosure Auction Sales
Why Most Lender-Owned Properties are not what they are Cracked up to be
Lender-Owned Properties are Sold to the Public through Real Estate Brokers
Chapter 3: What Every Pre-Foreclosure Investor needs to Know about their State’s Foreclosure Statute
Buying Properties from Owners in Foreclosure requires Specialized Knowledge
The Definition of Foreclosure
Where to find your State’s Foreclosure Statute Online
The Two Types of Foreclosure Actions Used to Foreclose on Real Estate Loans
How the Judicial Foreclosure Process Works
How the Non-Judicial Foreclosure Process Works
Why you must Know if your State has a Home Equity Sales Contract Statute
The Two Statutes that Regulate California Pre-Foreclosure Property Investors
The California Civil Code is Available Online
Where to find Reliable Information on the Foreclosure Process in your State
State-by-State Foreclosure Timeline
Use the Pre-Foreclosure Property Investor’s Kit to Become your Own Expert
Chapter 4: Everything you need to Know about Existing Loans on Pre-Foreclosure Properties
How to Avoid Being Characterized as a Flake and Blown Off by Lenders
The Two Types of Security Instruments Used to Secure Real Estate Loans
The Two Types of Lenders that make Real Estate Loans
The Three Types of Residential Real Estate Loans
The Difference between a First, Second, and Third Loan
The Difference between a Loan Broker and a Lender
Residential Mortgage and Deed of Trust Loan Documents are Available Online
Loan Terminology Dictionary is Available Online
Three Covenants that Pertain to Mortgage and Deed of Trust Loans in Default
Transfer of the Property or a Beneficial Interest in Borrower
What you need to Know about Reinstating Loans that are in a Default Status
Borrower’s Right to Reinstate after Acceleration
Lender’s Acceleration Remedies
The Due-on-Sale Clause as Defined in the Federal Code of Regulations
Loan Assumption Rule for Federal Housing Administration-Insured Loans
Loan Assumption Rule for Department of Veterans Affairs Guaranteed Loans
No Stated Loan Assumption Rules for Private and Seller-Financed Loans
Personally Review all Loan Documents for Due-on-Sale Clauses
Taking Title Subject to Violates the Due-on-Sale Clause in Most Loans
Taking Title to Property Subject to Existing Loans can be Risky Business
It is not a Criminal Act to Violate a Loan’s Due-on-Sale Clause
The Difference between Assuming an Existing Loan and Buying Subject to
The Definition of Equity Skimming
What you need to Know about Equity Skimming
The Federal Equity Skimming Statute
Chapter 5: How to Finance the Purchase of a Pre-Foreclosure Property
The Three Types of Residential Real Estate Loans
Where to find Information on Loan Programs Nationwide
Freddie Mac and Fannie Mae Limit Investors to 10 Loans at One Time
Most Lenders do not have the Authority to Foreclose on FHA and DVA Loans
How Investors can Legally Assume FHA Loans as Owner-Occupants
The Problem with Assuming DVA Loans as a Non-Veteran Owner-Occupant
A Legal Way for Investors to Get around the Due-on-Sale Clause in DVA Loans
Require that Loan Payments be made through a Licensed Loan Servicing Company
Hold all Documents in Escrow when Buying on an Installment Sale Contract
How to Purchase a Pre-Foreclosure Property Subject to an Existing Loan
Notify Lenders that you Plan to Take Title Subject to their Loan
Three Potential Sources of Startup Capital
Use Fixed-Rate, Low-Interest Lines of Unsecured Credit to Buy Owners’ Equity
A Creative Way for Cash-Strapped Investors to Pay Owners for their Equity
Chapter 6: How to Get Started Right now as a Profitable Pre-Foreclosure Property Investor
Incorporate Today’s Technology into your Pre-Foreclosure Investment Business
Set up a Home Office for your Business that Qualifies as a Tax Deduction
How to Organize your Office on Wheels
Maintain a Separate Checking Account for your Real Estate Investment Business
Why it is Best to Pay all Expenses with Business Checks or Business Credit Cards
Maintain Automobile Mileage Records to Document Business-Related Travel
Maintain Expense Records
Use a Computer Software Accounting Program to Maintain Financial Records
Depreciate all Equipment Used in your Real Estate Investment Business
Best to Store Photocopies of Records and Documents in Three-Ring Binders
Store Original Copies of Records and Documents in a Safe Deposit Box
Record Keeping Information Available Online
Internal Revenue Service Publications Available Online
Internal Revenue Service Publications that Pertain to Running a Business
Use the U.S. Master Tax Guide as your Tax Reference Guide
Hire a Properly Licensed Professional to Prepare your Tax Returns
Why you should Hire Independent Contractors instead of Hourly Employees
Do not Form a Separate Business Entity until you Actually Become an Investor
One Sure-Fire Way to Fail as a Pre-Foreclosure Property Investor
How to Overcome the Fear of Failure that Stops Most People in their Tracks
Use the Thomaslucier.com Web Site as the Companion Resource for this Book
Part II: My 14-Step Process for Investing in Pre-Foreclosure Properties
Chapter 7: How to find Property Owners with Loans that are in Default and Facing Foreclosure
The Most Important Advice in this Entire Chapter
The Foreclosure Ball Does not get Rolling until a Loan is in a Default Status
The Type of Information that is usually Contained in Foreclosure Notices
How a Notice of Lis Pendens Works
How a Notice of Default Works
Use Worksheets to Keep Track of Information in Foreclosure Notices
Nationwide County Recorder Office Information Available Online
Foreclosure Notices are required to be Published in a Newspaper of Record
Where to find Court and Commercial Newspapers
Recorded Foreclosure Notices can be Accessed Online
Foreclosure Reporting Services Provide Information Online
How Most Lenders Handle Delinquent Loans
Do not Overlook Property Owners who are One Payment Away from Foreclosure
Use Classified Ads to find Property Owners with Delinquent Loans
Questions to ask Property Owners Calling in Response to your Delinquent Loan Ad
Chapter 8: How to Contact Property Owners in Foreclosure
Most Letters Mailed to Owners in Foreclosure are Very Poorly Written
Use Direct Mail to Contact Property Owners in Foreclosure
Use Postal Zip Codes to Target Potentially Profitable Properties
Letters are Sent to Owners in Foreclosure during the Loan’s Reinstatement Period
Letters Appealing to Emotions and Offering Immediate Relief Get Best Response
Mail Typewritten Letters that are Individually Addressed and Personally Signed
Send your Letters via First-Class, Stamped Mail
Send Multiple Follow-Up Letters at Regular Intervals to Maintain Contact
Each One of the Six Letters to Owners in Foreclosure Repeats the Same Message
Use Computer Files to Keep Track of Letters to Owners in Foreclosure
Best to Hire a Professional to Write your Letters
Do not make Cold-Calls in Person to Property Owners in Foreclosure
Do not make Cold-Calls by Telephone to Owners in Foreclosure
Chapter 9: How to Get the Lowdown on Loans in Default from Foreclosing Lenders
Why Time is always of the Essence when Verifying Loan Information
The Fastest Way to Obtain Loan Information from Foreclosing Lenders
Property Owners with Computers can Obtain their Loan Information Online
What to Do during your Initial Meeting with a Property Owner in Foreclosure
Have the Property Owner Request an Estoppel Letter from the Foreclosing Lender
Obtain the Borrower’s Written Authorization to Release Loan Information
How to Obtain Loan Information from Private Lenders
Chapter 10: How to Perform due Diligence on Pre-Foreclosure Properties
The Definition of due Diligence
Use the Internet to Perform Preliminary due Diligence on Pre-Foreclosures
It’s Best to Use a Pre-Foreclosure Property due Diligence Checklist
Where to find the Names of all Property Owners in your County
Where to Search Property Records Online for Free
Six States do not require the Public Disclosure of Real Estate Sales Information
Private Companies Maintain Real Property Ownership Records Databases
What to do if your County’s Property Records are not Available Online
Do not be Bashful about asking “Public Servants” for Help
How Parcels of Land are Identified for Tax Purposes
How to Use Grantor and Grantee Indexes
How to Use a Tract Index
Many County Records are Available Only on Microfiche Files
How to Locate the Owners of Abandoned Properties in Foreclosure
Documents must be Notarized and Recorded to be Part of the Public Record
The Two Types of Real Property Liens
Specific Liens and General Liens
The Priority of a Lien is Determined by the Type of Lien and Date it is Recorded
Check the Public Records to Verify that all Recorded Liens are Uncovered
Fifteen Liens to Check when Researching Pre-Foreclosure Property Titles
Most County Recorders are Slow to Index Recorded Documents
Common Abbreviations Used in Property Title Documents
How Title Companies Index Documents in their Property Records Databases
Have Title Searches Done at your County’s Public Records Library
The Two Most Common Types of Property Title Searches
Hire an Experienced Title Abstractor to Perform your Title Searches
Online Crime Statistics Search
Online Demographic Information Search
Where to Search Online for People
Always do a Google Search of a Pre-Foreclosure Property Owner’s Name
Always Verify the Property’s Insurance Claims History before Making an Offer
Chapter 11: How to Thoroughly inspect a Pre-Foreclosure Property
Always Include a Property Inspection Clause in your Purchase Agreements
Find a Competent Property Inspector
Watch Out for Unscrupulous Owners Trying to Conceal Major Property Defects
Always have the Owner Accompany you on Walk-Through Property Inspections
Make Certain you Check Out the Neighborhood where the Property is Located
Be on the Lookout for Indoor Mold when Inspecting Properties
Indoor Mold Information Available Online
How to Prevent and Clean up Indoor Mold
Inspect Suspicious Properties for Environmental Contamination
Online Environmental Hazardous Waste Search
Housing Built before 1978 may Pose Potential Lead-Based Paint Hazards
Online Lead-Based Paint Hazard Information
Use Inspection Checklists to Conduct your Pre-Buy Property Inspections
Chapter 12: How to Accurately Estimate the Current Market Value of a Pre-Foreclosure Property
No Kelly Blue Book for Investors to Look up Used Property Values
The Definition of Equity
How the Real Estate Appraisal Industry Defines Market Value
The Difference between a Property’s Assessed Value and Its Appraised Value
Online Sources of Property Appraisal Information
Three Common Methods Used by Appraisers to Estimate Property Values
Best to Use the Comparison Sales Method to Estimate a Property’s Current Value
Online Sources of Comparable Residential Property Sales Data
How to Get Free Building Replacement Cost Estimates
Online Sources for Construction Replacement Cost Calculators
Pursue Only Pre-Foreclosures that have Relatively Low Debt-to-Value Ratios
Defining a Pre-Foreclosure Property’s Current Market Value
How to Accurately Estimate a Pre-Foreclosure Property’s Current Market Value
Four-Step Method for Estimating a Pre-Foreclosure’s Current Market Value
How to Calculate the Amount of Equity that an Owner has in a Pre-Foreclosure
Chapter 13: How to Negotiate with Property Owners in Foreclosure
Five Rules to Follow when Negotiating with Property Owners in Foreclosure
What you need to Know about Most Property Owners in Foreclosure
Most Property Owners in Foreclosure do not want to Sell their Property
Owners usually Refuse to Enter into Serious Negotiations with People they Dislike
Why it is next to Impossible to Negotiate with Owners who are in a Nasty Divorce
Avoid Negotiating with Owners who are Addicted to Drugs and Alcohol
Act in an Honest Ethical Manner when Dealing with Owners in Foreclosure
Do not Show up for Negotiations with an “I Buy Foreclosures” Sign on your Vehicle
Verify the Identity of the Property Owner before you Begin Negotiations
Always Project the Image of a Savvy Polished Professional Investor
Apply the KISS (Keep it Simple) Principle when Conducting Negotiations with Owners in Default
Adopt a Negotiating Style Compatible with your Personality
Play the Role of Problem Solver when Negotiating with Owners in Foreclosure
How to Open Face-to-Face Negotiations with Owners in Foreclosure
You will never Know what Owners will accept unless you ask them
Stress that it will not Cost Owners Any Money to Sell their Equity
Know when it is Time to Stop Talking
Three Scenarios that Determine How Much to Pay an Owner for Equity
Offer Debt Relief Only to Owners with Vacant Properties in Foreclosure
Offer Debt Relief and a Relocation Allowance for Owner-Occupied Properties
When to Offer to Buy the Owner’s Equity for 50 Cents or Less on the Dollar
Chapter 14: How to Get Subordinate Lienholders to Discount their Liens by 50 Percent or more
Subordinate Liens Affect Profit Margins in Pre-Foreclosure Property Transactions
The Difference between a Judgment Lien and a Consensual Lien
Time can be a Double-Edged Sword when Negotiating with Lienholders
The Five Most Common Types of Subordinate Liens that Attach to Real Property
States require that Subordinate Lienholders be Notified of Foreclosure Actions
Subordinate Lienholders are Named as Defendants in Foreclosure Lawsuits
Trustees required to Send Subordinate Lienholders Copies of Notice of Default
All Subordinate Lienholders are not Always Notified of Foreclosure Actions
You must Become Familiar with your State’s Lien Law
Unlicensed Contractors have No Lien Rights in Most States
Most Local, State, and Federal Government Agencies will not Discount their Liens
How to have a Federal Tax Lien Removed from a Property’s Title
How to Contact the Internal Revenue Service on a Property Owner’s Behalf
Internal Revenue Service Office Locations Nationwide
Do not Pursue Pre-Foreclosures that Belong to Owners in Bankruptcy
Where to Research Federal Bankruptcy Cases Online
You must Verify all Judgment or Name Liens to Determine their Validity
In Most States, Recording a Fraudulent Lien Constitutes Slander of Title
How to Contest the Validity of a Judgment Lien
What to do when a Lienholder is No Longer in Business
What to do when you find a Loan that is Owned by a Bank that No Longer Exists
Use a Worksheet to Compile Information about Each Subordinate Lienholder
Contact Subordinate Lienholders by Letter
What to say to Lienholders during Negotiations
What to do when a Lienholder Balks at your Initial Offer
The Most Important Advice in this Entire Chapter
Chapter 15: How to Negotiate with Foreclosing Lenders and their Attorneys and Trustees
What you need to Know about Loan Loss Mitigation
How to Deal with Uncooperative People in Loan Loss Mitigation Departments
How to Contact the HUD Nationwide Loan Loss Mitigation Department
Negotiating with Lenders’ Loan Loss Mitigation Departments
Why Attorneys and Trustees have No Real Incentive to Work with Investors
How to Avoid Getting Ripped off by Attorneys Charging Excessive Legal Fees
Chapter 16: How to do a Short Payoff Sale on Properties with Little or No Equity
Short Payoff Sales Provide an Opportunity for Investors to Create Instant Equity
The Definition of a Short Payoff Sale
The Four Parties that are usually Involved in a Short Sale Transaction
Short Sale Requests are Processed by Lenders’ Loan Loss Mitigation Departments
Short Payoff Sales are Lenders’ Last Resort before Proceeding with Foreclosure
Most Lenders have a Stringent Hardship Test that Borrowers must Pass
Twelve Factors Lenders Consider during the Short Payoff Sale Approval Process
How Private Mortgage Insurance can Affect a Short Payoff Sale
Final Short Sale Approval must Come from the Investor Owning the Loan
How to Quickly Determine the Feasibility of Attempting a Short Payoff Sale
Obtain the Borrower’s Written Authorization to Release Loan Information
Investors need Cash to Finance Short Payoff Sale Transactions
All Lenders require that Short Payoff Sales be Arm’s Length Transactions
Two Main Reasons that Property Owners will not Agree to a Short Payoff Sale
Offer to Pay Property Owners a Separate Relocation Allowance
Tell the Property Owner about the Tax Consequences of a Short Payoff Sale
A Loan Sold Short is Cancelled Debt and Subject to Federal Income Tax
How the Internal Revenue Service Defines Insolvency
Most Lenders Use a Broker’s Price Opinion to Determine a Property’s Value
Include a Short Payoff Sale Proposal Letter in the Short Sale Package
Include a HUD 1 Settlement Statement in the Short Payoff Sale Package
HUD 1 Settlement Statement Available Online
Use a Checklist when Preparing a Short Payoff Sale Package
Fifteen Steps Necessary to Complete a Typical Short Payoff Sale Transaction
Federal Housing Administration Short Sales are Called Pre-Foreclosure Sales
Federal Housing Administration Short Payoff Sale Information Available Online
Toll-Free Telephone Number for the FHA National Loan Servicing Center
Department of Veterans Affairs Short Payoff Sales are Called Compromise Sales
Department of Veterans Affairs Compromise Sale Information Available Online
Department of Veterans Affairs Regional Loan Centers
Chapter 17: How to Prepare your Purchase Agreements
Fourteen Key Provisions that must be Included in your Purchase Agreements
Three Contingency Clauses that must be Included in all Purchase Agreements
Do not Use the Same Purchase Agreements that Real Estate Licensees Use
Hire an Experienced Board-Certified Real Estate Attorney in Good Standing
The Standard Qualifications for an Attorney to be Certified in Real Estate Law
The Standard Definition of an Attorney in Good Standing
How to find a Board-Certified Real Estate Attorney in your State
Online Attorney Locator Services
Make Certain your Purchase Agreement Does not Violate your State’s Statutes
Equity Purchase Agreement Notices required by California Civil Codes
Make Certain that all of your Purchase Agreements are Properly Witnessed
Have the Owner Complete and Sign a Property Disclosure Statement
Chapter 18: How to Close on the Purchase of a Pre-Foreclosure Property
Expect the Unexpected when Closing on a Pre-Foreclosure Property
The Most Important Advice in this Entire Chapter
Title and Escrow Agents are Nothing More Than Third-Party Facilitators
Most Title and Escrow Companies are not Investor-Friendly
Use a Board-Certified Real Estate Attorney to Close all your Transactions
What you need to Know about the Real Estate Settlement Procedures Act
Review your HUD 1 Settlement Statement on the Day before the Closing
Double-Check all Closing, Loan, and Title Transfer Documents for Mistakes
Prorate the Property Taxes Using the 365-Day Method
Have all Utility Meters Read on the Day before the Closing
Do a Final Walk-Around Inspection of the Property on the Day of the Closing
Use a Buyer’s Closing Checklist to Avoid Overlooking Anything at the Closing
Record the Deed and Mail all of the Checks to Lenders and Lienholders
Chapter 19: How to Fix up Pre-Foreclosures for Maximum Curb Appeal and Resale Value
Seven Key Elements that must be Included in your Property Fix-Up Plan
Avoid Being Ripped Off by Unscrupulous Repairmen and Contractors
Hire Only Properly Licensed and Insured Repairmen and Contractors
Find Competent Professional Tradesmen to Work on your Properties
Require that Tradesmen Submit Written Estimates for all Jobs
What you need to Know about your State’s Construction Lien Law
Free Job Cost Estimating CD-ROM Available at Home Depot Stores
Building and Repair Cost Calculators Online
Give the Property an Industrial-Strength Cleaning
Eliminate Smelly Indoor Odors from the Property
The Most Important Advice in this Entire Chapter
Choose Color Schemes that Enhance your Property’s Curb Appeal
Apply Textured Coatings to Rough Interior Wall and Ceiling Surfaces
Use a Professional Carpet Cleaning Service to Clean the Carpets
Install Low-Nap Commercial Grade Carpet on 7/16-Inch Rebond Carpet Pad
My Property Fix-Up Motto has Always been Clean, Repair, or Replace as needed
Always Conduct a Walk-Through Inspection before Making the Final Payment
Keep Track of your Property Repair Expenses on a Daily Basis
Chapter 20: How to Package, Market, and Resell Pre-Foreclosures for Maximum Profit
How to Calculate the Resale Value of a Pre-Foreclosure Property
Compile a Property Information Sheet Listing all of your Property’s Features
Package Pre-Foreclosure Properties to Highlight their Best Features
Use the Internet to Market your Properties Globally
Create a Property for Sale Web Page to Advertise your Properties Online
Mapping Information Available Online
Use URL Forwarding for Property for Sale Domain Names
What to Include in your Pre-Foreclosure Property for Sale E-Mail Fact Sheet
Place Classified Ads in Local Newspapers
Best to Include Buyer Qualifications in your Classified Ad Copy
Always Place a Professional-Looking For-Sale Sign on the Property
Record an Outgoing Message for Buyers on your Telephone Answering Machine
Work with Real Estate Brokers without Signing a Listing Agreement
Local Real Estate Market and Economic Conditions Affect Real Estate Sales
Qualified Buyers are Hard to find in Most Real Estate Markets Nationwide
Avoid Wasting your Time with Non-Qualified Prospective Buyers
Work with Lenders to Pre-Qualify your Buyer Prospects
Provide Seller-Financed Mortgage Loans to Qualified Buyers at Market Rates
Residential Loan Application Online
Residential Mortgage and Deed of Trust Loan Documents are Available Online
Provide Buyers with a Limited One-Year Buyer’s Protection Plan
Make Money by Selling your Purchase Agreements to Other Investors
Assign or Sell your Purchase Agreements to Third Parties
What you must Know about the Vacancy Exclusion Clause in Insurance Policies
How Income from the Sale of a Pre-Foreclosure Property is Taxed
Tax Information Online
Use the U.S. Master Tax Guide as your Tax Reference Guide
About the Author
Index
Copyright © 2005 by Thomas J. Lucier. 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, (978) 750-8400, fax (978) 646-8600, 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, (201) 748-6011, fax (201) 748-6008.
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. The publisher is not engaged in rendering professional services, and you should consult 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.
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Library of Congress Cataloging-in-Publication Data:
Lucier, Thomas J.
The pre-foreclosure property investor’s kit : how to make money buying distressed real estate . . . before the public auction / Thomas Lucier.
p. cm.
ISBN 0-471-69279-4
1. Real estate investment—United States. 2. Foreclosure—United States.
I. Title.
HD255.L829 2005
332.63’24—dc22
2004021911
To my wife and business partner, Barbara V. Lucier, who has steadfastly stood shoulder-to-shoulder with me through the good, the bad, and the ugly!
LIST OF DOWNLOADABLE FORMS
Form 7.1 Sample Foreclosure Lawsuit Worksheet
Form 7.2 Sample Notice of Default Worksheet
Form 8.1 Sample First Letter to Property Owners in Foreclosure
Form 8.2 Sample Second Letter to Property Owners in Foreclosure
Form 8.3 Sample Third Letter to Property Owners in Foreclosure
Form 8.4 Sample Fourth Letter to Property Owners in Foreclosure
Form 8.5 Sample Fifth Letter to Property Owners in Foreclosure
Form 8.6 Sample Sixth Letter to Property Owners in Foreclosure
Form 9.1 Sample Owner Interview Worksheet
Form 9.2 Sample Loan Worksheet
Form 9.3 Sample Estoppel Letter to Institutional Lenders
Form 9.4 Sample Borrower’s Letter of Authorization to Release Loan Information
Form 9.5 Sample Estoppel Letter to Private Lenders
Form 11.1 Sample Phase One Environmental Audit Checklist
Form 11.2 Exterior Property Checklist
Form 11.3 Grounds Inspection Checklist
Form 11.4 Attic Inspection Checklist
Form 11.5 Garage and Carport Inspection Checklist
Form 11.6 Electrical Inspection Checklist
Form 11.7 Plumbing Inspection Checklist
Form 11.8 Heating and Air Conditioning Inspection Checklist
Form 11.9 Kitchen Inspection Checklist
Form 11.10 Bathroom Inspection Checklist
Form 11.11 Dining Room Inspection Checklist
Form 11.12 Living Room Inspection Checklist
Form 11.13 Bedroom Inspection Checklist
Form 11.14 Home Office Inspection Checklist
Form 12.1 Sample Current Market Value Worksheet
Form 14.1 Sample Subordinate Lienholder Worksheet
Form 14.2 Sample Letter to Subordinate Lienholders
Form 16.1 Sample Short Payoff Sale Proposal Letter
Form 17.1 Sample Real Estate Purchase Agreement
Form 17.2 Notice of Cancellation
Form 18.1 Sample Walk-Around Property Inspection Checklist
Form 18.2 Sample Buyer’s Closing Checklist
Form 19.1 Sample Daily Repair Cost Worksheet
Form 20.1 Sample Outgoing Sales Message
Form 20.2 Sample Participating Broker Agreement
Form 20.3 Sample Assignment of Real Estate Purchase Agreement
PART I
GETTING STARTED AS A PROFITABLE PRE-FORECLOSURE INVESTOR
Chapter 1
How You Can Make $60,000 a Year Investing in Pre-Foreclosure Properties Part-Time
First off, I want to take this opportunity to thank you for investing your hard-earned money in a copy of The Pre-Foreclosure Property Investor’s Kit. I also want to congratulate you on making a very wise investment decision! As you will soon find out, this book lives up to its title. It is packed with step-by-step instructions, ready-to-use worksheets, checklists, letters and agreements, and practical, no-nonsense advice on how to buy properties directly from owners with mortgage or deed of trust loans that are in default and facing foreclosure.
The Definition of Pre-Foreclosure
First things first: Before I begin to tell you how you can make $60,000 a year investing in pre-foreclosure properties part-time, I need to give you a brief description of what the term pre-foreclosure means. Pre-foreclosure refers to the period of time during the foreclosure process between when a lender files a foreclosure lawsuit or a notice of default in the official public records and the date the property is scheduled to be sold at a public foreclosure auction or trustee’s sale. The entire foreclosure process is covered in great detail in Chapter 4.
Why the Pre-Foreclosure Stage Is the Time to Buy during the Foreclosure Process
The real trick to consistently making money in real estate is to find a steady source of readily identifiable property owners who have a compelling reason to sell their property. This type of property owner is known in the business as a motivated seller. And that is exactly why I like investing in pre-foreclosure properties. Pre-foreclosures provide a steady source of readily identifiable motivated sellers in the form of property owners with mortgage or deed of trust loans that lenders have publicly declared to be in default and facing foreclosure. As you will soon learn, the future looks bright for pre-foreclosure property investors in the know. The coming months and years could provide a record number of opportunities to buy properties, at a discount, directly from motivated sellers who have a very compelling reason to sell their property. In Chapter 2, you will get the lowdown on exactly why you should never bid on properties at public foreclosure auction or trustee sales or buy lender-owned repossessed properties.
The First Step to Making $60,000 a Year Investing in Pre-Foreclosures Part-Time
I do not know about you, but to me, $60,000 a year is nothing to scoff at, especially from a part-time job. And if you are willing to apply the information and advice that is contained in this book, and work hard, and don’t quit the first time you run into an obstacle, you can reasonably expect to earn $60,000 a year investing in pre-foreclosures part-time. The $60,000 annual income figure that I am using in this chapter to illustrate the profit potential that pre-foreclosure properties can provide to hard-working investors is not based on wishful thinking or pie-in-the-sky logic. Rather, it is based on local foreclosure market conditions and how much time, money, and energy the average investor has to dedicate to investing in pre-foreclosures. For example, in lower cost housing markets, an investor might have to do six $10,000 deals in order to earn $60,000 annually. To accomplish this, an investor would have to buy and resell one pre-foreclosure property every two months. In more expensive housing markets, it could very well take an investor just four $15,000 deals to earn $60,000 annually. This would require completing one deal every three months. And, in high-end markets, an investor could do two $30,000 deals or even earn $60,000 from a single property. Please keep in mind that individual results will vary and that many people may not reach $60,000 in profits during their first year in business. But, what if you earn only a “measly $20,000” during your first year? I am willing to bet that most of the people reading this book could put an extra $20,000 in annual income to good use.
Why Now Is One of the Best Times Ever to Invest in Pre-Foreclosure Properties
Today’s soft economy, lax lending policies, predatory lending practices, and historically low interest rates are causing overextended homeowners to default on their mortgage and deed of trust loans in very large numbers. As I write this, the Mortgage Bankers Association of America has just reported in their quarterly National Delinquency Survey that a near record number of single-family homes were in foreclosure during the last quarter of 2003. Also, other organizations that monitor residential loan trends are not making any rosy predictions about any possible future decline in the number of mortgage foreclosures. In fact, the number of home loans foreclosed on each year has steadily increased over the past 20 years. According to the U.S. Census Bureau’s statistical abstract, the number of homes in foreclosure in 1980 was 114,000, while the number of homes in foreclosure in the year 2001—the latest year in which information is available—was 555,000. This is an increase of over 250 percent. The main reason that I do not see any letup in the number of foreclosures in the foreseeable future is because of the unbridled spending habits of most Americans, which are fueled by easily accessible credit in the form of credit cards. Far too many homeowners today are in debt up to their eyeballs and living on borrowed money, well beyond their financial means. They are living in houses they really cannot afford. And until Mr. and Mrs. America learn how to live a lifestyle that is based solely on their actual income, and not on the credit limits of their fantastic plastic credit cards, the number of foreclosures nationwide can only go one way: straight up!
Six Factors Contributing to the Skyrocketing Number of Foreclosures Nationwide
The following is a list of the six main factors that most financial experts claim are contributing to the skyrocketing number of mortgage and deed of trust loan foreclosures nationwide:
The National Delinquency Survey
As I briefly mentioned, the Mortgage Bankers Association (MBA) compiles and publishes the quarterly National Delinquency Survey (NDS) that shows the seasonally adjusted delinquency rate for mortgage and deed of trust loans on one-to-four-unit residential properties. According to the MBA, the NDS currently covers more than 32 million loans that represent about half of all outstanding first-lien residential loans in the United States. The loans surveyed are reported by approximately 130 lenders, including mortgage bankers, commercial banks, thrifts, and life insurance companies. To review the National Delinquency Survey, log on to the MBA Web site: www.mortgagebankers.org and click on News Room and scroll down until you find the NDS.
Nothing Illegal or Unethical about Buying Property from Owners in Foreclosure
In spite of what many uninformed people may believe, there is nothing inherently illegal or unethical about buying properties directly from owners with mortgage or deed of trust loans that are in default and facing foreclosure. The fact of the matter is that the vast majority of pre-foreclosure property investors nationwide are honest, ethical business people, who provide much needed debt relief to tens of thousands of financially distressed property owners annually. And during the course of reading this book, you are going to learn how to be a profitable investor without having to resort to the vulture tactics that are commonly employed by predatory foreclosure investors. Treating property owners in foreclosure in an honest, ethical manner is not only the right thing to do, but also the best way to avoid being the subject of the lead story on your favorite local television evening news broadcast exposing sleazy real estate investors who prey on homeowners in foreclosure.
It Takes Knowledge and Persistence to Be a Profitable Pre-Foreclosure Investor
Trust me; you do not need a degree from Harvard Law School in order to make money buying properties directly from owners with mortgage or deeds of trust loans that are in default and about to be sold at a public foreclosure auction sale. Please do not get me wrong: Finding, researching, inspecting, negotiating, buying, and reselling pre-foreclosure properties can be a lot of hard work. But it can also be a very lucrative line of work, provided you are knowledgeable, well organized, and have the good old-fashioned stick-to-itiveness that is necessary to be a profitable pre-foreclosure investor in today’s competitive foreclosure market.
How I Got Started Buying Pre-Foreclosure Properties 20 Years Ago
When I started out as a real estate investor in 1980, there were no books available on how to buy properties directly from owners in foreclosure before the auction. In fact, everything that I read on the subject of investing in foreclosures told me to buy property on the county courthouse steps at public foreclosure auction sales. I attended a few public foreclosure auction sales, but I was not impressed by what I observed. I saw investors get caught up in the frenzy surrounding the competitive bidding process and end up overpaying for property. So, I decided to forget about investing in foreclosures. However, in 1985, Archie, one of my birddogs in South Tampa, called and told me about a single-family house on Fitzgerald Street, near MacDill Air Force Base, that was scheduled to be sold at a public foreclosure auction sale in 30 days. Archie also told me that due to the husband being injured on the job, the owners were six months behind on their house payments, and the owners had decided to vacate the house and move in with relatives before the scheduled sale date. The next day I mailed the owners a short note that read: “What do I have to do to buy your house?” I enclosed a business card and told them to call me anytime. I received a telephone call from the wife two days later. She told me that she and her husband did not understand how I could possibly buy their house while they were six months behind on their payments and owed the bank over $3,000 in loan payments, late fees, accrued interest, and legal fees. I told her that it was possible, and I made an appointment to meet with her and her husband. That evening, I negotiated a deal where the owners sold me their equity in exchange for my bringing their loan current and assuming their non-qualifying Veterans Administration (VA) mortgage loan. As far as I understood it at the time, I had done nothing more than take over a delinquent loan from a homeowner in distress. Now in hindsight, I realize I had done my first pre-foreclosure property deal without even knowing it. However, I quickly realized that the concept of taking over loan payments from financially distressed property owners had a lot more profit potential than bidding against every foreclosure investor in Tampa on the Hillsborough County Courthouse steps. And, I have been refining the process of buying properties directly from owners in foreclosure ever since I struck that first deal back in 1985!
How I Made a $14,000 Profit on My First Pre-Foreclosure Property
I turned around and resold the house on Fitzgerald Street one month later to a staff sergeant in the United States Air Force for a $14,000 profit. Here’s an in-depth, step-by-step analysis of the actual transaction:
Today, I value my time at $100 an hour and will not pursue a pre-foreclosure property unless I can make at least a $15,000 profit before taxes and without offering any type of seller financing. Most professional pre-foreclosure investors that I know around the country tell me that they average between $25,000 and $35,000 profit per deal.
A One-on-One Graduate Level Seminar That Is Not Available at Any College
As the old saying goes, they don’t teach this stuff at Harvard Business School or anywhere else for that matter. To the best of my knowledge, there is not a single course available on how to buy pre-foreclosure properties at any fully accredited junior college, community college, college, university, or graduate-level business school within the United States. However, because you had the good sense to invest in a copy of The Pre-Foreclosure Property Investor’s Kit, you are now going to receive the college equivalent of a one-on-one graduate level seminar on the finer points of the pre-foreclosure property investment business complete with examples of real deals. But best of all, you are going to be able to learn at your own pace and within the comfort and privacy of your home. In other words, you are going to get a useful education without having to take out a student loan to pay for it or be subjected to the usual dry, dull, useless pap that’s being pushed on most college campuses today by long-winded, know-it-all professors with no practical, hands-on experience. And to top it all off, you will be able to actually put your newfound moneymaking knowledge to immediate use!
It Is Hard to Succeed When You Are Unemployed, Broke, and Have Lousy Credit
I don’t know how you are wired, but my internal bullspit detector automatically goes off when I read about the exploits of some novice investor who claims to have bought his or her first pre-foreclosure property for the paltry sum of $10 and then realized a whopping $53,000 profit by magically reselling the property three days later. The fact of the matter is that in spite of what some real estate fairy tale authors may tell you, it does take a certain amount of money and credit to be a successful foreclosure investor. I don’t want to come across as some sort of real estate killjoy, but for the average person with absolutely no real estate investment or business experience, it’s almost next to impossible to succeed as a pre-foreclosure property investor when you are unemployed, broke, and have lousy credit. The problem is that virtually all legitimate pre-foreclosure investment strategies require a certain amount of cash—or the creditworthiness to borrow money—to implement. The best advice I can give to any aspiring pre-foreclosure property investor who is currently unemployed, flat broke, and has lousy credit is to get a steady-paying job, save your money, and rebuild your credit.
How to Invest Without a Large Income, Big Bank Account, and High Credit Score
I just gave you a reality check on why an unemployed person who happens to be flat broke and has lousy credit to boot has an extremely slim chance of making it as a pre-foreclosure investor. Now I am going to tell you how you can get started investing in pre-foreclosure properties without a six-figure income, a large bank account, and a super-high credit score. First off, the amount of money that you will need to do your first deal depends on what segment of your local real estate market you target. For example, my target market in Hillsborough County, Florida, is stable, blue-collar neighborhoods where houses sell for $90,000 to $140,000. Please keep in mind that a house that sells for $140,000 in Tampa would cost double that amount in the Northeast and triple that price in California. And depending upon the circumstances, it usually costs me between $8,500 and $11,500 to reinstate the loan and buy the owner’s equity at a steep discount. However, if I were to put the same property under contract and then turn around and assign or sell my purchase agreement for a $5,000 profit to an experienced, professional investor who has the financial wherewithal to close the deal, my out-of-pocket expenses would probably be less than $1,500. If I decided to ask a foreclosing lender to modify the terms of an existing loan so that the loan could be assumed, I would need a FICO Score of only 620 and an annual income of around $40,000 to assume the loan on reasonable terms. (The term FICO refers to the name of the company, Fair Isaac Corporation, that developed the popular credit scoring model named FICO.) So, as you can see, in my target market, you can get started as a pre-foreclosure investor with an annual income of $40,000, less than $2,000 in savings, and a FICO Score of 620. In Chapter 5, I give you complete details on realistic ways that you can finance the purchase of a pre-foreclosure property.
Learn How to Use My 14-Step Process for Investing in Pre-Foreclosures
Over the past 20 years, I have developed and refined a 14-step process for investing in pre-foreclosure properties. In Part Two of this book, you will learn chapter by chapter how to use my 14-step process and avoid the pitfalls and problems that plague most uninformed and unsuspecting novice pre-foreclosure investors just starting out. Here is my 14-step process along with a brief description of each step.
Step 1: Find Property Owners with Loans That Are in Default and Facing Foreclosure
In Chapter 7, you will learn where foreclosure notices are filed in your county and how to use them to find property owners with mortgage or deed of trust loans that are in default and facing foreclosure. You will also find out how you can access your county’s public records online to obtain information on foreclosure actions on the very same day they are recorded in the official public records.
Step 2: Contact Property Owners in Foreclosure
After you have finished reading Chapter 8, you will know the methods that professional investors use to contact property owners with mortgage or deed of trust loans that are in default and facing foreclosure. There are also sample copies of six very good letters that you can send to property owners in foreclosure. Plus, you will get the scoop on how to use classified newspaper ads to find owners with delinquent loans that have not yet been made public information.
Step 3: Get the Lowdown on Loans in Default from Foreclosing Lenders
Chapter 9 contains complete step-by-step instructions on how to quickly get the lowdown on loans in default from foreclosing lenders and their attorneys and trustees. You will find out how to quickly verify loan information without having to constantly deal with snotty loan clerks who can be a royal pain in the butt.
Step 4: Perform Due Diligence on Pre-Foreclosure Properties
In Chapter 10, you will receive a mini-course on how to perform due diligence on pre-foreclosure properties. You will also learn how to use the Internet to access the numerous public records that are available online to find current information on a pre-foreclosure property and its owner.
Step 5: Thoroughly Inspect a Pre-Foreclosure Property
In Chapter 11, you will learn how to avoid being bamboozled by an unscrupulous owner trying to surreptitiously mask a pre-foreclosure property’s major defects. This chapter also comes complete with 13 ready-to-use checklists for conducting your own pre-buy property inspections.
Step 6: Accurately Estimate the Current Market Value of a Pre-Foreclosure Property
By the time you have finished reading Chapter 12, you will know how to accurately estimate the current or as-is market value of a pre-foreclosure property. This is the single most important aspect of the entire buying process, so please make certain that you fully understand it before you go out on a buying binge!
Step 7: Negotiate with Property Owners in Foreclosure
Chapter 13 gives you the step-by-step guidelines on how to negotiate with property owners with mortgage or deed of trust loans that are in default and facing foreclosure. You will learn all of the little nuances that you need to know about when dealing with property owners in a state of denial.
