Question:

Let’s jump on in with Carol and Joan Bowser who have a question:  Dear Lou, we are so excited about the real estate business.  We wanted to learn all we can to help others.  Our questions are:  How important are short sales in negotiating with the seller?  It seems like a lot of additional paperwork and new negotiating skills with bankers.

Answer:

Well Carol and Joan, you’re absolutely right.  Short sales are a whole other aspect to this business, and as I teach, short sales are just an aspect of what we do.  They are not all that we do however I do recommend that you get proficient at the short sale process.

Now, everyone on the call pay attention to me.  What I believe is the best way to really operate our businesses is we take the leads as they come.  Some leads will lead us to the solution that is the only solution is doing a short sale.  Other leads will lead us that the only way to do that lead is to work it through to the foreclosure steps.  Other leads will guide us that the only way to buy that property is after the foreclosure sale.  Other leads will guide us that the best way to buy it is subject to the existing financing on the property.  Other leads will guide us that the existing loan on the property is great and what we should do is do a work out with the lender.

So, what we first need is all the details inside the box and then from there, and that’s the box on the seller questionnaire.  Once we get all the details in the box, then we can decide which way that lead is guiding us, and how we should do it.  So, Carol and Joan, absolutely you need to know about short sales because that’s an aspect of what we do.  If you don’t already have it, I recommend that you get my short sale profits kit because the way that we work the short sales is to approach the bank to ask them for a discount but we don’t approach them using their package.  We use our package.  We show the bank why it makes sense for them to do business with us.  Then, we actually coordinate a conditioned response from the bank by showing them all the details that they’re faced with.  The condition of the property, the ______ 3.11 is in, the comps on the property and all the details.

We just had one today where Countrywide came back to us.  Now, this is an extremely nice house in a very nice neighborhood.  Countrywide came back and they said well, our appraisal came in at $386,000. Right off the bat they dropped it to $346,000, so they took a $40,000 drop right off the bat.  Now, that’s after they had already sent someone to do a full appraisal, and I’m not talking about just a BPO or broker’s price opinion.  They actually hired an appraiser.  My staff person met the appraiser out there and actually went through the property.  One thing they found is an almost finished basement.  This is over 2200 square feet of almost finished basement with drywall already there, the moldings are already in, it’s ready for a kitchen; it’s plumbed out ready for a kitchen, ready for a bathroom.  This thing is ready to go.  When you meet with the appraiser, you have to have a certain idea in mind.  You want to show them the comps that you’re working from.  You want to show them the reason not to show the fully finished basement.  You’re going to have to use your negotiation skills because the bank is going to take that appraisal as absolute gospel.  The BPO and the appraisal is a very critical piece in negotiating with the banks.  So, when you said you need a whole new skill set of negotiating with the banks, you’re absolutely right.  You’ve got to have the bank see that it’s in their best interest to accept this offer and to accept this discount.

A few ideas on negotiating with banks:  First of all, we do not negotiate with the banks as an investor.  We negotiate with the banks as a financial advisor, working with the Jones’ to solve their problem, and, if we’re able to help them solve their problem, they won’t have to file bankruptcy.  Can you work with us here?  We found a buyer for the property; unfortunately, they cannot pay what you’re owed on this property.  Can you work with us to give us a discount on this property to get it closer to what the buyers are offering on the property?  So, you see, you’ve got a third party position here.  You really don’t have to be all that sharp with negotiating with the bank if you’re representing a third party.  All you’re trying to do is solve your client’s problem.  Who is your client?  Your client is the person who’s in default.  Your client is the client of the bank as well, but you’ve also found a buyer for the property and now you want to show the bank the exact reason why they should want to do business with you, and they’re actually going to see that with your short sale profits kit that you send into the bank.

Hopefully, that made sense Joan and Carol.  Now, you had another question but I’m going to refer that on to another question we received from another licensee, and I’m going to combine those questions.

Question:

Okay, Fred Kevilowitz, I’m sorry if I butchered your name Fred, says:  Lou, what do you do when the bank refuses to accept a short sale and the house is not worth the money owed on it?  Now, everybody, did you hear that?  What do you do when the bank refuses to accept a short sale and the house is not worth the money owed on it?

Answer:

Well, first Fred, you do exactly what I mentioned to Joan and Carol a few moments ago.  One of the things that you want to do is approach the bank as a financial advisor, and you want to show the bank exactly why they want to give the discount.  Maybe you hit them over the head with the offer, they refuse to accept the short sale and that was the end of the story.

We just got one accepted the other day that I’ve been negotiating with the bank for over three months on.  There was a second mortgage on the property; the bank was owed over $21,000.  We worked and worked and worked and worked, they kept coming back with $21,000, then they dropped it to $11,000, then they dropped it to $6000 and that still wasn’t good enough for me.  Finally, I got the bank to come back with a $2500.  Now, you understand what they just did.  They went from over $21,000 to $2500.  I can make that number work, but I only wanted to pay the bank $1000.  So, I went back to the sellers and I said can you help me out here?  The bank cannot make the numbers work; they’ll only accept $2500.  Can you pay us $200 per month until this differential is made up say for about a year? And, they agreed to that.

So, Fred, there’re lots of different alternatives to make your numbers work.  Let’s look at it from a lot of different aspects, and you definitely need some additional training.  If you haven’t been to Millionaire Jumpstart yet, you’ll get some of that training there and then you’ll get the more advanced training at the Millionaire Dealmaker, where we actually get deeper into the negotiating, deeper into what you say to the lender and how to negotiate it.  You break up into groups and you actually work as a group to work out the numbers.  This is where our advanced training comes in so handy and just like you went to college, or maybe you didn’t go to college, but lots of people get their advanced training at college from high school.  You’re going to have to get advanced training in how we do our deal structuring, but I’m kind of giving you some aspects here to look at.

Now, if the bank won’t accept the short sale after you’ve already approached them and after you’ve already hit all these different points and you’ve chiseled as much as you can, sometimes we have to allow the property to actually go to foreclosure.  When we do that, we call the foreclosing attorney up after the sale and we say what happened?  Were you able to get it sold at the steps? And, they say no. So, you knocked it off to the bank.  That means that you, that basically the foreclosing attorney said going once, going twice, sold to the bank, and the bank was the successful bidder at the foreclosure sale which typically offer exactly what they’re owed on the mortgage.  The foreclosing attorney says going, going, gone, it goes back to the bank and now the bank’s stuck with it.  It’s REO or real estate owned at this point.  I’m finding this out right after the sale.  So, what I’ll do is immediately submit an offer to the foreclosing attorney for them to forward on to their client, the bank.  When they do that now, there’s actually an offer on the table.  Typically, the foreclosing attorney has no problem sending that on to the bank, and now you’ve got an opportunity to open, or at least reopen, the door.

Understand that whoever came up with the amount for the foreclosure is not the same person you’ve been dealing with, typically, in the short sale department.  Loss mitigation and real estate owned are two different departments in the bank, and you’re going to have completely different people looking at that offer.

So, that’s a couple of ideas, Fred, and then we can take that from there once you’ve got the ball rolling.

Question:

All right, now Craig Berry, hi Craig, from Columbus, Ohio says presenting answers to deficiency judgment on debt forgiveness.  Lou, your previous call last week served helpful in acquiring five parcels of land at a nice profit to be recognized very soon.  Thank you!

Answer:

Lovely!  Okay, I’m glad to hear that Craig and I’m glad you were able to get the deficiency judgment and debt forgiveness thing taken care of.

Question:

I presented a deal this weekend and did not have a good answer when the client realized that they may have to receive a 1099 or face a deficiency judgment.  The initial short sale offer to the bank would have created exposure to the borrower close to $80,000.  I reviewed all options but the seller was still edgy after I explained most banks will either issue a 1099 or seek a deficiency judgment.  What to do.  What are some solutions to provide in this situation that we are all facing?

Answer:

Well Craig, here’s what I do.  I tell them there are a few options that you’re going to be faced with.  Number one, I may be able to get the bank to accept less than they’re owed for their mortgage.  If we do, I try to negotiate with the bank that they’re going to accept what’s called a satisfaction and release of the mortgage.  Now, what that means is the bank will just accept whatever the payoff is and that’s the end of the story.  In some cases though, the banks reserve the right to report to the IRS that you have received what’s called a debt relief, a relief of debt, and what that means is that that debt relief now can go to the IRS as income.  Ooh, that’s a bad thing isn’t it?  Not always.  Here’s why:  if the bank does send let’s say an $80,000 debt relief to the IRS that does not lead to the IRS charging that as income.  What can happen is when you file your tax return, if you know the bank has sent a 1099; you include an explanation of exactly what happened and the hardship that occurred.  The IRS in certain cases will forego that reporting and not count it as income.

Now, there’re some nuances to that and I can refer you on to some people that actually have gotten the IRS rulings and things like that.  The IRS will consider that, and they have some guidelines and I just don’t have them in front of me, but they have some guidelines that they look at.  In certain circumstances such as medical, such as hardships, things like that they do not count it as income for which the debtor or the tax payer would have to pay taxes on.  That’s really what we’re trying to avoid, is the 1099.

Now, the other question you ask about is deficiency judgment.  Deficiency judgments are a little bit different situations.  Deficiency judgments are where the bank can actually seek to be paid back on the shortage.  Let’s say that they accepted a discount on the sale of a property and they’re looking at that $80,000 and they’re saying well listen, I still want my $80,000. Well, there’re only rare circumstances where the bank actually goes for a deficiency judgment.  First of all, it’s subject to state laws.  Deficiency judgments in most states are hard to get.  If the bank is successful in getting the deficiency judgment, then they have to collect on it.  Well, in most cases, obviously, the person was already in a default situation, so, what does the bank really think they’re going to get if they get a deficiency judgment.  They’re going to spend a fortune in attorney’s fees to obtain the deficiency judgment in the first place, and then in the second place, they’re going to come after the client, their borrower, they’re going to come after them for that shortage.  If they come after them for that shortage, that’s a really big deal.  They’re going to spend a fortune on it and they can’t really show their superiors that they’re going to end up with any money.

I say all that to say that you’re really not going to have a lot to worry about, which leads us to Carol and Joan’s question.

Question:

How is the seller affected by the short sale as far as the deficiency amount?  Is he still responsible?  If so, it doesn’t seem like a win-win-win situation.  Can you help explain?  Should I leave this aspect of the business to short sale experts?

Answer:

Well, Carol and Joan, after I get done with you, you are going to be a short sale expert because I’ve told you a lot of things on tonight’s call on exactly how you can protect yourself and exactly how the deal works.  No, your seller is not going to have to worry about a deficiency judgment because like I said, it’s going to be rare, extremely rare circumstance that the bank’s going to come after that.

What we do is explain to the borrower listen, we’re going to attempt to get the bank to do a satisfaction and release.  If they won’t do a satisfaction and release, then, we’re going to let you know about that.  I can’t make you any guarantees that they are going to do a satisfaction and release, but we’re going to negotiate as hard as we possibly can that when the bank gives us our final payoff, they’re also going to include the satisfaction and release.  Does that work for you? Boom, boom, boom.  When I’m talking to the seller, I give them reasons why I’m going to do the best I can, but I can’t make any guarantees.  By the way, Carol and Joan, and Craig, we don’t really pursue a short sale situation without getting all the documents from the seller, and that means including the deed to the property.  I don’t want you guys working on tedious and time-consuming short sales if you don’t actually control the property.

Question:

Now we’ve got a question from Sandra Gibson.  Hi Lou, did you say that you would provide a web site link to valuable information about each state’s foreclosure laws?  Can you tell me how to get to that link?

Answer:

Yes, I can, Sandra.  I want you to go to louisbrown.com, that’s L-O-U-I-S-B-R-O-W-N.com.  There you will find a “members only” section and the “password” section I want you type in, excuse me, in the “user name” section I want you to type in “student.”  In the “password” section, I want you to type in the serial number to your Whole Enchilada Junior disc.  It’ll say WEJ, just leave out the hyphen and then put in your serial number and that will give you access to louisbrown.com “members only” section.  Now there, you’re going to find the landlord tenant laws for all 50 states.  You’re going to find the foreclosure laws for all 50 states.  You’re going to find a copy of a deed for all 50 states, copy of a mortgage for all 50 states and details about the foreclosure requirements for all 50 states.  So, everyone on the call, that’s a good thing to do, and you can go get the details about your particular state.

Question:

I have Sammy Rageb who says:  A homeowner went to foreclosure and went to court, and the court told him to leave the house by April 19.  Can we do anything for this owner?

Answer:

No, Sammy, it’s over.  He’s been foreclosed; the owner of the property now, which is probably the bank, has filed a dispossessory proceeding, which is an eviction proceeding and has told him that he’s got to leave.  So, he has been evicted.  About the only thing you could do for him is to help him find another house and maybe make yourself a commission in between.

Let’s say that your person who’s being evicted, sometimes they’re smart enough to save the payments that they haven’t been sending to the bank, so, they’ve actually got some down payment money.  I know this because sometimes we sell houses to these people on lease option and agreement for deed.  In fact, we’ve done that many, many times.  People that are being evicted from other properties become our customers because they’ve got some money to work with.  It was their money that they didn’t pay to their lender because they got upside down on their mortgage or something like that.

So, if he’s got some money, you could actually call the ads in the paper and you say listen, I’ve got someone here that has x dollars, will you give them an option to buy your property or will you give them a rental on your property? If it’s just a straight rental, you can offer an option to buy and get yourself part of the money there.  So, let’s say that they had $3000 to work with; you give $2000 to the new landlord and keep $1000 for yourself.  That could be a neat little thing.  You have to be careful about doing that thought because you don’t want, if you don’t have a real estate license, you don’t want to be called out for trying to do real estate brokerage.  In this case, you’re just trying to help a friend find a house, but you’re only offering $2000 to the new landlord and you’re collecting $3000 from your client.  Again, just be careful if you do something like that and don’t make that a business unless you get a real estate license.

Question:

Alright, now here’s a “subject to” question from Nelson Page.  When you take title subject to and place a property in a trust, what name do you use to put the utilities in?

Answer:

Very good question, Nelson.  Here’s what we do.  I recommend that you create what I call a naked trust, which basically is a personal property trust that has no assets in it.  You create the trust, you name it whatever name you want to such as Wilson Management Trust, and there’s nothing in there so Wilson Management Trust then applies for utilities in that name and then all future bills go to Wilson Management Trust.  You make sure that you definitely pay the bills and whatever deposits and everything because now you establish a credit of sorts with the utility company.  Then, the next time that Wilson Management Trust calls, sometimes you can avoid the deposit because Wilson Management Trust has an account with the utility company.  So, do that and I think you’ll like that.

Question:

Alright, the next question is on structuring a deal from Joyce:  I was just trying to structure a deal with an ugly mortgage with a prepayment in effect for another 18 months.  My thought was to have the seller place the property in a trust and purchase it subject to.  Then, sell the property with owner financing with a down payment to cover seller’s equity percentage he wants plus some for me.

My question is two-fold.  Can you sell a property this way and who actually owns it?

Answer:

Alright, first of all, can you sell a property this way?  Yes, you can.  Basically, Joyce, you would own the deed to the property.  Basically, the trust would have the deed to the property and ultimately somewhere in line there you’d be a beneficiary of that trust.  So, absolutely the trust would hold title to the property and yes, the trust now through you as their manager can sign an agreement with your new buyer or renter or lease optionee, and you’ll be in fine shape.

The next question is who actually owns it.  It would be the trust that owns it and you would merely have an interest in the avails and proceeds, which may flow from it.  So, in other words, you would have an interest in the beneficial interest of the trust but not in the actual ownership of the title to the property.

How would you structure the trust is your next question.  Well, I would have the real estate go into a land trust; have the beneficiary of the land trust be another trust which is called a personal property trust and then have the beneficiary of that be me, or, my living trust.  Or, if you’re high on the paranoia scale, you can even put an LLC and then have the shares of the LLC held by the living trust.  Yes, I’ve got a lot more to teach you on that particular subject, Joyce, so you do need to attend the advanced training on the Protecting Your Assets, which is the Maximum Asset Shield training.  That’ll be coming up again in August, and I definitely want you all to get yourselves to that because that’s critical training for protecting all that you’re creating here by being in this business.

Now, let me just make another couple of comments.  We’ve got a little bit of extra time and I just want to make a couple of comments here about Joyce’s deal.  She says I was trying to structure a deal with an ugly mortgage with a prepayment in effect for another 18 months.  My thought was to have the seller place the property in trust and purchase it subject to.  Then, sell the property with owner financing and a down payment to cover seller’s equity percentage he wants and some for me.

That’s what I wanted to address right there.  Why don’t we give the seller maybe a little bit of money right now, moving money, and give the seller the balance when the property actually sells?  I want you to be careful about giving up money early in the game.  I want you to have as much of that money as you possibly can and give the seller as little, and in most of our cases, the seller’s getting little to nothing at the closing.  However, they might be able to get more when we actually sell the property.  I just paid off somebody recently $22,000 that they agreed to as their equity on or before seven years.  In other words, if the property sold before seven years, they would get their $22,000.  If it didn’t sell in the seven years, I would still have to pay them the $22,000, which I did, so, that’s another way to structure it.  You probably picked up on the fact that there was no interest on that loan.  That’s some of the advanced strategies I want you to learn on how to structure deals Joyce, but it sounds like you’ve got yourself a good one, and I definitely want you to do it and then tell me all about it once you’ve done it.

Question:

Okay, Rodney Hatton has a lease option question, and he says:  Dear Lou, I am in the process of lease optioning a property in Jacksonville, Florida.  The property’s sales price is $129,900 with an option fee of $4500 using your contracts.  What is the best system for showing these properties?  Only about 40% of prospective tenants show up for their appointment and it is taking away time that I could be rehabbing other properties.  I’m not comfortable with the lock box as some of the people I have seen; I would not rent a video to.  That’s beautiful.  This property is not in a war zone, but crime is still fairly high.  Thanks a million, Rodney Hatton.

Answer:

Well, Rodney, here’s what I want you to do.  First of all, we have a very specific process for doing this.  It’s outlined in your Volume 8, Property Management System on the CDs and also I give you a lot more training at the live MPI, which is Massive Passive Income.  So, here’s what we do.  Now, follow me closely.  First of all, we do put a lock box on the property but when the people call, Rodney, I want you to be prepared to interview them.

Ask them:  Hi, my name is Rodney and whom am I speaking to?  Joan?  Joan, what’s your last name?  Williams?  Great, Joan, tell me, what’s your telephone number in case we get disconnected?  Great, Joan.  Alright, Joan, tell me something.  Where do you work?  How long have you been there?  How much do you earn?  And your spouse, where do they work and how long have they been there?  How much do they earn?  Fantastic!  Based on what you’ve told me, it sounds like you might be able to qualify for the property.  What I’d like you to do is go drive the neighborhood, see what you see, drive the schools, look at the property.  Get out of your car and walk around it, and if you like what you see, give me a call.  I might be able to get you in the property right away.  Otherwise, we would have to schedule an appointment.

Now, Rodney, what did we just do?  We basically prescreened a client.  We basically prescreened her asking questions she didn’t expect to answer.  So, you’re going to catch them off-guard, and you can usually get a true statement when you catch somebody off-guard.  Now, the next thing is if you don’t really trust it, you can actually ask them.  We did ask her where do you work.  Alright, great.  Call the work; see if that person works there.  The next thing is let’s say that Joan calls you back.  Oh yes, I love it, I want to see the inside.  Alright, Joan, here’s what I want you to do.  Walk with me up to the door, great, there, I have a contractor coming over this afternoon on the property and he’s going to take care of some things for me.  So, I want you to, in fact, I could get you in right now but just take the lock box in your hand and roll the following numbers around.  Okay, good, now open up the little side pocket, good, now there’s a key in there.  Alright, take that key out and unlock the door, great, now put the key right back in the lock box.  Close it up.  Alright, have you got that done, Joan?  Good, now roll those numbers around.  Good, Joan, okay now, you’re in the house.  Walk with me through the house, tell me what you see and we can just chat about it.  Now, either Rodney you could stay on the phone with her or have her call you back before she leaves.  When she leaves, if she’s about to leave, you say well, what did you think, Joan?  She says oh, I like it.  Okay, well, Joan, I need you to go over to the kitchen sink, alright, in the drawer to the right of the kitchen sink open up that drawer.  Good, there you go, alright, right in there are applications for rental.  Now, Joan, I need you to take out one for each person 18 years of age or older and I need you to fill that out.  Joan, when can you get that done?  This afternoon, great!  No problem Joan.  Alright, now, here’s what I want you to do.  How would you like to be assured that no one else gets the property before you, because I’ve been getting lots of calls on this property Joan?  You would?  Great!  Alright, now when you bring that application, I need our application fee and I need a reservation fee equal to one month’s rent.

You see, what we’re doing Rodney, is we’re taking you out of the property management business.  I don’t want you wasting time on potential tenants that you don’t have complete control over and that you don’t know who you’re working with, because I agree with you.  There’re lots of people out there in the world I wouldn’t rent a video to either.  The only ones I’m interested in are those that can afford my property, and the only way you’re going to find that out is to actually go through the process of asking them how much they make.  Just as an additional piece of training on this call, it should be that their income, their combined income, that your rent should be about 1/3 of their combined gross income.  I want you to be careful about that one as well.  You make sure that you’re not over-financing these people because basically, you’re making a loan to these people and you’re going to need to have about 33% of their income for your rent or we even like it better if it’s only 25%, 20 or 25%.  This day and time, we’re having to look at things a little bit differently.  I agree with you 1000% that most of them, as you said only 40% actually show up for their appointment, you’re absolutely right.  I don’t know who raised these people but these people have not been raised with any respect at all.  So, we’re not even going to bother to show up either.  We’re just going to send them to the property and let them show themselves the property.  How does that sound Rodney?  I hope you like that.

Guys, let me know what you think about that and how your implementation of that strategy works.

Question:

Alright, Ron Brown has a trust question, and he says:  Dear Lou, I put my home into a land trust.  How do I get the homestead rebate?  Does the trustee have to apply?  Last year, I was turned down because my name was not on the deed.  Thank you, Ron Brown.

Answer:

Alright Ron, here’s what I want you to do.  Get the paperwork from the local tax collector’s office.  Yes, the trustee typically has to apply.  The trustee applies on behalf of the trust’s beneficiary.  You’re going to fill out the paperwork and mail it in.  Mail it in time for the trustee, excuse me, before their deadline.  Now, when they send it back, most of the time they will just grant the homestead exemption, but if they send it back with any questions, you’ll have to send them an affidavit of trust.  As you know, when we are recording our deed on public record, I have you attach my affidavit of trust to explain exactly the details about the trust.  But, in this particular case, we’re going to have to alter the affidavit of trust to include an additional line that the beneficiaries of the trust are x and y, maybe you and your wife.  As a result, it actually goes in with the tax collector seeing who the beneficiary is, but that’s not recorded on public record, and so we still record on public record the one we usually would but this is going to be an additional document going to the tax collector’s office only.  It’s only in the tax collector’s file to give them the reason to grant you your homestead exemption.  That’s a very good question, Ron.

Question:

Okay, Edith Mock, hi Edith, one of our Platinum members.  Edit Mach has a question:  When doing the personal property trust, my paranoia is high.  I think she means my paranoia is high, let’s start off that way.  Edith understands that the MAS, which is Maximum Asset Shield training, one of the things I have there is a paranoia scale, and everybody has to kind of rank themselves on the paranoia scale.  So, based on what you rank yourself as, is the number of levels that we actually add in additional layers of protection on your property and on your asset protection plan.  So, Edith says her paranoia scale is very high and she’s asking when doing the personal property trust, if I make the LLC the primary beneficiary, then do I make the living trust the secondary beneficiary?  If so, what happens should the LLC be attacked?  Our LLC does and pays…okay, let’s back up.  Let’s answer that one first.  If I make the LLC the primary beneficiary, then do I make the living trust the secondary?

Answer:

What we generally do is we say in the absence of the one entity, it goes to the other entity.  So, Edith, what that means is, if you fail to pay your dues to the state, and the LLC went defunct, that we’ve got an actual secondary beneficiary in there but only under the condition that something happened to the LLC, that it is defunct, that it is no longer in business, then it goes to the secondary trustee.  Yes, the secondary beneficiary, and yes, the beneficiary could be a living trust.

Then, you go on to say what happens should the LLC be attacked.  What would happen, you go on to say our LLC does and pays for all the rehabs.  Should I be using a different LLC for the beneficiary of the personal property trust?  Edith, yes I would.  I would not use a business-doing entity to be a beneficiary of any trust.  In other words, it’s over doing business out in the world.  What I would recommend instead is let’s have the trust bank account write all the checks for the rehabs.  What that means is then, that you’ve taken, as you’ve learned at the MAS training, we take the personal property trust in Volume 5, and we ______ 34.19 owns the property.

So everybody can follow this, let’s say that Edith bought a house for rehab.  The house for rehab is going to be held by a land trust.  The beneficiary of the land trust is going to be a personal property trust.  Beneficiary of that is going to be an LLC in Edith’s example.

Now, separately, there’s a personal property trust that has a bank account.  That bank account has money in it.  It doesn’t do any business, it doesn’t sign any contracts with anybody, and it doesn’t do anything but write checks.  It would write a check to the different people that are doing the work on the property, however, it would not be the one who hired them.  Who would hire them?  It would be the manager of the land trust.  So, Edith, if you’re acting as the manager, let’s say it would be E. Mach as agent that would hire the individual who’s going to act on your behalf.  They’re actually going to rehab the property.  E. Mach as agent, but it doesn’t say as agent for whom.  To find the documentation on that, we would merely go back to the land trust and we would find that indeed, the trustee of the land trust had hired you as the manager of that project.  As such, you are responsible for delivering a completed project.  Now, you are going to use the bank account that you’re the trustee of.  You will be the trustee of the bank account, not of the land trust.  That trustee of that bank account actually writes the checks.  You write the check to the contractor.  All the while, you’ve been doing this, you were doing it for the benefit of the owner of the property who had a beneficiary.  That beneficiary is the LLC.  Effectively, the LLC has not been doing business.  All it’s been is a beneficiary of a trust.

Hopefully, that cleared it up.  That’s a pretty advanced question for our group Q&A, but it’s a good one and I think it gave everybody another reason to come to MAS, which is Maximum Asset Shield.  I believe that’s August 23 through the 26th this year.  You definitely want to get yourself registered for that.  By the way, I’ve mentioned a couple of things on the call today, so, if you call the office at 1-800-578-8580, that’s 1-800-578-8580, we can get you registered for those events and give you more details about them.

Question:

Alright, Leslie Sanders has a question:  When buying real estate, please explain how a real estate investor should deed the property when using a land trust and/or an LLC.

Answer:

Alright, Leslie, simply you would buy the property, let’s go back to the original purchase and sale agreement.  In the purchase and sale agreement, it would be you, as agent that would be entering into that contract.  Your contract, because you’re going to use mine, has an assignability clause.  That means you can assign that contract.  So, you’re going to assign that contract at the closing to the trust that’s actually purchasing and closing on the property.  You make up a name of a trust and the trust actually receives the deed to the property.  The trust and the trustee receive the deed to the property.  You heard me explain about Edith’s question so, you can be the beneficiary or the LLC can be the beneficiary of that trust.  Okay?

Question:

Now, the second question you have is:  In your Asset Protection and Estate Planning Manual, in the instructions to real estate closing agent, page 57, why would the title company have any reason to follow Mary Livingwell’s instructions?  As the beneficiary, if she reveals her authority, it will become a document of record in the closing agent’s file.  As the beneficiary who issues the instructions, she reveals her beneficial interest.  Why wouldn’t the trustee issue the instructions?

Answer:

You’re absolutely right, Leslie, that’s no problem at all.  The trustee or the beneficiary can issue the instructions.  The reason that I’ve put Mary Livingwell as the one giving the instructions is typically, we’re trying to give the title agent a reason to just get the deal done and we’re telling them exactly what to do.  Just because we told the title agent what to do doesn’t mean that they’re going to have anything to do with the trust, and that doesn’t even mean that that person who signs that document is going to remain as the beneficiary.  The beneficial interest can be changed at any time.

I do this merely to make your life easy because sometimes our trustee is out of state and we have to have him sign all these things and fax all these things back and forth, and it will actually be you setting up the closing.  We don’t typically use the instructions to the closing agent.  It’s only done in situations where you want to make sure, particularly if it’s someone who doesn’t understand our process, which is most of the people out there, you want to explain to them exactly how that deed is supposed to be done.  That’s the most critical thing that you’re trying to communicate on the instructions.  Doesn’t really matter as much who the instructions come from as that they do what you want them to and set that deed up correctly.  What does that mean?  That means you also need to review that deed and make sure it’s done correctly.

Question:

Alright, Marie Mattingly has a question:  Hi Lou, I so enjoyed you when you spoke at Robin’s workshop in Orlando in early March.  I was so impressed with you I bought your five-book program with CDs.  You are awesome.

Answer:

Well, Marie, I think you’re pretty awesome too and congratulations on buying the Whole Enchilada Junior.  That’s the first step in building a fantastic multi-million dollar business.

Question:

Now, she goes on to say my question, and I guess my fear, is that I am an agent with Caldwell Banker in St. Louis and I guess I have reservations about how to wholesale a deal while working as an agent who works for a big nationwide agency.  With Caldwell Banker being the biggest agency across, I have to imagine that there are a lot of agents who work for them but want a wholesale deal, possibly getting the commission on the listing side and yet finding a property for a buyer then buying the contract themselves and making a wholesaler’s fee.  I have my personal reasons why I have to stay with Caldwell Banker and it is not an option that I switch to a smaller mom and pop agency.  I’ll be happy to send you my contract that I have with them if you do not have one to assist you in assisting me.  Knowing you, you probably don’t even need it though (lol – laugh out loud).

Answer:

Okay, what contracts do we use?  Alright, I think what you’re asking here Marie is that you’re concerned about using the big agency’s contract versus using the Lou Brown contracts.  I’m not sure if that’s the question, you’re asking there, but let’s see if we can attack that one first.

First of all, if you want to use the Caldwell Banker contracts, that’s just fine.  Use it but attach, in Special Stipulations, just put as per attached Exhibit A made a part hereof by reference, and then just attach my contract.  That way you’ve met any commitment that you made to them which I don’t know that they have this particular requirement in their contract with their licensees.  I would be surprised that they would say that you must absolutely use their contract because that would be kind of like a restrain of trade.  The reason I say that is because you as an agent will represent many people in many different types of transactions.  Some people will come with their own contracts.  Are you supposed to say I’m not going to present that to my client because it’s not our contract?  No, you are required by law to present any offer even if it’s on a napkin.  So, I doubt that they have restrictions on the type of contract that you would use, however, to make business easy sometimes you have to kind of give people what they want.  You can use their contract but attach mine as the exhibit referred to in Special Stipulations.  So, let’s see if that’s what you were asking there.

Question:

Now, you go on to say do we use a special sales contract.  No, you use mine.  Next, don’t I have to use all of their forms?  No, I answered that one.  I picture myself going in to speak with a seller who has property listed.  Normally, we try to find buyers and only get a buyer’s commission and we do a lot of work for that commission.  You’re absolutely right about that.  Is it unreasonable for me to think I can get a commission and a finder’s fee?  How is the closing handled?

Answer:

Well, Marie, you can get both.  You can be a principle in the deal and you can also receive a commission.  Now, you can receive that commission in several different ways.  One, as a reduction in the offer price.  You can offer to get no commission, but reduce the price by the amount of commission that you would’ve gotten.  That saves you the income tax that you would’ve had to pay if you had received the commission because you’re merely reducing the basis of the property, what you are paying for the property, which might be a good, clever way to handle that.  Thank you, Bruce; Bruce had that idea.

How is the closing handled?  Let’s see.  Can I get a commission and a buyer’s fee?  The finder’s fee of course would be your amount that you can receive as an assignment fee to assign the contract on to a new buyer.  In your Volume 1, Buying, there is an assignment contract in there, so that’s what I want you to use when you’re wholesaling properties, Marie.  Alright, good; good information here.

You go on to ask how is the closing handled.  If the listing is not listed, I understand that I then have an opportunity to negotiate to buy the contract or property which gives me more flexibility and not a commission, but it still comes down to what am I allowed to do as an agent and what types of contracts do I use?  Okay, I think we’ve answered that.

Let’s see.  I’ve worked hard to get this license and I guess my biggest fear is not approaching or finding buyers or sellers, but doing something wrong.  Well, Marie, I wouldn’t worry about that because the worst thing that can happen is that you’d lose that license.  If you lost the license, that would be the worst thing that could happen.  Another thing you want to always do and which typically just solves the problem in most transactions is if you merely disclose everything.  In the contract, you would say “purchaser is a licensed real estate agent purchasing for their own account” or “purchasing for their own personal portfolio.”  Basically, that covers the deal.  You’ve disclosed that you’re a knowledgeable individual, you’re a licensed individual, and that your intent is to purchase for yourself.  You can even go ahead and disclose “purchasing for my own account with intent to resell for a profit.”  If you’ll read, I’ve actually got that built into my contracts already that it is the intent of the purchaser to buy the property in order to make a profit.  So, we’ve already got some disclosures in my contract.

I am sure there are many agents who have the same fear, so, if you would please tell me how agents should do the wholesaling deals without putting their license in jeopardy, you would be at the top of my list of awesome.  Well, I hope I did that then Marie.

Question:

Let’s see here, now we got John Keanrath and he says:  What can we say to the seller to assure that they will not reveal to the bank or mortgage company that we have or will be making the payments on their property, and will be taking over their property by a quick claim deed within a land trust?  This kind of concerns me since they will be receiving phone calls from their creditors and the mortgage company.  Lou, no one comes close to having transformed the way I execute our investing business as you have.  You are king to us at Stone Canyon Properties, LLC.

Answer:

Well, fantastic John.  I appreciate your saying that.  Now, here’s the thing.  I want you to kind of sit down with the seller and say there’re a few things we can do for you.  One is we can take over your existing financing.  Good news here.  You are behind in your payments and we know exactly how to work with the bank to get them to accept our offer.  Many times, we can actually reinstate or do a work out with the bank, but we’ll need your cooperation.  Now, how do I get their cooperation, John?  I go through that cost to sell worksheet.  I actually go through the seller presentation kit.  I show the bank every reason why they should want to do business with me.  Then, at the end of that presentation, we get out the cost to sell and say before I can buy your property, I have to first calculate what it’s going to cost us to sell your property.  Can you help me out here?  Then, I give him the cost to sell; then, we go through the numbers together.  When we get down to that final number, it’s usually a negative a whole lot of money.  I say there’s two ways we can handle that.  You can pay us that money right there and we can buy your property.  Or, we can work with the bank and we can reinstate your loan and you won’t have to pay that money.  Which would you prefer?  Oh, I’d like you to work with the bank. Good, there’re a few things.  If we’re going to work with the bank, we’re going to actually work with the existing financing you have on the property.  Otherwise, we’d have to go to the bank, get a new loan, pay all the points, pay all the closing costs and everything else, and that would make your deal out of sight too costly where there’s no way we could do your deal.

What we can do is take over your existing financing.  There’re a few ways we can do that.  First of all, your loan has what’s called a “due on sale” clause in there.  So, we need to have you understand that we’re going to take over your transaction from this point on.  If the bank ever calls you about anything, you just send them back to me.  You tell the bank that you have hired me as your financial advisor and that I’m going to be working with the bank from now on.  If they ask you have you sold the property, you say listen, my financial advisor is handling everything.  Here’s their telephone number; you just call them.  If they ask you what your maiden name is, or your first name or your last name, you say listen my financial advisor is handling everything, just call them.

One thing I want to tell you Mr. and Mrs. Jones that if we make your payments on time for the next 12 months, do you think that’s helping your credit report or hurting your credit report?  They can see that pretty quick that that’s helping their credit report, so they say oh, okay, well that’s fine.  Go ahead and leave it exactly that way. I say just remember, if the bank ever calls, you don’t call the bank and the bank doesn’t call you.  We’re taking this over and we’re going to do that from there.

Okay, wow, an hour goes by fast and we’ve got more questions.  Alright guys, I hope you benefited from this group Q&A call.  We will forward these questions on to the next group Q&A and I look forward to seeing you guys in the near future.  Now, if you’re just a group Q&A member, and you haven’t yet upgraded, I want to remind you that there’re several levels to our coaching program.  The next level is our One-On-One individual Q&A.  If you’re on our One-On-One program, you’re guaranteed of getting your questions answered.  First, it filters through my staff.  If they’re able to answer it by telling you where it’s located in the Whole Enchilada 13 volumes, then they’ll send that question right back to you.  If it’s what they call a Lou Question, which is more complicated, complex question, then they hold that for me and I do answer that and get that right back to you.

The next level above the individual Q&A is the One-On-One coaching.  That’s where I’m on the phone with you 25 minutes per month, and we actually talk about your business.  We talk about your structures, your problems, everything that’s going on in your life, anything that’s stopping you from moving forward, anything that’s slowing your business down, anything that you can do to accelerate that business.  We look at your business and we figure out what you need to be focused on for the next month after our call.  Inside of the One-On-One coaching also includes your direct Q&A throughout the month basis and the group Q&A twice a month.  So, you’ve got all these levels of coaching included.

Then, our final level is the Platinum Level, where we actually come together three times a year in a group setting and mastermind one another’s businesses.  That’s three two-day events here in Atlanta where we actually spread it out throughout the year.  It’s a one-year program and it includes your One-On-One, where you’re with me monthly as well as your direct Q&A as well as your group Q&A.  So, if you need a coach and what athlete doesn’t need a coach, because right now you are running for money, and I want to teach you how to run faster, quicker and get there safer than anybody else can.  I want to be your coach to help you get there and we have two levels to our Platinum Program.  There’s our Apprentice Level and our Pinnacle Level.  For those of you who are just getting started and have only done a few deals, you qualify for our Apprentice Program.  For those of you who have already built a business and you’re already doing deals, you qualify for our Pinnacle Level because I have different levels of coaching for you based on where you are in your business and we grow you up through there.

If you’re interested in that, and I recommend all of you to do that, call the office at 1-800-578-8580 and speak with Helga and get yourself upgraded on the coaching.  Folks, it’s been a real pleasure for me to teach you tonight and give you all these answers.  I look forward to hearing back from you and knowing your successes, your problems, your opinions, your strategies; we want to help you get more and more successful in your business.  Good luck, good health and may God bless.  See you soon.