Pay Off Debt Consolidation

Bank of America sent out nearly 100,000 solicitations to distressed homeowners to offer them a chance at a deed-in-lieu transaction. “Deed-in-lieu” refers to returning the deed to your home to a lender in order to avoid the foreclosure process. You get to walk away from your home, and the lender declares the debt resolved because you returned the home, your collateral. Many lenders have said that they will offer a variety of incentives for this type of transaction because it saves them a great deal of resorces in processing costs even though they may take a hit when they try to resell the home in today’s difficult market.

Some short sale investors are viewing this new trend with concern, particularly since some lenders have stated that they find deed-in-lieu transactions preferable to short sales since short sales take a long time. Additionally, homeowners who are going to lose their homes no matter what may find this to be an acceptable alternative since it is being portrayed as a route to 100% resolving the debt rather than stressing about being followed up with later for the difference just when you have gotten back on your feet.

As a short sale investor, you should not stress about this. There are several homes that will still go through the short sale process, and not all circumstances are going to qualify for a deed-in-lieu transaction. You can point out to homeowners who may be backing out of a short sale that unless the wording in their deed-in-lieu agreement specifies that the debt is considered entirely resolved by the return of the property, as this may not be the case.

Furthermore, while both deed-in-lieu and a short sale do go on your credit history and negatively impact your credit score, a deed-in-lieu remains on your history for a full 7 years, and you may have to request that it be removed. According to new legislation, short sales may be removed as soon as 3 years in some cases.

In fact, some homeowners may opt for a deed-in-lieu transaction in place of a short sale transaction with you. Nevertheless, the current deed-in-lieu “push” could actually be good, since it may put a notch in homes that lenders were unwilling to short sell anyway. Just be willing to answer questions about this sort of transaction, then keep doing your short sales and helping individuals in trouble resolve their housing scenarios.

If you haven’t checked out www.FreeShortSaleCourse.com you are really missing out.

As a short sale investor, you will often deal with landlords who may be facing foreclosure on rental properties. These short sale deals can be very attractive to traditional short sale negotiators who may have been “locked out” of many deals because of homeowner participation – voluntary and mandatory – in federal short sale programs. However, there are some complications that can occur with rental properties that may not be an issue with first or even second homes that are owned and inhabited by the property owner.

One of the biggest concerns for landlord-sellers bargaining short sales is that even in states that do not assess an income tax on conventional short sales in which a homeowner transacts a short sale on the home that he or she lives in, the short sale of a rental property often will result in the issuance of a 10-99 that will be viewed by the state as income. There are ways to deal with this and one is to appeal it, but when dealing with landlords you must remember that these individuals are subject to a different set of tax laws if they are short selling rental properties.

Also, landlords may find themselves in a distressed situation thanks to insurance issues. Particularly if they have made a claim recently, the insurance company may have hiked their rates or even canceled their policies. Due to plummeting equity in many properties and a number of natural disasters in recent months, finding new insurance for rental properties has been for the most part difficult.

While this may not impact your end buyer, it can effect you or another investor who is purchasing the property to hold or season. Make sure that the property is insured and insurable by you even if you do not plan to hold onto it.

As the rules and regulations on short sales change nearly day-to-day, investors much keep abreast of the changes. Only in this manner can you truly help distressed property owners who need a short sale in order to salvage their savings and exit a property.

PS if you haven’t checked out my Free Short Sale Course you are really missing outwww.FreeShortSaleCourse.com

As short sale professionals, we know that meeting with a homeowner who is in default on their mortgage for the first time is crucial to successfully closing the sale. The results of that first conversation will set the tone for the results of your last one.

If you’re going to be in sales, the first rule is to find out specifically what their issues and concerns really are before you try to sell them anything. When you understand their situation, you’re in a better position to help everyone get what they want. Every experienced salesperson does that.

In the short sale niche, our clients are homeowners in distress. Generally speaking, their problems are obvious, right? They’re losing their house, and they’re drowning financially. Specifically, though, not everyone has exactly the same mindset about their needs during financial troubles. If you want to work with these homeowners, you need to hit home about what is really bugging each of them personally about their situation.

Once you get to the emotional root of the problem, you can focus on creating the solution that will help them the most. As you’re listening to them talk about their problem, you need to be looking for that win-win somewhere in that awful situation. There is usually a win-win there for both you and the homeowner. Your job is to find it, and then help them see it.

You’ve been listening to them for a while, and you now know their story. (If you’re smart, you’ve been letting them do most of the talking.) When they’re done – and only when they’re done – you need to talk about how working with you is the right solution to their problem. That’s where the Positive Results Conversation comes in.

The Positive Results Conversation gives you the chance to repeat their concerns back to them and explain what you can do to help them with each one. This is also the time to explain foreclosure options and how each option may affect their future.

After a good discussion of their options and alternatives to foreclosure, you and the homeowner should discuss the short sale process. Any short sale investor should be able to talk about how this works and why this can be their best option, but you should also be prepared to answer objections from people who don’t trust the system. Together, you can set realistic expectations for the outcome.

Expectations are everything when you are working with homeowners who are in foreclosure. If they know what can and can’t happen, they’re less likely to be suspicious of anything during the process. Managing expectations is the real key to making the Positive Results Conversation work for you. You’ll have more trouble than you know what to do with if you leave this part out of the conversation and then have to explain something crazy that happened later.

That’s also why you shouldn’t stop the Positive Results Conversation until you’re done explaining everything. The homeowner needs to know about everything in your presentation, or they won’t be able to make a fully informed decision about whether to work with you. If you leave an unfinished conversation, the homeowner won’t realize why your proposal can add value to their financial lives, and it may be easier for them to give up too soon.

Bring your own personality to the table, but stick to the script and keep the conversation under 90 minutes. By the end of your presentation, the homeowner should be able to see some positive results already: there is a knowledgeable professional in front of them who is willing and able to help, and there is a solution to their problem besides running away from it and watching what’s left of their credit rating go down in flames.

If you want to learn more, you can read about the whole Positive Results Conversation in the Short Sale Manifesto, which is a special report that can be found on our website (see the link below). There are a lot of talking points, but go over each one with the homeowner. We have done this for years, with positive results for homeowners and for us. Before you know it, you’ll be collecting all the documentation for the short sale package and moving forward.

Always remember that we put this presentation together from our own experience in dealing with homeowners in trouble. Everything on the list has a purpose; everything on that list is there because it will help you succeed as a short sale consultant. You will begin to see your own positive results when people in your own neighborhood start calling you “the problem property expert” and sending referrals your way!

Need to learn more about helping homeowners in pre-foreclosure? Check out the Strategic Real Estate Coach resource page for the best short sale success strategies!

Losing your house is an unbelievably stressful experience. The money won’t cover the bills, the creditors won’t stop calling, the family won’t stop arguing about who’s to blame, and you have enough to worry about without having to arrange for somewhere else to live. You wish you could snap your fingers and make it all go away.

You might know someone who has been through that already, so maybe you have an idea of what can happen. You might not even realize you have more than one or two options. Walking away from the house is tempting, but your real options have to include your end game. What do you want your debt and your credit to look like after the house goes away?

No matter whether you’re the homeowner or someone who works with homeowners in foreclosure, you should be aware of all the options in this situation. If you’re the homeowner, it is best to understand everything you can about the foreclosure process. If you’re someone who works with homeowners, it’s your job to help that homeowner understand their options during this difficult time. It helps if everyone has a realistic view of what could happen and why.

Let’s look at the deed-in-lieu option and loan modifications first.

A deed-in-lieu means that the homeowner agrees to simply hand over the property to the bank. It helps the bank make the repossession easier, but it still hurts the homeowner’s credit as if the foreclosure had actually taken place.

Are mortgage loan modifications the answer? We have all heard about the Home Affordable Modification Program (HAMP) initiated by the government to make more loan modifications a reality for homeowners in default. Unfortunately, only 4 percent of all homeowners that apply for modification actually result in their loan’s permanent modification. For instance, in one recent quarter, California had about 140,000 mortgage loans begin the trial modification process. Based on the current success rate, only 5,600 of those loans will actually be modified to avoid foreclosure. At that rate, modification programs are simply not helping enough people.

Here are some more likely options.

1) Option one: stay in the house as long as possible, using bankruptcy procedures to stall the courts until the foreclosure auction date. It doesn’t prevent the foreclosure, but it does let you stay put at the lowest cost.

2) Try to sell the house for the amount owed on the mortgage, hoping that a buyer will pay the asking price before the auction date. Obviously, it isn’t likely that someone will pay more than the home’s fair market value, so this strategy often fails.

3) List the house as a short sale, find a buyer, and make the buyer wait out the short sale process in order to buy the house at a discount. Many real estate agents recommend this solution because it sounds like the easiest thing to do while still earning their commission, but it’s a little more complicated than that.

One complication arises when the agent has to convince the buyer to not only sign the purchase agreement, but to wait at least 60 to 90 days to take possession. The typical buyer needs something that is already available.

Several roadblocks can come up during the process of negotiating a short sale if the seller and/or his agent don’t completely understand how to manage those negotiations. Lenders are very careful to train their loss mitigation department in debt collection, so sellers and agents who aren’t as well-trained in short sale negotiation skills can be easily sidelined.

I’ll give you an example. Did you know that deficiency judgments and post-sale promissory notes can be avoided in some cases? You can know the basics of how the process is supposed to work, but shouldn’t you learn how to work the process? Wouldn’t that alone be worth it?

4) List the property as a short sale, but work with an investor who already wants to buy the property and is willing to wait out the process and negotiate the short sale on behalf of the seller without cutting out the real estate agent. Maybe the investor will keep the property as a rental, or maybe they’ll sell it. They do get something out of the deal. An educated and competent investor also knows how to use contracts and the lender’s own paperwork to get the best results for a homeowner in trouble.

Here’s another reason why the homeowner would rather work with someone who coordinates short sales on a daily basis. Did you know that there’s more to the BPO process than just being there when the bank appraiser comes to the door? Do you have any idea how to use the process to maximize the short sale outcome in your favor? A good short sale investor does.

As a real estate professional, you should be able to explain these four options to a homeowner who is facing foreclosure. They can let it go and file bankruptcy, they can sell for the amount of the debt, they can apply for a short sale and wait for a buyer, or they can apply for a short sale with a buyer already waiting for them.

My partners at Strategic Real Estate Coach specialize in educating people about short sale solutions for homeowners in trouble. We offer a free Silver Membership in the coaching program, and the benefits include several reports to help you learn everything you need to succeed!

To get more in-depth coverage of the legal issues you might face, take a look at the blog on topshortsalelawyer.com. Attorney Jeff Watson is great at explaining the issues for short sale investors.

When you help people learn the truth about foreclosure and how to avoid it, you give them a chance to overcome one of the most difficult times in their lives. Educate each homeowner about their options, and watch them turn a bad situation into a fresh start.

Need to know more about talking to homeowners in foreclosure? Get free information from our real estate coaching website! Get a totally unique version of this article from our article submission service

Every real estate professional who works with homeowners in default needs to know a little about bankruptcy. At the very least, you should know enough to join the conversation because bankruptcy and foreclosure often go together.

Keep in mind that you’re not there to advise them on whether or not they should do it. Stick to talking about the facts related to how bankruptcy affects homeowners in foreclosure, and advise them to take that information to a bankruptcy attorney. You don’t want to let them think you can help them file, or be accused of practicing law without a license.

The point is to know enough about bankruptcy to speak with the homeowner like the professional you are. It is critical to know what bankruptcy will and won’t do for people in foreclosure, and that begins with learning a few terms. Once you understand the basics, you can help them figure out which questions to ask their bankruptcy attorney.

Stay: In court, an order to stay something means to hold off on pursuing it until certain terms are met. In bankruptcy court, the lender is ordered to hold off collecting money or assets from the borrower until the court decides what to do about the house. A stay will buy the homeowner some time to find a buyer, find the money to bring the mortgage current, or find another place to live.

Relief of Stay: When a stay is ordered by the judge in a bankruptcy court, the lender may file a motion for relief of stay. The lender is basically asking to be allowed to continue to go after the house or the money. The judge has the option to allow their request or deny their motion.

There are two common reasons that a lender will ask the court for permission to continue. One is negative equity. If there is no positive equity on the house, there is no money available from that asset to help other creditors. The court will reason that, if no other creditor is harmed from the action, there is no reason to keep the foreclosure from proceeding. The other reason is that the homeowner has fallen behind in the payment program which was previously mandated by the bankruptcy court. The theory is that, by failing to keep up with their bankruptcy payments, the homeowner has lost the right to save their house.

Abandonment of Assets: In bankruptcy court, an asset is considered abandoned when its value has decreased to the point that nobody will be interested in it but the owner and its secured lienholder. One example of an abandoned asset is a home that is worth less than the mortgage debt.

Discharge: In bankruptcy court, a debt is said to be discharged when the Chapter 7 or the Chapter 13 proceedings are over and the court is satisfied. The judge’s discharge order means that the person who filed bankruptcy doesn’t owe anything else on that debt.

Bankruptcy Dismissal: This bankruptcy court order is also given at the end of the proceedings, but unlike a discharge, a dismissal means that the individual does not have his debts discharged. This happens most often with Chapter 13 repayment plans. A judge will dismiss a bankruptcy when people fail to present paperwork or payment when asked by the court. The 2005 bankruptcy laws made it harder for someone to refile bankruptcy after one has been dismissed.

When you work with homeowners who are in default on their mortgage, there’s a good chance you will talk to someone who is considering bankruptcy to end their financial problems. Be prepared. Talk to one of the real estate professionals at Strategic Real Estate Coach about handling that conversation. The more you know about bankruptcy, the more you will be able to help a homeowner think through each of his options.

You may want to speak with a bankruptcy attorney yourself to get the details about how this works in your state. In the meantime, just remember this: When a homeowner files bankruptcy, the court won’t stop the foreclosure permanently, but it could delay the auction temporarily and buy the homeowner some time to work things out another way.

Need to know more about helping homeowners in default on their mortgage? Visit the Strategic Real Estate Coach website, and request our free report about becoming a Real Estate Rebel!