I’m going to get started right away with Laura who had a burning question from South Florida.  She says she sent it several times.  So, I want to make sure that Laura knows that we got her question, and we are going to give her an answer.  She’s the first one that gets an answer tonight.

She says, “My mother wants to give me a condo.  The property was $27,000 when she got it.  The city has appraised it for $110,00 for tax purposes.  It is free and clear.  She doesn’t want anything in the way of taxes.  I would like to fix it and sell it within two months.  How should I do this”?


Well, first Laura, there are several answers.  Very good news to you…it can be done without your mom having to pay any taxes.  So, that’s really good news here.  Now, your mom could gift the full value to you, and charge that full value against her estate value exemption.  Currently that’s $2,000,000.

Now you would need a CPA to be able to, basically, annuitize her life span.  Then credit that or charge that against her entire estate.  That can be done.  You would need a CPA to do the paperwork for this.

Number two, option number two: your mom could sell you the property at $27,000 and she would have no gain.  So, in other words, what she paid for it, she sells it for, and there would be no gain.  You could…she could sell you; in other words, carry back a demand note for $27,000.  Then forgive that note at $11,000 per year until paid.  That would mean that she would completely gift that to you over time.  Therefore, there would be absolutely no taxes to her, and there would be no cost to you.

The third option: where she could sell you the property at full value instead of $27,000 You now say it’s $110,000, and then forgive that at $11,000 per year for ten years.  That would be $110,000.  Okay, so if you felt more comfortable doing it at full value, rather than at what she originally paid for it, that would be one way you could do that.

Now, the fourth option I came up with Laura is that if she has lived in the condo for any of the two of the last five years, she could…sell that condo at whatever price she sells it for, and have zero tax consequences.  So, she sells it to you at $100,000, whatever she sells it to you at, and carries back a note on that that would be zero tax consequences to her, because you have…she rather, has no consequence in selling the property if it was her primary residence.

Now that would give you the benefit of having bought it at 100, 110, 120,000 dollars and then that makes now your basis, the price you paid for it.  So, if the price you paid for it is $120,000.  Then your basis is $120,000.  If you turn around in two weeks or two months, and sell that property for $120,000, then you have absolutely no tax consequence.  So, in this scenario, she could have no consequence, and you could have no tax consequence in doing the deal.  So, that’s a very exciting deal, Laura.  You could actually have no tax consequence in selling it.

Now, of course, good old Lou is going to say, “Why in the world, Laura would you sell that property?  Why not instead act as the bank for the new buyer, and why don’t you carry back a note in the form of an agreement for deed?  Then why don’t you receive income off that property forever…as the bank rather than sending your customer to the bank to qualify for a loan?  Why don’t you just get the original down payment, whatever they have to pay you, say maybe 10%, and then receive income on a monthly basis?”

You look at your own personal situation, but I’m going to say that’s probably a better situation for you than to receive the cash, because income is better than cash for most people.  You have bills that come due on a monthly basis.  You’d be better off to receive that cash on a monthly basis rather than receive a huge amount of cash.  That’s much more money over time, as Bruce is saying, because of the interest that you’ll be receiving on top of the principle you’ll be receiving.

Now, let’s say that you finance that for 40 years, at 10.99%, minus the original down payment you get, plus points that you add in.  Now, you have got something that’s a tremendous asset for your future.  So, I’ll let you make that decision, Laura.

I’m going to highly recommend that you come to Massive Passive Income, which is only a couple of weeks away, June 7th through the 10th. Where we’re going to give you the calculators, the paperwork, and everything to do that, and train you on it right there in class.

Where you can do graduated payments, graduated interest, and everything depending on who…what customer comes along, all the marketing for how you get that customer to come along, and so much more.  It’s absolutely critical to your future, and everyone listening on this call, we’re actually going to have a lot of selling questions covered tonight.  I want to get that one covered first.

Now let’s jump to a purchasing…well why don’t we do some selling questions?  Let’s just do selling for a change, and we’ll do buying on the backside instead of on the front side like we usually do.


Here’s a few questions that we got in, “What is the best exit strategy for today’s market?  Regina Merrill.”


Well, I’m going to tell you Regina that the best exit strategies in today’s market is not, I repeat…not to sell for cash.  The reason being that you are in the market with everybody else and that you are trying to compete with everybody else that’s selling for cash.  What a rotten place to be in today’s market.

Far better…if you try to lease option, or sell on owner financing, sell for work for equity, where you don’t even have to put any cash into your deal.  Or sell or auction the property off.  Now, I’m going to be going into tremendous detail on all of that at Massive Passive Income.  So, Regina I would highly recommend you get there, because today’s best exit strategies are not selling for cash.  I will say if you do choose to sell for cash, we have got exit strategies for that too.

It’s all going to boil down to the marketing you do, and how you market that property.  We market properties differently than everybody else does.  We do not…we do list sometimes, depending on if it’s an all cash deal, but we retain the listing side.  We use that percentage anywhere from 1 to 3% of the value of the property to market the properties ourselves.  The reason being, that we cannot depend on the realtor truly coming up with the cash that it’s going to take to appropriately market that property to get it sold quickly.

Let’s face it; most realtors are not going to spend 1, 2, or 3% of the value of that property to market it.  They might put an occasional ad in the paper, but what they’re really doing is shopping for customers that they can sell any house to…not just that house.

I want to totally put flashlights, spotlights, lightening, and everything else I need to do on my properties.  In fact, just as one comment, Regina, we even put three by eight banners on the front of our properties.  I’m going to be showing you pictures of all of our properties, and how we market that at the MPI.  So, you can totally get a feel for exactly how we are marketing that property.


Now, Sally says, “With all the extra inventory, and competition on the market created by sub-prime foreclosures, does that give you reservations about acquiring more properties and over exposing yourself…ourself?”


The answer Sally is absolutely not.  I’m going to tell you that now is the very best time to buy.  It is the very best time to sell, not for cash.  It’s the very best time to sell for when you act as the bank.  Now remember that one of my mottos as…is the seller is the bank.

Now, I believe that when I’m buying.  I also believe that when I’m selling.  When you are selling, you are the bank.  That’s a combination of things.  Lease, renting, a lease option, or agreement for deed owner financing.  Anytime you can carry back financing, you are going to be able to move that property quicker…and to a broader market place than if you try to sell for cash.

So, I want to teach you all those exit strategies, because it’s absolutely the best way you can build a business.  Particularly, in this market, like you say where we’ve got a lot of risk in this market.  It’s also, though, the best time you can buy, because you can get huge discounts in a market like this when there’s so much competition to be able to sell properties.


Next question from Andy is, “If I have a subject to, and I want to owner finance, how do I transfer title to my buyer and when?”  Adam, I’m sorry, Adam.


The answer Adam is that you bought the property subject to.  Now, you’ve got control over the property and the mortgage.  Now, you’re going to owner finance to your buyer.  The way you are going to do it is with something called an agreement for deed.  That means you’re going to retain the deed until they actually pay you off.  You’ve got an agreement for exactly how you’re going to transfer that deed when…they pay you off.

Now, Adam, what you’re going to do is continue to pay the underlying financing.  That is going to be recognized in the agreement for deed.  So, what that means is that in the agreement for deed you’ve got the opportunity to get that property sold quickly.

Now, when you sell that property with the agreement for deed, that means that you’re going to be able to retain that deed…let me say that one more time, until they pay you off.  When they pay you off in full, you will use part of that money to pay off that underlying financing.

If they never pay you off, and just continue to make monthly payments, you will continue to pay the underlying financing until it pays out completely.  Then you will continue to get the full amount of that payment until they pay you off completely.  Then at the end of their full payment schedule, you will pass the deed onto your buyer.  That is exactly the strategy on holding property.

That’s why Massive Passive Income is so important, because that’s exactly where we go into all the details of how to do that.  You see, I can give you all the theory here on the call, but application comes down to where you market the property, the paperwork you used to market the property, the calculators you use to calculate that, and all the aspects of how you deliver that message to your buyer.  That’s the critical piece of what you need to learn in the lab training in MPI.


Now, next question from Andrea is, “How do you find out the average time to sell in a particular neighborhood?”


Well, Andrea, that is a good question.  I wish I had a crystal ball and could tell you, “Here’s how long it takes to sell in a particular neighborhood.”  The best answer I can give you is to contact a realtor whose name you see in that area, in that market place.  Ask them that very question.

As a potential client, of the realtor who may be selling a home in that neighborhood, you can ask him, “What are the average days on market that you’re seeing in this particular neighborhood?”  They can tell you, because the MLS has that information.  They can tell you the average days on market right there.  All right, good question.


Next question comes from Ford, “What happens if you close on a house where the seller is in the middle of evicting a tenant?  How is the proration affected?”


Well, I will tell you Ford, that’s a little dangerous situation there.  If the seller is in the market of, in the market rather, in the process of evicting a tenant, then we want to be very careful about where they’re at in the deal.

Here’s what could happen.  In the eviction process, the tenant could file bankruptcy, and that could delay the whole process.  In the eviction process, the tenant could tear up the property on their way out.  So, I want some assurances and insurances in that process.

One way you could do it is to go ahead and purchase the property, but create an escrow account.  Get that money in the escrow account if those things happen that I just described.  If those things don’t happen, then the seller gets that escrow account as well.

Another way of doing it is buy the property subject to the eviction process, and that once the eviction is complete, you can close.  So, those are things that you can build into your contract…your purchase and sale agreement that will actually make…lay that all out.

Now, in my purchase and sale agreement, it actually says that the seller must deliver the property free, and clear, and vacant, if it’s a rental property.  So, they have to, they have the property vacated before you can buy.

Now, of course, and I want you to know this, that it’s completely negotiable.  So, of course, you can change that anytime you want to.  You can negotiate that in your contract.  In your purchase and sale agreement and say, “Look, I will buy that property.  However, we’re going to have to discount it.  Or we’re going to have to have…I get three months of no payments on the owner financing that we’re doing together.  Or in order for me to buy it, in this current situation, then I’m going to have to have owner financing.”

So, there’s lots of different points you can create in the purchase of the property when you’ve got that problem.


Now here’s another selling, renting question from Jan, “Since we’re charging pet fees and pet rent, do we still hold the tenant liable for ruined carpet when they are moving out?”


Well, that’s the good news Jan is that you certainly can, because my rental agreement charges a pet fee.  It’s not a pet deposit; it’s a pet fee and pet rent.  Well, that’s for the pet’s use of the property.  So, if they damage the property, that’s covered under the damages clause.  Of course, we’ve got out-bond in our moving and inspection report exactly what existed at the property at the time they moved in.

When they move out, there’s a move out checklist.  When you compare the move in checklist to the move out checklist, boom there it shows that those damages exist.  Yes, you can claim damages after they move out.

So, that’s a real powerful situation that puts you in, and you absolutely, positively, should all of you be at MPI.  I am going to go into all those management issues, and how you deal with it, because management is the other side of the coin for us.  I teach you that I want you to have twenty free and clear properties…at least twenty free and clear properties.

So, you can avoid…the freight train that’s coming at you.  That’s called our government reneging on the social security program.  They will absolutely change that program in your lifetime.  They will absolutely change it.  They are going to increase the number of years, how old you have to be.  They’re going to decrease the payments.  They’re going to increase the collections.  There’s a lot of things they are going to do to make that program look very unpalatable to you.

I believe they’re also going to put in a means tax.  In other words, if you have anything, then you don’t get what’s in your social security account, because you’ve got other means with which to support yourself.  The social security program is for people that did, never did anything with their lives.  So, that’s what I want you to be aware of that’s coming your way.  I want you to be very careful as you plan your exit strategies on these properties.

Let me tell you something, holding property is the only true solution for all of us on this call.  Holding property will give you income into your future.  Holding property will give you increases in values as you pay off those properties with worth less dollars.  As those properties gain in value as they have to, because dollars become worth less.  Then you are going to get the benefit of the increases in rent as well, because dollars are worth less.  So, now if we pay off those loans with, those fixed rate loans with worth less dollars while tenants move in and every year pay increases in rent, you cannot help but win.

Now, let’s say that we get twenty of those.  You cannot help but be wealthy at the end of our game.  So, our strategy then is to teach you exactly how to do those things so that you will stay in management long term.  You see most people get burned out in management, because they don’t know what to do.  They get burned out, because they never learned the skills of management.  So, that’s absolutely what we are going to cover in detail in a 120 page manual that we’re going to give you at the event as well.  It’s going to cover all the aspects of the training.

If you have not yet registered, remember those folks on our group q and a still get the early bird discount of the $1,000.  You want to be sure and get yourself registered.  Call the office at 1-800-578-8580.  That’s 1-800-578-8580 to get yourself registered for that four-day event in Atlanta.  That’s absolutely, got all the answers to the holding, to the selling, to the tax benefits, to all the other strategies that we have got available, because we’ve designed it for you guys.


Now take a little swig of water there.  Chad asks a question, “I am in Florida, for added privacy I would rather my lease option tenant pay to an LLC or land trust.  So, that the check is not made out personally to me as manager.  Would this be complex to set up and maintain?  I have not yet set up my LLC.”


Well, Chad what I would say is, “If you do set up an LLC, what we want is the LLC to be the beneficiary of the trust.”  You get several different benefits from that.  Number one, if you are looking to be full time in this business, then one of the things that you have to show the IRS is that you are an active…actively managing your properties, that you have 750 hours per year in management.

This allows you unlimited write offs.  Let me say that again, unlimited write offs.  When you hear about people having loss limitations in their rental portfolio, it’s because they do not qualify as managers of their property.  I want you to qualify as a manager.  So, obviously if the checks are being made out to you comma as agent, then you are managing your property.  That’s one aspect of it.

The other aspect of it is that I recommend you set up a separate trust.  This is a personal property trust.  Now, this trust is going to open a bank account.  You’re going to deposit all the rent into that bank account.  As a result, that bank account is doing no business with the tenant.  It’s going to be you doing business with the tenant and the actual trust who owns that particular property.

So, you, as manager, have been hired by the trustee of that trust to manage that property.  As a result, you have a management agreement, but you do not, as far as the tenant knows, own the property.  It’s this trust that owns the property and that trustee who has hired you as manager.

Now, you take the rents that come in, and you deposit those rents into your new trust bank account.  As a result, those rents can now come to whomever the rightful beneficiary is.  That rightful beneficiary could be an LLC.  Or Chad, it could be you.  As a result, the tenant doesn’t know where the money finally goes.  All they see is that the money goes into the personal property trust bank account.

That’s what I recommend for all of my licensees to do in setting up their privacy and their asset protection.


Now, we’ve got a foreclosure question here from Dennis Wilson.  He says, “When do you use?”  Let me try that again.  “When do you lose the ability to negotiate existing mortgages on a foreclosure deal?

Is a post foreclosure purchase usually cash only, because the mortgages existing on the property disappear when the mortgage is knocked off on the courthouse steps by the attorney?”  This is the opinion of Michelle Wilson, the daughter.

“Or do you have a narrow window to negotiate after the property is knocked off, but before the property is transferred back to the lender by the attorney.”  This is the opinion of Dennis Wilson, the dad.


You are both right.  Opinion of Lou Brown, the mentor.  Michelle is right…in that legally, once it is knocked off on the courthouse steps, that means that the attorney knocks it off and says, “Going, going, gone.”  The lender is the high bidder.  Then essentially that mortgage was extinguished at that moment in time.  It went away.

You are right Dennis…that before that deed is actually recorded to the lender, there is time to be able to negotiate.  Now, for example, Dennis, you could go directly to the foreclosing attorney and you could say, “Here, I understand you knocked it off to the lender.  Here is an offer for that lender.  They may want to entertain this offer right away before they list it with a realtor, and have that additional expense.  Would you please fax this to your client, so they can make a decision before they go to that expense?”

Now, of course, the attorney wants to retain a relationship with that client.  So, they typically will send it on to the client to make a decision.  Then you can actually get the client, now typically, it goes now to the REO department.  The REO makes a decision about whether they should go ahead and accept this offer.  Or whether they should go ahead and go through their typical process of listing it with a lender.

So, good news Dennis and Michelle, you are both right.  You can both make money on those kinds of transactions.  Very good question.


All right.  Now, let’s see here, we have a purchasing property question from Haynes Parker.  Haynes says, “Lou, please review the steps in notarizing a sales contract and taking it to the courthouse.  Thanks, Haynes.”


Well, Haynes, good news.  You don’t have to notarize a sales contract.  So, it’s not the sales contract that gets notarized.  Now, you’ve got two options of things that can be notarized to protect your interests at the courthouse.

Number one: we’ve got a form in your buying system, called the notice of purchase and sales agreement.  That notice of purchase and sale agreement is a…document that is signed by both the buyer and the seller.

Now there’s another document, called the affidavit and memorandum of purchase and sale agreement.  The affidavit is only signed by the buyer.  So, what I recommend you do Haynes, to make it easy for you, is you sign the sales contract in front of the seller, and both you and the seller sign the notice of purchase and sale agreement.

The only problem is we can’t record that, because we don’t have a notary with us when we’re at the seller’s house.  So, what we then do…the next day is we sign the affidavit in front of a notary, and that we attach the notice of purchase and sale agreement.  That becomes an exhibit to the affidavit.  That’s the document.

Now, for the document names, the notice of purchase and sale agreement, that’s your BSH 1306.  You’ll find that, everyone on the call, on page 134 of volume 1.  There’s a filled in version and a blank version.  Then right after that, on page 137 is your affidavit memorandum of purchase and sale agreement.  There’s a filled in version and a blank version of that as well.

The affidavit is what gets notarized, and what gets recorded in the courthouse along with the exhibit A, which is your notice of purchase and sale agreement that’s signed by both parties.  That way you have an iron clad proof that there was an agreement with the seller.  That it’s highly, highly unlikely any closing attorney or title company would ever close around a document like that, if it is found in the courthouse.

One other thing I will add is that you make sure it is recorded in the appropriate place in the courthouse.  You make sure that that thing has got the…right notice to the clerk of court at the top.  So, that they will cross-reference this document with the sellers warranty deed.  Very critical.


Now we have a buying question here from Carol who says, “I am working on financing my first rental property in Atlanta.  I have talked with several different mortgage lenders.

Recently I called a lender who explained that in today’s market, if a house is appraised and is found to have even a broken window, or needs appliances, it moves that mortgage into a rehab loan versus an investment loan.  This underwriter told me my best strategy was to get the hard money, and then call him to re-finance later.  Please help with this.”


Well, Carol the first thing that comes to mind is the property already owned.  You say I’m working on financing my first rental property.  I’m not sure if you mean financing it after you purchased it, or financing it to purchase it.

So, let me give two answers.  First of all, if it’s already owned, then you’ve got a better… source, because what you can do is actually use that.  Perhaps even just put an equity line of credit on the property.  With that equity line, you can pull down the cash as you need it, right out of a checkbook.

The good news there is you’re not charged interest on it until you actually use the money.  I think that’s a very wise way for us to be in this business is to not spend money on interest if we don’t actually use the money.  So, or…until we use the money.

So, I want you to be careful on that one, Carol.  Go ahead and check with the different lenders such as Wachovia, Bank of America, etc.  They all have extremely favorable loans in the equity line of credit area.

The next thing that could happen is that not all lenders are created equal.  If that lender won’t do it, I guarantee you there’s plenty more that will.  If the property’s in horrible condition, I do believe it’s a rehab property, and it’s definitely a different kind of loan.  If its just cosmetics, many lenders will actually lend based on that current value at the time that the loan is made.

To work with us…we do have someone; some of you have heard me talk about the power of Wal-Mart before.  What I use all of our licensees as is the power of Wal-Mart.  So, there’s lots of folks that want to do business with Wal-Mart, and there’s lots of folks that want to do business with Lou Brown, because he’s got a whole lot of customers.

So, what they do is they give us very special deals…if they come through our database, or if they come through our customer base.  So, what I would say is if you’re interested in finding out about the current lenders that we’re working with, just call the office at 1-800-578-8580.  They can put you in touch with those folks.  They’re good folks that lend in all 50 states.  They do understand the business we are in.  They do have financing programs that will suit us.


Now, another question that I happen to have overlooked that Laura had asked was about borrowing money from Lou.  I think she says, “Did I understand right?  You lend money?  If so, how?  Thank you, I really enjoyed your boot camp.  I learned quite a bit.  Laura thanks again.”


Okay, so to answer that question about lending.  Yes, we do.  We lend to our licensees.  In order to access the web site for that you merely go to streetsmartinvestor/Lending with a capital L.  L-E-N-D-I-N-G.

Now, there you’ll see an application.  It asks…is this a loan or is this a partnership?  Let me give you the distinctions on that.  If it’s a loan, it’s typically the traditional rates of 5 points and 15%.  You know, traditional hard money lending.  The details are right there in terms of filling out the questionnaires, submitting it to us, giving us all the details, etc.  It’s all right there.

Now, if it’s a partnership, and you click off the partnership box, the good news there is that there’s no payments for you.  So, if what you have to give up quite a bit though.  These are 50-50 deals that I do with my licensees.  The good news is that you don’t have to make monthly payments on it.  Then at the end, we take the cost of funds off the top, and we split 50-50.

So, that can work well for you, and of course, while we’re partners, I’m also advising you on exactly what to do.  How to do it, how we can get the properties sold quickly, or rented, or whatever you want to do with it.

Also in the purchasing scenario, helping you through short sales, through purchases, through tough contracts, through big projects, small projects, really doesn’t matter to me, because what I want to do is support you guys in being successful.

I found out that I can probably bring as much value to the deal as I am costing just by merely being involved in it.  So, that’s very exciting to me to be able to do that as well.  All right, very good questions.

So, we’ve got lending sources for you for traditional loans.  We’ve got lending sources for private money loans.  We’ve got partnerships for you too.  Just keep in mind that we can be your financing source for the deals that you have.  You don’t have to worry about borrowing.

However, I do recommend that you always build up your own quote, unquote lines of credit with private moneylenders, because they can really help you.  These are the folks that are not involved in real estate, who will lend at 6, 7, 8%, and allow the interest to accrue.  That’s good work.  Now that’s another thing that I teach at the in-depth trainings, to go into the details about how to borrow money, and how to do it right.


Now, we’ve got a subject to question here from Jonathon Brian.  He says, “Hi Lou, recently an investor in our local real estate investors group related a problem he was having.  He bought a property subject to, putting the property into trust, and having the seller assign the beneficial interest to himself.  His land trust now owns the property.

He had been making the payments to the lender for about a year and a half, when the seller just recently filed bankruptcy.  I do not know if it is a seven or a thirteen.”  He means chapter seven or chapter thirteen.  “Our local investor tells us that the bank is not accepting the payments at this time.  My question is what problems might occur when buying a property subject to?  Taking over the payments, and then having the seller file bankruptcy sometime later.”


Well, Jonathon, this is a very rare case.  In most cases, the lenders will continue to accept the payment.  The reason being, that many folks in bankruptcy will re-confirm their own personal residence.

Whether they are renting or buying a house, they can bankrupt all their credit card debt, and even auto loans, and things like that.  They will keep their residence.  They have the option of doing that, depending on the state you are in.  So, I would say that, in almost all states that I’m aware of, they will allow them to keep their property.


“Now, I understand this is not their personal residence; this is a property they had sold over a year and a half before.  So, why in the world would the lender not be accepting the payments?”


Well, that would be exactly my question.  Why would they not accept payments on something when indeed they should be?  Now, to clarify this for everybody on the call, let me carry on with your next question.


“When I buy property subject to, I have the seller create the land trust, and then assign and quick claim the beneficial interest in the land trust to a personal property trust that I also set up.”

Well, Jonathon, you’re doing it exactly the way I teach you to do it.  One of the mistakes I noticed in his scenario, is he had had the beneficial interest assigned to himself.  We don’t do that.  We have you assign and quick claim to the other party, which is the…personal property trust.

You go on to say, “A local real estate attorney told our group that by buying the property this way, and then having a seller file bankruptcy within one year, may create problems for us.  What is he talking about?”


Well only that the debt…from a bankruptcy standpoint, if they file the bankruptcy, they must bankrupt against all debt in their name.  So, what happens is they do include this property and this loan in their bankruptcy.  What happens is, because you’re paying it and you continue to pay it, it’s not counted for the purposes of liquidating the estate.  It’s not counted in their estate.

Anytime you have a situation like that, you can contact the bankruptcy attorney for the plaintiff, which would be the borrower, the person you bought the property from, explain to them that you bought the property from them before this bankruptcy.  Would they please just enter that you’re going to…that that property is going to be re-confirm and the payments will continue to be made to the lender.  When that happens, the lender begins accepting the payments or continues to accept the payment.  That house, for all intents and purposes excluded from the bankruptcy.

What’s really great about them having included it in the bankruptcy is the debt is divorced from the individual.  So, even though the debt exists, and even though the debt exists against the property, it will no longer…no longer exist against the individual.  It is divorced from them.  Isn’t that a good thing?  So, it’s actually not as bad as it might seem when you’ve got an opportunity like that.


Okay, now the next question is another subject to question.  It’s from Marie Mattingly and she says, “Hi Lou, I’m a realtor with Caldwell Banker in St. Louis.  I’ve heard realtors, and mortgage officers brokers need to be careful with the subject to clause.  Do you agree and why?  If so, how do we get around it?”


Well I think…I’m not sure what you mean by the subject to clause, but I suspect what you mean is the due on sale clause.  What that means is in all mortgages, or almost all mortgages, there is what’s called a due on sale clause, when the property sells, the loan must be paid.

When we buy property, of course, we assist the seller in placing their property into their trust.  Then we have ourselves appointed as the manager of the property.  Then we have them assign and quick claim their beneficial interest in that trust to another trust.

What those folks that you’ve heard from…don’t know is that we have a methodology that delivers the solution without putting you at risk.  So, what you want to do is, of course, fully disclose that you’re a realtor in the contract.  In my paragraph 17 B, add that you, the purchaser, is a licensed real estate agent acting for their own account.

So, that way we can have a really clear understanding that you were licensed…that you knew that they were disclosed that you were licensed.  They have every option to check it with anybody they want to.  Otherwise, they are selling their property.  I would say that the only reason other folks would say negative things about it is, because they think it’s illegal.  If done correctly, it is not.

Besides, banks love us these days, Marie.  Just imagine that the banks with all their problems they’ve got right now with incredible default rates, incredible problems.  Imagine that they’ve actually got somebody that’s coming in and rescuing a loan.  They are re-instating the loan, putting it back on the books.  They are taking it out of the…loss mitigation department, taking it off of their default books.  They are putting it back on the performing loan books.  I mean, how much better does it get?

So, I say that the banks just dearly love us these days.  They are not going to do anything to upset that apple cart if they can avoid it.


Now the next question here is from Velva.  She says, “What is required by the IRS to gift $10,000 to a relative to be tax free?  I am from Florida, thank you.”


Well, good news Velva.  First of all, it’s not $10,000 anymore…it’s $11,000.  The IRS doesn’t require anything from a reporting standpoint for gifting.  Now, let me just explain this to everyone on the call, because this is a really…a good little technique to reduce the size of someone’s estate below the limits of the estate tax exemptions.

If someone begins gifting $11,000 per year, that reduces their estate by that $11,000.  The person receiving it does not have to report it as a gift, and does not have to pay gift tax on it.  So, essentially, it’s just a transfer to another…could be heir.  It could be anyone really, and there’s no tax consequence to that.

Now, here’s more good news.  If they are married, they can gift $22,000, to an individual.  Each…the husband and the wife can gift $11,000 each.  Now, here’s more good news, they can give that same $22,000 to each of their children.  Their cousins, uncles, aunts, anybody they want to.  They can give that, get it out of their estate, put it into someone else’s hands, completely estate tax and income tax and gift tax-free.

So, that’s a good way to get an estate reduced.  That’s a very good question Velva.  Now, one other thought about that, there are provisions called the Crummey provisions.  Now, with the Crummey provisions, once the $11,000has been gifted, it can…C-A-N, can remain in the giftors estate.

Now, the way that’s done, is letters are sent to the people it’s gifted to saying, “I just gifted you $11,000.  Now you have 45 days to take that money.  If you don’t take that money, it will remain in the estate.  However, the gift will not be…the gift will be charged against the value of the estate.”

In other words, it won’t be counted in the value of the estate.  Yet, it remains inside the estate.  It can still grow inside the giftors’ estate.  So, what most families do is the Crummey letters.  Crummey is the person who actually defied the IRS, and sued them and won.  That’s why it’s called a Crummey trust.

The provisions of the Crummey trust are that you can take it, but if you take it, of course, then it won’t be any future gifts.  So, smart families, allow the gifting to occur don’t take the money.  Leave it in the estate, then it can be gifted at the death of the person, and that whole amount comes down and is not even accounted inside the estate.

Isn’t that a good thing?  So, we’ve got so many great questions tonight.  I’m just very impressed with you guys.


All right, now let’s have some more buying questions here.  John says, “If a seller says, “No thanks.” during your presentation, what materials, if any, do you leave them with?”


Well, I only leave them, John, with a business card.  You know, I know about leave behinds.  I’ve certainly done it.  In some cases you feel almost compelled to leave something behind.  If I do, I leave my cost to sell guideline sheet behind, showing them what it is going to cost them to sell.  My real goal is to get some kind of commitment from them.

So, there you have to use some sales techniques and just say, “Well, let me ask you a question.  What is it that would have you make a decision tonight?  If you were to know, what would you say?

If you had the opportunity to get this burden lifted off of you tonight, wouldn’t that be a good thing?  What I’ve talked to you about tonight, does that make sense to you?  Would you like to have an opportunity to get rid of this problem tonight?  Is there any questions about everything that I’ve gone over?”

Most folks that I’ve worked with have questions after I’m done.  Naturally, I’m here, I’ve heard them all before.  So, I’d like to answer those for you before I leave.  Let me make sure that you understood this.  Let me go back through it, because most of the folks I work with want us to go ahead.  They want us to go ahead and proceed that night.  What was it that I didn’t tell you that would help you make a decision tonight?”

Now what I’ve done is given you probably seven, eight, ten different ways to handle the objection of, “I’ll talk to you later about this.”  Then…try to find out and figure out what their objection is and then put that to work.  That’s the critical element here.


All right.  Now, Simon says…Simon says, “Is it worth trying to do a deal from a foreclosure list where the holder of the second mortgage is foreclosing?”


Well, I think so.  Now, what you want to do is contact the second mortgage lender, and ask them if they would be willing to sell their mortgage.  If they would be willing to sell their mortgage, you could actually step into their shoes and carry on with the foreclosure.

Many times, people don’t want to go through this task, and they certainly don’t want to take someone’s home away from them.  So, what they say, “Yeah, I’d love to just go ahead and get rid of this.”  That’s your chance to buy the second at a discount.

Then what’s really interesting, is that once you’ve got control of it, you’ve actually got the opportunity to continue to make payments to the first mortgage lender until you get the property sold.  So, you can actually be subject to in line with the lender.  Really, really good stuff.  Great question Simon.


All right, when I get all the paper…excuse me, when I get all the paperwork signed and the deed, doesn’t it have to be notarized?


Well, I answered that one pretty much with Haynes question earlier.  When you get the paperwork signed with the seller, the deed…yes indeed, does need to be notarized.  Yes indeed…if you’re doing a subject to with them at the kitchen table, and you’ve got all the other paperwork there.

Then you need to pile up in the car and go to the grocery store if they have a notary.  Or go to a bank, their bank, hopefully.  Any place that has a notary.  The UPS store, wherever that might be, because that actually notarizes that signature.  That deed is not recordable unless it is notarized.

There’s also companies like, I believe, its Notary On The Go. that can travel to you, and or come with you.  Now, there’s expense involved in that.  Hey, we’re about to make 30 or $40,000, I think we can afford it.


All right.  Next a buying question is, “Please elaborate on the loan recast.”


For those of you on the call who don’t know what a loan recast is, I have been teaching this for several years.  Where we…when we see a loan that we don’t like, we go back to the lender, and we do what’s called a loan modification.  We get the lender to adjust and change that mortgage.

So, for example, these days, we’ve been seeing a lot of adjustable rate loans.  Well, they’re really ugly.  We want to get rid of those if we possible can.  So, we recast that loan into a new loan.  They modify it by taking the adjustable rate and making it a fixed rate.

The other thing they will do is lower the interest rate from a higher interest rate to a lower interest rate.  Then we take arrearages, and put it on the back end of the loan.  Or work out a payment plan on the arrearages.  So, there’s many things that I can teach you about re-structuring the debt.

Re-structuring the debt is one of our techniques at MDM, which is Millionaire Deal Maker.  We have that again a few months from now.  You want to definitely, definitely get to that training.  Every one of them is different.  We do go over exactly how you do these things.

Today’s market has definitely changed.  So, we want to make sure you guys know how to deal in the current market.  It is going to change dramatically over the next six months.  We’re here to…we’re here to teach you how to do it.

We’re doing it ourselves.  We’re actually talking with the lenders, and discovering for the benefit of all of our licensees exactly what’s going on in the market.  So, you guys can take advantage of it.  Actually with their blessing, take advantage of it.


“How do you handle a seller who is not happy with the offer, and curses you out or curses?”


Well, well Maria I tell you, don’t worry about that.  I…sometimes and we all know this; sometimes you have a bad day.  Sometimes that day you have that bad day and you want to take it out on somebody.  You happen to be the target of the moment.

So, I would say, “Miss Jones, I understand how you feel.  Obviously, I would like to offer you as much as I possibly could for your property, but judging by the numbers right here, where do you see that we can make a difference.”  Of course, I am using my cost to sell guidelines.  So, I can come up with a plan that actually shows them how we got to the final number.

Now, if you’ve been cursed out by a seller, it’s probably, because you did not do your homework.  It’s probably because you did not take the time to show them the real numbers.  The reality check of what’s really true out there in the real world.  If you’ll do that, I promise you, you’re going to have success in your business.

We take the time to show people…that’s why I created that seller presentation kit.  To take time to convince people to do business with you first.  Then secondly, to show them exactly how you arrived at your numbers using the cost to sell worksheet.  These are two critical elements when doing your presentation.

I was just on with one of our platinum students today.  He was telling me, “Oh, my gosh, Lou, this presentation kit makes it so easy to sit down with people and just go through the program with them.”  He’s has so much success by doing it.  We were talking about a transaction he is closing on right now.

So, you guys, just take advantage of it.  Its good, good stuff and it’s designed to be there.  It’s not designed to just make your life miserable.  It’s designed to actually get a result with the seller.  Do it…and you’ll have those results.