Group Q & A
Hello everyone, welcome back to another Street Smart Q&A, I have a lot to report on this session and I hope you’re paying attention to this great market that we’re in. You know, it’s amazing to watch how many people are saying how horrible and terrible and bad things are and we are just inundated with opportunity. I hope you’re looking at this from the right way and not living in fear because this really can be a time that really “try men souls” as they say but the opportunities out there are just amazing.
I’ll give you an example, we just put a bid in on a property, it’s a 3 bedroom, 2 bath, its got a garage, that’s a one car garage, not a spectacular home but an everyday home in an everyday neighborhood. What’s really interesting about it, it’s a ranch style home, it was built about 25 years ago; but it’s only about a mile from a shopping center, Kroger shopping center, just beyond a Home Depot, so the area is good, the shopping is close, there’s lots of things going for it; but let’s look at the numbers. We put the offer in at $18,000 – that’s right, you heard me right, $18,000.
Just take a look at that, if I can get $850.00 a month rent, which I ought to be able to every day on a 3 bedroom, 2 baths with a garage in that kind of neighborhood. Then I did say the word “rent”, of course, we’re always going to filter it through our rent to own and owner finance programs but just think, if you had the opportunity to open up the market, to just straight rental, and let’s say forget about 1 month for taxes and 1 month for insurance and just say okay, we’re going to take $850.00 x 10, that’s $8500 a year and even with my cost of realtor commissions, closing costs, and everything else, being able to recover the payment on that in a little over 2 years or about 27 months, now just take a look at that.
If you could borrow the money necessary, which as I said, the purchase price be $18,000 but then there would be, probably about $1,000, maybe a little bit more, in closing costs and then I have to pay the realtor who found me the deal, who’s actually out working and finding these deals for me, I have to pay him $2,500 and then another $1,500 to oversee the rehab. Which is very minimal, in fact I probably won’t even have to hire him to do that piece of it.
So when we look at the whole cost that I have in it, it’s probably a little bit less than $24,000. Now, you just take a look at how quickly you can recover your investment and this is what I’m talking about in this market. You really can take advantage of some incredible opportunities that we simply will not see in a year and a half or so. So now is the time to really take advantage of this.
Build up your skills in borrowing money and start talking to everybody you talk to, give them that example or one that is valid in your market. Get with realtors that are getting the hot sheets on a daily basis, and see what’s coming available; because it’s really an amazing thing.
Now the second thing I wanted to bring to your attention in this session is about taxes; and many of you may not be aware that long term capital gains taxes are scheduled to decline for low and moderate income tax payers; and folks, we need to pay attention to the fact that because of this wonderful thing called depreciation, the government gives us the right to become low and moderate income tax payers.
The way we do that is because we have so many write-offs against our ordinary income, that we can lower our taxable income, which means that we can actually put ourselves in a lower tax bracket, which means something very, very interesting for the coming years.
If you are in the 10-15% tax bracket, in 2007, capital gains were only 5%. But in 2008, 2009 and 2010 that actually drops to 0% on capital gains. That’s a pretty amazing number. Now alternatively though, if you’re in the 25-35% tax bracket, then the 15% that was true remains true throughout 2008, 2009, 2010 – and in 20111, it actually goes to 20%.
So we want to be very careful as we pay attention to our overall taxes, what can really happen. In fact, quoting from an article from Sandra Block who posted this from USA Today, she says that like a lot of things you find online this rumor contains a kernel of truth that you can skip taxes.
From 2008-2010, the long term capital gains rate for some investors will drop to 0, but before you start planning a fire sale of your stocks and mutual funds, and she forgot to put in there real estate, make sure you’ll be eligible for this tax break.
The 0% capital gains rate will be limited to individuals in the 10 and 15% tax brackets. Those folks now pay 5% long-term capital gains. In 2007, a married couple who filed jointly must have taxable income of no more than $63,700 to qualify for the bottom two-tax brackets.
For a single filer, the cut of is $31,850. The tax brackets will be higher in 2008 because the IRS adjusts them annually for inflation. The actual amounts won’t be announced until later this year.
Even if you meet the income limits, only a portion of your gains might qualify for the 0% rate. That’s because capital gains from the sale of stock or mutual funds, and again, real estate as well, are added to your income. That additional income might push you into a higher tax bracket.
Suppose for example, that you’re a married couple that the income cut off for the 15% tax bracket in 2008 is say, $65,000; and that all your income comes from capital gains. If your 2008 taxable income is $55,000, none of your gains would be taxed, says John Roth, a tax analyst for CCH. But, if you sell enough investments to generate $70,000 in long-term gains, $5,000 of those gains would be taxed at 15%.
So that means anything below that would be taxed at the lower rate. That should help some of you to look back on what happened in 2008 and then do some tax planning for 2009. This is going to become a critical piece of how we establish our tax strategies, because here’s an opportunity to take advantage of moving and selling some properties right now, and having absolutely no taxable event as a result of it.
But again, you have to look at your situation. Those of you who work with our CPA wiz and our tax wiz, already know what you’re situation is and whether you’d be able to take advantage of that or not.
Another thing that you want to be aware of is our tax wiz is also offering an opportunity now for $39.00; they will do an analysis of a questionnaire that you fill out. What this does is actually open the door to a data base that is linked to the IRS, and it takes your entire questionnaire and filters it through all the possible tax benefits, tax gains, tax write-offs, that you could possibly do.
It actually does that match in an instant and then you can actually look at your overall tax picture and see if you’re taking advantage of some of the things that are actually available to you. So that’s a great filter if you want to know more about that, call the office: 1-800-578-8580, that’s 1-800-578-8580. What happens is a report and this report actually not only says here’s all the possible deductions you could take, but actually sites the IRS code that it relates to so that you know it’s not just made up stuff.
This really pulls in a lot of things that we teach you at MAS about establishing yourself long term for the best taxation and the best tax rates.
Now, onto our questions…
Q: We’ve got Rodney and Tanya Hatton, welcome, they are Platinum Masterminds and they have a question for us. I always enjoy it when platinum masterminds submit questions for the Group Q and A as well.
“Good morning Lou, I wanted to ask if there is anything in the subject to paperwork that states that the insurance refund from the seller is ours when the house is bought. We closed on a house where the seller is an attorney and she canceled the insurance on her own and got an $825.00, when we agreed at the attorneys office that the money was to pay for our new insurance policy. I’m not sure how far I should push this as she works in the states attorney’s office. If I knew in advance that she worked in the states attorney’s office, I probably would not have closed the deal.
The closing attorney had her sign a statement ‘at the time my loan is paid off, please apply any escrow balance to the loan balance’, this does not state that we get the insurance refund, even though the insurance policy was just paid out of the escrow money. We also had her sign the trustee authorization form.”
A: Well, Rodney and Tanya, good news, we have in the contract itself, now remember this is if you did use the street smart contract called The Standard Real Estate Purchase and Sale Agreement. It’s BSH 1301, in paragraph 4, the title is Proration’s and it says here that “seller will assign to buyer at no cost to buyer sellers escrow account and property hazard insurance policy, and/or any refunds which may issue in lieu of proration of all taxes, association fees, monthly hazard insurance premiums, and monthly mortgage insurance premiums as of the date of closing.”
You see, you already had this covered in your contract, now the other thing that covers this is paragraph 15, that says Survival of Agreement. “This agreement shall survive the closing execution and delivery of the warranty deed as agreed here in by the undersigned. Buyer intends to buy, sell, rent or trade, for a profit.”
So, number 1, you have this covered in your original purchase and sale agreement, but then, number 2, even after closing that paragraph survives closing. Number 3, as you said, you had them sign the Trustees Authorization Form, which says that “the trustee holds title to the property herein described below, I hereby authorize the above named trustee or such other trustee that shall succeed, said trustee, signatory authorization on my behalf to endorse and deposit for the benefit of the trust any hazard insurance premium refunds, insurance claim checks, mortgage insurance premium refunds and/or any refunds associated with the escrow account maintained with the mortgage holder on the below described property.”
It goes on to say: “I also authorize the trustee of the above named trust signatory authorization to modify any existing hazard insurance policy or to cancel the existing hazard insurance policy on the property once replacement coverage has been secured.”
So you see, we’ve got it covered in several ways. Number 1, you have the right to the money. Number 2, you even have the right to cash the check if it’s made out to the sellers name; and of course, you had your seller, grantor, sign that trustees authorization form, which is form LT 2142, on page 158, of the volume 4 Land Trusts, and you also had her sign the contract that starts on page 104, of your volume 1, Buying System.
So there you go, Rodney and Tanya, good news, you’re taken care of. Now strategically, you’re other question is should you shake this tree? Should you bring any attention to this? That’s a great question, and it’s really an $825.00 question, because that’s what you stand to gain if you were to receive it.
I think I would handle it this way – I would likely have the closing attorney type up a little short letter saying that there was an error at closing and that pursuant to the contract, paragraph 4 and paragraph 15, that there was actually money that was due to the purchasers, and it has since been sent to you, Mrs. Jones, the seller and this money is actually due to the purchasers. Please forward this to my office for distribution according to the terms of the closing agreement, thank you very much.
So just something short, simple and shouldn’t raise too much issue. I think even if she were to take it to other attorneys in the state attorney’s office, they would say, “well, did you sign a contract?” and she would say “yes”, and “is that what the contract says?” and she would say “yes”, and “did you understand what you were signing?” and she would say, “yes.”
She certainly can’t use the argument that she didn’t have the opportunity to take it to some kind of attorney’s for review prior to closing. She certainly had that opportunity, and either did or didn’t take advantage of it, either way; she took advantage of a situation where she had agreed to give that money to you and later took it.
So you have to decide if it’s worth it to you but definitely stand on very solid grounds if you choose to go ahead and pursue it. Good luck on that one, Rodney and Tanya.
Q: Now we have Purchasing Property Questions from John Jermaine who says: “If I have a target zip code where can I get a good mail address for homeowners to mail my ‘we buy houses’ postcard?”
A: Great question John, there’s several different sources of information: one is Melissadata.com, and you can provide your parameters such as zip code, but you could even go farther than that.
You could put in parameters of values of home, types of homes, types of homeowners, all kinds of different things to ring out the addresses of the ones that you really want to go after, or what we call your target market. There’s another company called infousa.com, that you can get lists from; but I’m going to say to you that deepening on the size of your business and the size of your budget, you may want to consider something else.
We’ve put together something called MailWiz and MailWiz actually obtains the list for you, does the mailing for you under a schedule pre-described that you set up on their website. You actually know what date the mailing is going to be done, when the campaign is going to go out and they’re using very directed copy on the postcard that gets sellers attention.
So you may want to look at using MailWiz, and again, you can call the office 1-800-578-8580 for more information on that. One thing that they will do right now, they have a special going on two campaigns, and so when you’re looking at this zip code, John, another thing you want to look at is what am I saying to these people?
Now, you can choose to send a generic postcard to the entire zip code, but it may be wiser to actually target market, and that means find all the folks that are out of town owners and send it to them. Find all the folks that are free and clear owners of property and send a different message to them. Find all the folks that are 60-90 days behind in their mortgages and send a different message to them.
Find all the folks that live in apartments or rental units and send a different message to them. If you’re seeing what I’m really sharing with you, John, is that what I want you to do is target market. It’s good that you’ve narrowed your area down to a particular zip code but now let’s narrow it further. Why send out 15,000 postcards, when really you ought to be sending out 500. But, when you get that list of those 500, you send it out this month and then next month and next month after that.
You keep touching these people and after a while, they get softened up and they start paying attention that hey, not only have you talked to them before by postcard, but you talked to them again, and you talked to them again, and again. That says to people that you’re real, that your legitimate, you’re not a flash in the pan, you’re a legitimate businessperson that offers these services.
For a lot of people, now they have the opportunity to get that property sold, instead of just listing it for sale, they can actually get it sold, that’s pretty exciting to a lot of people. Also, you have the opportunity to narrow your market down to the price ranges of homes that you really should be going after.
So the deal on this is pretty incredible and again, calls the office to get more details on it, but they’re doing two campaigns at a very, very special price right now, and I think you’ll be very excited about it. Again, they do all the work for you, they obtain the lists, they mail the postcard, they do everything for a fixed price per postcard, not per campaign, but per postcard so that really makes it very cost effective for you to have somebody else handling it.
Because the truth, John, is I want you to spend your time analyzing leads, not licking stamps, not typing postcards, not printing out labels and sticking it on cards.
Q: Now Adam Passer Play has a question: “please go through the entire process from when you do the over the telephone seller questionnaire interview, to due diligence, to arriving at the house, and what you say when you arrive, to what you do next, i.e. inspect the homes, seller presentation and credibility kit, cost to sale worksheet, our cost to sell worksheet, etc., common negotiation tactics, what you say when it’s time to write up the order, where you contracts are during the presentation before you pull them out, common contract concerns, and handlers, what to do if the home seller says they want to show it to their attorney, that clause I’ve heard you use for the attorney, to what to do about notarizations, to getting the home seller to escrow, to closing, all the way through to the close.”
A: Well Adam, that’s about a 4-day boot camp. I’m very happy to train you on that, in fact, we have one coming up April 23-26 called Millionaire Deal Maker and we go into great depth on each one of these. I can understand what you’re really looking for, Adam, and I appreciate it, but it is a long answer.
Let me see if I can kind of narrow it down to something that can help you and can help everyone else. See the real gain; the real gain is to get the lead in the first place. If you will get the lead and follow that seller questionnaire, using it as a guideline, in fact, as a script, it really has you fair it out all the information you need to get from the seller.
So the first concept is to touch the seller, have them respond, what we really want them to do is go to your website and answer the questionnaire there, physically, so that you don’t even have to worry about that piece of it. And of course, those of you on the call, who don’t have the street smart websites, you definitely need to get the Street Smart investor websites because we have all of that done for you.
The whole design of the website, everything that we use in our own business, we actually allow you to use in your business with your own URL, or address on the web. That’s what a URL is. And what it does is, answer a whole lot of questions that a seller might have and really give them some guidance, then they fill out the questionnaire on line, press submit and the whole lead comes to you by e-mail then you have a chance to actually analyze the lead before you call the seller back.
So either way, whether they call you or whether they go to your website, the next step is going to be to analyze the information that you’ve gotten. “Thank you Mr. & Mrs. Jones for this information, I’ve filled out my questionnaire now, the folks I work with I need to do some research before I can really make you an offer so you’ve given me everything I need, including all the details about the existing loan, you’ve given me the details about the location, address and everything else; so I’m going to go to work now, get the details on what the comparable are in the neighborhood and the other information, then I’ll get back to you and we can set a time to make an offer. How does that sound to you?”
Boom – and then you give them the opportunity to understand that you have to do some research before you can do anything. Your next step is to go to your street smart investor websites and click on your comp wiz, and that’s comparable wizard, and what the comp wiz does is really give you a great report on the data that the courthouse has, as well as all the comparable sales in the area.
It really makes it quite simple and easy for you to be able to determine what the value is, but I don’t want you to stop there. I also want you to go to zillo.com, I want you to go to another source that we have, we call it prop wiz and I want you to get 2-3 comparable data research, because I don’t want you to just rely on one piece of information or one source of information for comparable, I want you to look at several different things and what we find that’s so amazing is each service tends to pull up things that the other service did not have at all.
Sales that the other service didn’t have, it’s pretty amazing that this stuff overlaps as infrequently as it does. So that gives you a chance then to really determine value, and see if it’s a good neighborhood. Well, if you follow the logic that I was talking to John about earlier, you’ve already determined the neighborhoods and you’ve determined the zip code so now you know that the schools are good, that this is going to have good resale opportunity, good future appreciation opportunity, that kind of thing is very valuable to you.
Now the next thing you want to do is in determining your due diligence, when you talked to the seller, one of the questions was what is your situation? That is designed as an open ended question to gauge and determine motivation. So if I have a fairly highly motivated person, we’re going to go ahead and schedule a meeting, whether they come to our office or we go to their house, we’re going to schedule a meeting with them.
What I want to do at that meeting is first review all of their paperwork. If it is a possible subject to deal, then what I tell them is in advance I need them to get together all of their house paperwork, that means their mortgage, all the details, and I can then have a chance to review what the things they told me over the phone are actual fact and I can go ahead and determine that yes, the house does have a mortgage of x amount on it, yes here’s the statement right here that says, here’s what the interest rate is, here’s what the payment per month is, all that detail.
Now, the next thing I’m going to do also when I arrive at their home is to go through the presentation kit. “Mr. & Mrs. Jones, I want to just give you an opportunity to get to know us a little better. First of all, while we were on the phone I invited you to when you get a chance to go to our website and check us out, did you have a chance to do that?
Oh, you did, fantastic, well let me just remind you of a few things that we do, first of all”…and then I just go right through the seller presentation kit, pretty much outlining the things that it has in it because I want them to get reconnected to us, the fact that we’re professionals, the fact that we know what we’re doing and the fact that we can help them out.
You see, people forget what they’ve read and seen, even if it was just a few minutes ago, so I like to remind them what they’ve seen while I’m talking to them about us helping them out. If they are the type of personality that is a different personality, then I’m going to do something different. So on that call, when I was asking them the questions and listening to their what is your situation answer, another thing I was doing is determining their personality type, and volume 3 negotiations, helps guide you through the different personality types out there.
There are some folks that are total bottom line type people and they don’t need your sales pitch. They just need to know what you can do to solve their problem. So they’re not really the first primary customers to go through the presentation kit with. Why? Because they don’t care. It’s just not important to them, it wouldn’t matter what you said, they just are bottom line, here, I’m ready to give you the keys to the house, if you’re ready to take it.
So I do some credibility with the credibility kit, but not as much. In fact, what I might do with that personality type is leave them with the credibility kit while I go inspect the home. So I bring a clipboard with me and it has on there, the interior and the exterior inspection checklist, and that is in your volume 2 Selling and Holding System.
I put that on the clipboard and I just start touring the house, and that list of things pretty much reminds me of things to pay attention to when I’m looking at the house. If I need to make notes, I can flip over and make notes on the back of things that need to be repaired that are not just common stuff.
Then, when we get back together, after I’ve had a chance to look at the property, and no I don’t need them to guide me through the property, I can see it myself, I like to keep them busy looking at the presentation kit and that kind of thing. Then I come back to them and I say “well, good news Mr. & Mrs. Jones, I can make you an offer today on your home, here’s what I need to take into consideration.
First of all, the condition of the property, and then all of our costs of selling the property; when we go to sell the property. Just as you will have cost if you list and sell the property the traditional way, we are going to have costs when we go to sell the house the traditional way.
So before we can make an offer, we have to take into account what those costs are going to be. Could you give me a hand here?” Then we hand them the Cost to Sell worksheet and ask them what each item on the Cost to Sell worksheet is, and ask them to insert the numbers. We have the calculator, they insert the numbers. Then I explain, as I go through the Cost to Sell worksheet what each one of those things means and why I have to pay close attention to that cost.
Then we finally total it up, and deduct it from what they owe on the mortgage, and that becomes the beginning point in the negotiation. Now, let’s say that they’re cooperating with us and that the numbers that we’ve come to on the Cost to Sell work for them, then I get out my Standard Real Estate Purchase and Sale Agreement, that we talked about earlier.
Now, if you’re a graduate of Millionaire Deal Maker, we also give you software that allows you to pre print your offers before you even go to go see the seller. Now you can do that with your individual software, your individual form software and, by the way, all of your forms are available on the backside of your investor websites as well.
So you can pull those up at any time and actually see and fill out the form and then press print. So whether it’s the software on your computer or whether it’s on your investor websites, you can pull that off. Now the third thing, though, that’s so valuable is when you graduate as a certified deals specialist from Millionaire Deal Maker, then we allow you to actually have special auto fill software, and you merely put in your information and it will print out 4 different offers. This makes it really simple and easy before you go visit with the seller.
You can put those in your kit and when you visit with them, even have them ready so that the first one you come to is the first one you want to offer, don’t even let them see that you’ve got 3 or 4 other offers. Then pull this one out, put it on the table and say “well, I thought you would agree so I went ahead and put together the paperwork before I came. On the front here, here’s all the details of what we just talked about, here’s the earnest money that I’m going to give you tonight, here is…and of course that’s the $10.00, that I’ve explained to you at millionaire jump-start, how that works; but then we go into whether you’re taking it subject 2, whether they’re carrying back financing, all of that’s outlined on that first page of the contract in that area where all the money is spelled out.
If they agree to that, then they’ve pretty much agreed to the contract. So that’s where I spend time going over the numbers to make sure that “Mr. & Mrs. Jones, I wanted to make sure that we’re on the same page together so here, this is the earnest money that I’m going to give you tonight and then here is the financing that you’re providing to us that we’re going to make payments to you on and then here is your existing loan that we’re going to take over the payments on and then here’s the balance that’s due you at closing; and as you can see, it’s all added up as we agreed to when we went through the Cost to Sell, so everything is ready to go. Does that work for you Mr. & Mrs. Jones?” Good.
“I’ve already okayed the agreement and what I want you to do is go ahead and okay it as well and we can send this off to the title company tomorrow to go ahead and pull title and we can get this ball rolling; and get you closed out very quickly, does that work for you?” Good, boom. You get their initials on each page, you get them to sign the final page and now you understand our process, Adam, and I hope that really helped you in kind of guiding you through.
There’s a lot to the story and there’s a lot more I could say, but what I would really encourage you to do is get yourself registered for Millionaire Deal Maker, because that is where we hone and really work on your skills; and get you totally up to speed and comfortable with this process, cause we do it over and over and over again at the event where you actually split up in teams and go over live deals that people bring to class.
Real leads, that real people are really working, we actually create an offer for right in class. Then we make those offers while you’re there so we can see the kind of money that’s actually being made while we’re together.
Q: You go on to ask “who is your higher authority when negotiating, and what vocabulary do you use with home sellers so they’re convinced you have a higher authority. Because you really do, if you don’t have a higher authority who would you use and what would you say if you did have one?”
A: Well, first of all Adam, you do always have a higher authority and it’s usually your lender. So what I say when I’m working with folks is “the group that I work with has empowered me to make the offer, or the group that I work with, I’m the one that goes out and inspects the properties and makes the offers and sets up the closing and that kind of thing, so I’m the one that does a piece of the story.” That’s usually…and the best way really, you can present yourself so that you have a chance if they push back with you, then say “Mr. & Mrs. Jones, this is what I’m empowered to do, but I can go back to the group and see what they might be willing to do in addition to what I’ve already offered you; understand that what I’ve offered you today, it’ll never be less than this, it will never be less than this, but maybe there’s something else that they see that I don’t see, that would allow us to offer you more, would that work for you?” Boom, and there’s how you handle higher authority.
Q: Now Terry More Miller says “In December when I came to MJS you mentioned that you bought 16 properties without your going on location, I’m thinking about purchasing properties in depressed areas so I can benefit from the rebound in later years, can you let me know what resources you use to tell market trend, get heat maps, do evaluations and so on, and so on, thanks and God bless.”
A: Well Terry Moore, I really appreciate your saying that because you’re right, we do look at a number of things when we’re evaluating an area. One is our prop wiz, where we actually not only evaluate what the county says about the property, one thing on the data streaming source that our prop wiz is _____(38.18) in the neighborhood, it also shows us trending, whether that neighborhood is trending up in price or trending down in price, which is very important.
It shows us in comparison with other neighborhoods around it, so then I can see what’s happening in those neighborhoods as well. I can always see other foreclosures that are happening right now in that neighborhood. So that when I go look at the property, I can actually knock on their doors while I’m there and talk to other folks that are in foreclosure when I’m evaluating these, now the 16 properties, REO properties, so they were not in foreclosure they had already been foreclosed on and owned by the bank.
In most cases, banks list with realtors, so what you want to do is be sure you’ve got yourself listed with the REO realtors because these guys, honestly, really work in a very closed circuit and what they’ll do is as soon as they get a listing in, if you’re one of their power players, you get to see that listing before it ever hits the MLS. You get to see it, usually, 24 hours or more before it hits the MLS if it ever hits the MLS, that’s the other part of it.
So you want to try to definitely get yourself established if you’re interested in all cash deals, which is what REO’s are. They don’t typically finance these in your own, good luck to you. So when our realtors find those kinds of deals, then they send us the addresses and say, usually, they’ve already seen the property and tell us all the bad stuff that’s wrong with it, then we do our own in house evaluation of the values.
We look at all the different data sources I mentioned before as well as determining what’s going on in the neighborhood, and then if you think there’s too many foreclosures going on or if this is a declining neighborhood, then we don’t want to have anything to do with it, and we simply don’t make offers on those properties.
Or if the agent says no, we want an offer on this, even if it’s terribly low, then we’ll make a terribly low offer and see what happens because quite honestly, at some point, most houses can be bought, you notice I didn’t say all, but at some price I’ll buy just about any house.
Q: Now Beverly Rues says “hey, I had a question on how we work with leads on the MLS if they have expired.” I’m not sure I understand, Beverly, I think you’re saying here that if the property was listed on the MLS and now it’s expired, what do you do with those leads?
A: It’s good news that most of that data is available on the MLS system. If you are a realtor, you can pull that up, if not, your friendly real estate agent can pull that up and give you all the expired listings. Now good news, you can pull that data up and mail to them, and I mentioned our mail wiz earlier, they’ve actually got one of the campaigns all set up for expired listings, you just have to submit the list to them and they will mail it for you.
In the case of the other ones I was talking about the other campaigns, I was talking about, then they actually obtain the list and do the mailing for you, but in the case of the MLS, expired listings, you’re going to have to pull that up and they will do the mailing for you.
Now to further answer your question, what I’m saying is that you really want to have the right message to that market. You want to say to them you’ve tried and tried to get your home sold, you hadn’t been able to get it sold, we may be able to help. We buy houses every day in your neighborhood, we can take the house in any condition and we can close quickly.
If that’s of interest to you, give us a call, boom, and here’s your telephone number and also your web address, or fill out our questionnaire on the web at…and there’s where you put our street smart website address and actually get them to go there and fill out the questionnaire for you. Hopefully that was helpful for you, Beverly.
Q: Now Suesay Grennace, another of our platinum masterminds says “Dear Lou, I am loving the new form ‘dear mortgage servicer’ in my mastermind apprentice for loan mides.” Let me first explain to everyone what she’s talking about. When you become a mastermind, we post things and test things through the mastermind before it becomes how things are done in the general population.
A: So what Susay is referring to, is that we have created some paperwork to approach lenders for loan modifications, and she’s saying that she’s had some experience with this one and she say’s “I wish to call attention to section 1403 recently after 22 tries, I finally got to the A to R and faxed into Wamu, what’s left of it that is, to a call center in Costa Rica, last person to leave the office turn off the fax.
So I called to ask if they got it on Monday, Si, I mean yes so I was told then they needed to fax me back a payoff they told me your client is seven months behind. Friday now, and no payoff info nada. “Yeah baby, I want everything in writing too so we know where to saw the bone.” I asked several times to be sent to someone in the US, plus I think no comprende the 501c3 in Espanola.”
Your comments please, this one should be interesting. It’s an arm for $207,000, almost 10% interest, the house is worth $120,000 and short sale for $104,000, Paul was 23 when he bought the house that was 8 months earlier for $98,000. Are loan mods that different from short sales in the beginning? Why are they not fulfilling the A to R? Third parties need the info.
So, to answer your question, Susay, you’re right, loan modifications are similar to short sales in that you do have to obtain about the same information, you do have to ask for a hardship reduction in the payment and perhaps even a reduction in what’s owed on the property. Then also the interest rate, the terms, all those things can be changed on the loan modification into a loan that you like.
Well, I can tell you now if they owe $207,000 it’s very unlikely that they’re going to allow it to be modified down to $104,000, however, it may be worth a try. What a lot of these lenders such as Wamu are doing, is they are packaging up defaulted loans and selling them off to companies like Litton and Aquan and others who are actually taking the bad paper, and then working with the borrower to make it good paper.
Some companies are very proficient and easy to work with on loan modifications and others are just ill-equipped to do so; and we will see what the new administration brings with this new stimulus package but the interesting thing is they may actually, much more strongly support loan modifications than they have been so far.
So I would say this is a hit and miss business. Each lender is different, each lender’s situation is different, and I encourage you to just merely try to do the best you can with what you’ve got to work with and get to someone who is a decision maker and just keep talking.
Keep asking, “who is your supervisor and what is their telephone number?” and “who is your supervisor and what is their telephone number?” And “who is your supervisor and what is their telephone number?” If you can possibly move up the food chain, often you can get to somebody who is a decision maker and will not run you around like you have gotten the run around so far.
Q: Now Susay also goes on to say “another questions regarding load mods, this house was built in 2005, 1554 square feet, bought for $196,000 cash in February 2007. This couple in Arizona, 50 plus sister, and 50 year old J.T. in Texas, 70 year old mom lives here, son and wife had bad credit, take out $80,000 loan, then due to mom’s medical problems and teenagers problems, cost of gas and distance, etc. they have fallen behind.
Mom lives in this house, 1 mile from Needles, California. No zone, not a go zone. Days on market about 10 months, a fraction next to 0. House is new, it’s pretty, except the weeds next door taller than my van ragweed on steroids, you know. I didn’t know they grow so big, now they’re 90 days late; yesterday someone called the family and told them they are going to foreclose.
Let’s say that there’s 100 houses out there, a third are for sale, many foreclosures in that little subdivision, for work people generally have to drive 40 miles round trip per day to work at a casino and so for low wages. Tax access or market value is $175,000 but my realtor friend gave me many comps over there, of houses in the $80,000 range. This one, the newest, the largest, and line of credit of $80,000 at 10%, I am trying to figure out how much the lender would get out of foreclosures so I can fill out the form, I’m thinking if they did foreclose, because of holding costs, maybe $57,000? Help, your opinion is much needed and appreciated, yes, and this family is not living in the house because of mom living or still living in diabetes, 2 kinds of cancer, smokes like a chimney, they are renting from friends 20 miles closer to work, can this interest rate be modified?
A: What other options? Bankruptcy can be an option to pursue this servicer, how do you find out who’s backing the loan? Okay, thanks very much Lou.” Okay, Susay, you’ve got a situation that is very workable. The fact that the house is vacant is not good and the lender may already know that. So whenever you talk with the lender on this particular deal, be sure and say that you’re client wants to move back into the house if they can possibly work out a loan modification.
Then tell them about all the houses that are in foreclosure, and all the ones that are for sale and tell them exactly how bad it is, and the 40 miles round trip, and the low wages, and everything else. Then tell them that you would like to modify the existing loan down to $57,000 and a payment of whatever. Now you need to determine, Susay, what you can rent this for.
Because it’s very, very, very, very, very important that you can find a renter at the right rental rate to make yourself you know $300-400 month positive cash flow on this. So be very careful what you offer to the bank, for example, in my area a house like that in today’s market, I could easily rent it for $1000 a month. Now, I don’t want to really pay the bank more than $500 a month. So that’s pretty much where I’m going to start.
You have to look at it from your point of view, how much can you rent? If you can only rent that house for $500, then definitely you only want to pay the lender $200 a month. If they say absolutely, positively, not, we cannot work with the loan modification on this, and then you’re going to have to back up and do a short sale. Find someone who will fund this knowing all the negatives of that neighborhood.
Frankly, I’m not sure this is a deal that you should be pursuing, because there is so much competition in that neighborhood. Your potential buyer or your renter is going to drive through that neighborhood just like everyone else and they’re going to see all those house for sale, and they’re going to get depressed too. So I would far prefer that you’re finding deals in areas where there’s not a lot of houses for sale; and that you can get a buyer/renter in there quickly.
Schools, location all these things are factors that are important when you’re determining what neighborhoods to work in.
Q: All right, Joe Golden has a land trust question and he says “land trust asset description, what goes after described as?”
A: Well Joe, that would be single family home, apartment building, commercial property, you would just merely describe what the asset is that’s going into the land trust.
Q: If we were talking about a personal property trust, then you would be talking about bank account or 1995 BMW 535i vehicle identification number, so and so.
A: So, you just put the information in there that relates to that. Is proof needed on trustee compensation to make it more bullet proof? Well, you can Joe; it really depends where you fit on the paranoia scale. Obviously if you owe someone $100 and they owe you $100 you don’t have to really write checks to each other. You can just kind of let it go. But if you want to make darn sure that you can show compensation for the trustee, then absolutely, go ahead and write a check to them and they can cash it; or they can sign it back over to you.
Q: Number 3, if the beneficial interest in a land trust is transferred by what means and who informs the mortgage company of the change for interest reporting purposes? Well Joe, I would advise you go to your volume 4 Land Trust and go to page 148, that’s all the details about buying a property, subject to the existing financing.
A: The beneficial interest information is covered in your land trust guidebook because what’s gonna happen is that they’re going to do an assignment and quit claim of beneficial interest in the trust that is outlined right there. Who informs the mortgage company of the change for interest reporting purposes? Well first, we want to make sure that the mortgage company is actually playing ball, so you first want to do a change of address form.
Then after they change the address and you begin receiving information at the new address that would be the time to tackle changing the interest reporting or the borrower’s identification number. First, I just want to make sure that the lenders accepting payments and cashing the checks, so I wouldn’t really attempt that process till after 6 months of having control over the property, control over the asset. Having put someone in it and making the payments and having the bank cash the checks. This is another thing that we check every month to make sure that the mortgage checks are actually being cashed.
Q: Now we have a trust question from Garamo Zueluega, who says “Lou, I have 3 questions about EIN and the trusts.” Well, I’m always happy to hear from one of our coaching students, Garamo and glad that you’re part of our coaching program as well.
One, I understand you recommend only to have one EIN for all your trusts unless I heard wrong, how is this possible when I create my first EIN I had to put the name of that trust so wouldn’t it conflict with the rest of the trust if I used the same number?
Q: Well Garamo, no, not really, because the IRS is more concerned not with the name on the trust, what they’re concerned about is the reporting under that number.
A: So we merely use a name of a trust, it doesn’t even have to be the trust, just a trust, to obtain the number in the first place. Then we use that number multiple times to have reporting for tax purposes. So that gives you the opportunity then to do that very thing and obtain the number than have all of it reported under that one ID number.
Now, you can go ahead and get a separate ID number for each trust, it’s just as I’m explaining to you, unnecessary because you’re going to attach a schedule to your form that’s actually going to have all that in there. Two, when I use the auto fill disc and fill out the info sheet for personal property trust, it asks me for the EIN, I do not see the EIN in any of the documents I print out, what is it for? And should I use the same EIN I used for the land trust, this PPT is the beneficiary.
Well, just don’t put anything in that EIN because you’re absolutely right, if the personal property trust is the beneficiary of the land trust, you’re not going to use that number for anything. You would only use an EIN for a personal property trust when that personal property trust is going to open a bank account. You will need an EIN number in order to open a bank account.
For all of you listening, if you don’t know what an EIN is, is the employer identification number, also known as TIN or taxpayer identification number.
Q: Three, when I apply for the EIN online, or by mail, it asks me for the grantor’s name and social security number. What should I put there? My name or the name of the seller of the property I am buying under the trust? And if it is my name, and the beneficiary of my trust, as the LLC, then should I put the LLC info.
A: The answer is yes, you should use the LLC’s info, its number in order to obtain the trust ID number if the LLC is the beneficiary of the trust.
If instead you are going to be the beneficiary of the trust, then it would be you, using your number to obtain the ID number. So another way of saying that is whoever is the beneficiary of the trust is who should obtain the ID number for the trust that’s going to be used for tax reporting purposes.
You go on to say, “as always thanks a lot for your support, I don’t know what I would do without it, by the way, I’m buying 2 possible 3 houses this month, isn’t it great!” Garamo I am so proud of you, you are just doing fantastic. When I heard from you earlier this month that was your first house of the month, then now look at you, you’re already doing possibly 3 houses this month already. That is really such a motivator for everyone on the call; I’m so excited that you shared that with us.
By the way, everyone, be sure and share your successes too, how are things going? Are you buying? What are you buying? Tell us about the deals that you’re working on, deals that you’ve bought, how quickly did you fill it, how much did they pay, how much did they pay down, how much did they pay per month, that’s so motivating to everyone else whose listening to this information.
Q: Ryan Gillespie, another coaching student, “Hi Lou, thanks again for these coaching calls, my question is regarding trustees. On Wikipedia, it says that a trustee carries the fiduciary responsibility and liability to use the trust assets according to the provisions of the trust instrument and often regardless of their own or the beneficiary’s wishes. The trustee may find himself liable to claimants, perspective beneficiaries or third parties.
In the event that a trustee incurs a liability for example in litigation or for taxes, or under the terms of a lease, in excess of the trust property they hold, they may find themselves personally liable for the excess. This seems to indicate that a lawsuit against my trustee can end up going after the property in our trust. In addition, it appears that a trustee can be held liable for something in a trust that they don’t own, am I misunderstanding this, can you explain what Wikipedia’s statement means if so.”
A: Well first of all Ryan, let’s understand Wikipedia, those are postings from various people and their opinions about how things work. Let me tell you about the law. The law says that a trustee has no personal liability provided that they follow the terms of the trust agreement. Now, let’s look at the trust agreement, Ryan, it actually says that the trustee must take direction from the holder of the beneficial shares of the trust.
In my trust, the beneficiary is who holds the shares and the power of direction over the trustee, unless it has been given to a director in that case, the director holds the power of direction over the trustee. If the trustee does what they are supposed to do, and does what they are told to do, they don’t have personal liability. It’s only when they go outside of that that they have risks. So you say, well shouldn’t the trustee be represented by an attorney? Well, yes they should be and in fact, the trust, my trust actually provides for that and says that the trustee has a first lien position for any money that it expends on behalf of the trust and that it does not have to pursue any lawsuit or any other steps if they are not provided the funds to do so by the holds of the beneficial _____(62.06).
So, therefore, the trustee is not required to defend any lawsuit, and in fact, the trust, if it does not defend the lawsuit can end up with what’s called a default judgment and yes, it can end up with a lean against the property and later even liquidation of that lean of the property to pay off that lean. So hopefully, that clears it up for you that really the trustee should not have any liability and in fact, has a real coverage on the deal.
We’ve gotten through a lot of questions and honestly, there’s more as well. So I will forward these questions to the next Group Q and A and I thank you for your participation, we’ve had such good participation over the last weeks and we encourage you all to always submit questions and I will try to get it to them on our hour long that we have together and I just encourage you to really get excited about your real estate business.
I encourage you to really pay attention to the times that we’re in, I encourage you to really set yourself up for success because you’re going to look back on these times with nostalgia and say “those were the days my friend, we thought they’d never end.” We’d sing and dance forever in a day.
That was the life, we choose, we fight and never loose, for we were young and sure to lose our way. No I’m just kidding with you, but really, pay attention to this because I’m telling you, I’ve been through down markets before and this is really a chance for you to make some enormous equities in a short period of time.
If you let this pass by, you’ll just be in a regular market which we make money in too, but this is like your extra ordinary profits and I encourage you to take advantage of those. You can see the value of this coaching, it’s very important; the folks that have been with us that have grown their business dramatically in a very short period of time have done so because of coaching. What I’ve provided to you right here is merely an example of what we provide.