Hi everyone.  Welcome back to another installment of our group Q and A.  Where you have the questions and I’ve got the answers.  We’re going to have a great time today.  We’ve got a lot of great questions.  I want to start with _____.14.  He’s got a question that I was going to cover in preview and I’m going to go ahead and read his question and give you the answers based on current market conditions.  We got a lot of questions.  This particular time about market conditions, so let’s do spend some time on this.

He says; I Lou, I would like to ask you how do you see our opportunities after what is happening currently with the economy and that the government wants to take over everything bad, like back in the 80’s.  How will this affect us?

____.49 say’s Hi Lou I’m just curious, what are the far reaching consequences of the federal government bail out of the mortgage mess on us as real estate investors?  Does it impact negatively or positively on us in terms of opportunities in buying more houses or less houses?  What to you think?  ____1.13 from California.

Janice from Connecticut asks, Hello Lou, I would love to hear your comments regarding what is happening in the industry regarding all the government bailouts and how you anticipate it will affect what we do.  Thanks so much.

Obviously there’s a lot of interest in this question right here.  Here’s what I see, I think we are going to have a tremendous opportunity.  I totally believe in it.  Where is the bottom?  I can’t tell you that.  I don’t know.  I know one thing the governments doing everything it can possibly do to create a bottom.  That means as they have topically done in the past they begin printing money like mad men.  They’ve been printing a lot of money over the last five, six years, but they are going to print a lot more here in the next few months.  One of the things that the housing bail out program did when they took over Fanny Mae and Freddie Mack, they said by the way, we are going to put $200 billion dollars into the economy in the form of government backed loans.

Again they are encouraging the private sector to; a) go forth my child, multiply.  Create loans.  Create as many as you can cause we got $200 billion dollars sitting over here in the bank waiting to buy these loans from all kinds of lenders.  This should crank up the lending machine again.  It should crank up mortgage brokers seeking borrowers.  It should crank up the house buying marketing where the realtor is now going to feel a lot more confident about spending marketing dollars to find buyer because there’s money in the market to loan to them.

Likely, these loans will be for folks that do have some kind of credit issues and backgrounds.  It is likely that they are going to make these loans for the less fortunate or the less credit worthy folks, and that means, of course, that is going to open up a bigger market, and a bigger marketplace.  For all of us, what does that mean?  That means that we can get our house sold, and we get our houses sold for cash.  Should we look at that as our solution?  Absolutely not.

Right now in today’s economy, what I see is that we should put customers in as quick as we possibly can.  We can move them in on a rent-to-own plan and then begin working with them to get them qualified for traditional loans.  Who knows when this moneys going to show up, and how it’s going to show up?  In the mean time if we have got a customer in the house, he is paying monthly and covering the debt service along with a cash flow then we are in good shape.  That could be a good thing.

I don’t stop there and Lou the economist can continue to talk to here.  One other thing I see with this $700 billion bail out of Wall Street is that again the government is trying to create a floor.  They are trying to turn the economy.  Because with capital markets fear is one of biggest driving factors, not actual fact but more fear.  We’ve seen this happen over, over, and over again.  Right now there is fear in the market place because they thought and Wall Street thought that, hey we were not only seeing the end of this we were seeing possibly an upturn in the economy.  Now I believe that wall street thinks that we’re in for a longer hall, and that means that their going to be fearful about doing anything.  We need to pay close attention to that as well.

What is fear?  False evidence appearing real.  One thing that is driving a lot of traffic right now is speculators and the government stepped in and said okay, we’re not going to allow speculation right now.  In other words people can not sell short on stocks that they think are going to drop and they can’t do market manipulations or betting.  Actually what it is, is betting.  Its’ betting on what’s going to happen.  They stopped all bets right now for a lot of companies including General Electric, American Express, Wal-Mart, a lot of big companies.  They said you can’t bet on these companies right now, what their stock is going to do and we’re going to let thing settle down so that the speculators can run away.

The reason oil went to $145.00 a barrel was purely speculation.  Then we saw recently that it dropped down to $90.00 a barrel.  You see there is not a floor in that and we are going to see a lot of fluctuations because of speculation.  Now of course the hurricane did not help oil prices so they started back up again.  There are a lot of gas stations without gas right now.  I don’t know if that is happening where you are but it’s happening where I am.  We’ve got to save long term first ____6.31 the gas is coming back.  They had an interruption in the supply because the folks that process the fuel were shut down for some period of time.  They just got to allow the supply to get back into the gas station.  That’s not a long term issue.

What is a long term issue is the market that we are facing right now.  What does this mean long term?  What should you be doing?  Well ladies and gentlemen what I want you to do is, you can become such great specialist in finding property at huge discounts right now.  The concern is are there buyers for those properties.  You can be very good at what you are doing in finding properties, but I want you to be equally as good at selling those properties.  What should we do in today’s marketplace?  I recommend that you build a middle level buyer.  We can say all day long that you can retail properties, but unless you’ve got your own financing on their, you’ve go your own cash, or you’re able to buy the subject to the existing financing, our traditional way of selling properties is going to be good but our traditional way of buying is going to be tougher.  In other words, taking over existing financing subject to… yes we can.  As long as there’s cash flow in the deal.

Subject to could be more difficult if the prices continue to drop.  Why?  Because the properties going to be over financed.  As soon as the property gets over financed, subject to goes out the window, and now we have to restructure the financing.  Usually that ends up being a short sale with the lender where all we are going to do is offer the lender less than they are owed for their mortgage.  Which is in line with today’s market and gives you a clear $30 thousand dollar profit let’s say, then you are going to be in a good position to go ahead and buy that property.  If you don’t, do it this way then what’s going to happen is you end up with a lot of ____8.41 in your inventory, and not a lot of cash flow… and I want you to have as much cash flow as you can get.

What’s the real problem?  Now that’s going to force you to have to find money for your deals.  We need to do several things.  One is create a lender list, and we are going to have to start calling.  First of all, let’s start with everybody you know.  Hi this is Janice, have you seen what’s going on in the markets these days?  Does that concern you?  It concerns me too.  I think the stock market is the silliest place to have money, in fact I think it’s gambling.  Do you have an IRA or a 401(k)?  Uh ha, are you disappointed in what it’s earned over the last four years?  Yeah, me too.  If I could show you a safe, secure place to put your money, in good real estate, well-located real estate, where you can see the profit, you can see that you have a really safe place for your money to be, and you could get a guaranteed return on your money, would you be interested?  Then the answer,  ___9.47 should be yes.

If it’s yes, you say well let’s get together over lunch.  I want to show you what my program is all about, because I buy, I sell, and I hold real estate, and I need funds just like you’ve got for these kind of deals.  Let me show you some of the deals I’ve been doing.  You set your appointment.  Go see the people and I want you to nail down some cash.  Because if buying from banks on REO’s or short sales is going to be a very common thing over the next eighteen months you better have some cash to work with.  We’ve got to kind of shift our thinking and say go for the gold, get the cash, and get the cash from folks IRA’s and 401(k)’s that they can control, and they can self direct to you.  Then once you identify your cash now we need to identify our sources of leads.  You’re going to go realtors, and you are going to make outbound calls to every real estate company in town.  You’re going to ask, is there someone there who specializes in bank REO’s.  Bank Real Estate Owned who has… and get the listing from the banks.

Then you want to talk to that agent.  You say I know that you have an A-list of buyers and I’d like to qualify for you’re A-list.  That means that as soon as you get a listing from the bank you and I both know what you do.  You go ahead and call you’re A-list, and you say look, here’s the deal, I’m not going to put it in the MLS for twenty-four hours.  If you go ahead and put an offer in right a way it’s yours if the bank accepts it.  These realtors sit on the listings and often don’t get them into the MLS for a bit of time.  Twenty-four, forty-eight, seventy-two hours and then it goes into the MLS.  They are calling their A-list buyers so I’ve got to get you and help you learn how to get on the A-List and here’s what you do.  You say, listen first of all I want to tell you that I’m not going to waste your time.  If you send me a deal I am going to give you an offer.

I will not sit on it.  I promise you I will give you an offer.  They already know they’re not going to be wasting their time with you and therefore you get on their A-list.  When they send it to you, what do you do, I want you to be immediately evaluated that lead, come up with a number that you feel is today’s retail sale on that property.  Then instantly submit back an offer and make that offer subject to inspection.  Because you haven’t been out to see the property yet.  I know, sometimes they say, Is this your offer?  It may be your offer.  You got to go out and check it out and make sure that all the plumbing is there and all the other things.  The latest trick is that they want to see nonrefundable earnest money.  I don’t want you to put up nonrefundable earnest money, unless you know that it’s a deal.  If you don’t know that then let’s be very careful what we do.  I would rather you put up a refundable earnest money of again, subject to the inspection.

Sometimes they say, this is not subject to anything.  Your money is not refundable, so therefore, on those deals you’re going to go out and look at the property.  Evaluated it then submit your offer.  On the others, let’s just submit offers.  Let’s see if we can get something accepted.  As soon as they accept it, then you go out and look at the property, and make sure that the offer you made is the right offer.  If not, you go back and say, well we didn’t notice that the roof was leaking.  We didn’t notice that all these other things were wrong with the property.  So therefore we’re going to have lower our offer, and now the offer is five, ten thousand less whatever that number is and see if the bank will accept that.  If they will, you can give non-refundable earnest money, go ahead and close with them.  You’ve already got your money lined up.  Then you’re in perfect position.

Now, the key is, what kind of money did you line up.  If it is good, long-term money from someone’s IRA or 401(k), then you can put a customer in on your rent to own program, or owner finance program volumes 9 and 10.  That can really set you up for a good long-term deal and allow you to get retail on the property.  You can also plug in the work for equity program, letting someone else… whose moving do all the work on it.  You can go to another.  This is the market that I see right now.  We’ve got to access cash.

Now, the other thing I want you to focus on is creating a wholesale buyers list.  I mentioned earlier one thing is that all these realtors have a wholesale list.  Some of them will give it to you, but others say no, I’m not going to give you my list.  Then you say, I’ll be glad to pay you a referral fee if I purchase a property and you submit it to your list.  Now, I’m not going to list it, but I will pay you a referral fee if someone off of your list buys this property.  Will that work for you?  Of course there will be a quick closing and you will get cash in your pocket.  Some will and some won’t.  So what.  Someone’s waiting.  Just do it again.  Don’t stop doing something just because one person said no.  This is one of the biggest mistakes is see people make is when I give them a piece of advice, they try it, they only tried one time and understand that the pieces of advice I give you are not going to work in all situations.  You’ve got to be sensitive to knowing that certain folks have no problem with what I’m saying and others will.  Then we’re going to create our business out of this.

Where are you going to find your wholesale buyers list?  Number one you’re going to go to the newspaper.  Every body that advertises, “We buy houses” in the newspaper is a potential wholesale buyer.  We just bought one the other day.  The guy had gotten a short sale on the property at $94,000.  He agreed to a $4,000 assignment fee.  We bought it for $98,000 all cash and the house is worth is about $169.9 after we do about $9,000 worth of work.  Now, you can see that has a real nice spread to it.  That was someone who actually was advertising.  Found us, and now he’s going to be bring us deals on an ongoing basis, because we didn’t what we said we were going to do.  You look through the newspapers, see whose buying, and put them on your wholesale buyers list, but you got to call them and interview them.

Hi, this is Janice, tell me what kind of properties are you looking for?  What number of bedrooms?  What number of bathrooms?  What location?  How much cash do you have to work with?  What is your source of funds?  How quickly can you close?  What condition of property will you accept?  Only paint and carpet or something deeper than that… a total rehab.  Tell me what you will accept and I won’t bother you with things that won’t work for you.  How many deals have you done?  Try to qualify will them.  Are you full time in the business?  Then you are really creating your own A-list like the realtors have their A-list you are going to have you’re A-list too.  People with the cash, been in the business know what they are looking at can make a quick decision.  You’re going to go for those first.

The other thing I want you to do is post on Craig list that you are looking for people to buy your properties.  Build that buyer list.  Interview the people.  You can even put them in your Street Smart website and then when you have a deal come in, boom; you can just sift that list and get your wholesale buyers.  Okay, that answers all of your questions about what I think right now you should be doing in today’s market.

Nathan and Kelly Witt say, Dear Lou living in a nondisclosure state presents a few small hurdles.  The main one for us as beginners is gaining access to comparables.  My wife is considering getting her real estate license so we are not constantly dependent upon information from realtors.  If she does get her license, can you talk us through, what else a person must do to gain access to the MLS from home?  Meaning, we’ve heard it said, a licensed agent must hang their license with a broker, pay a monthly fee, etc.  Thanks for your ongoing guidance.

Well Nat, glad you asked that question.  I’m sure you were just listening to what I was just talking about.  As you’re calling around talking to these realtors, I want you to also… there’s someone out there that is not busy right now.  There’s someone out there, who is willing to do some extra work.  That’s who you are really looking for.  Someone who will go in the MLS every day, and they have something called the hot sheets or hot list, and that’s where you can get your list on a daily basis of properties that fit your criteria.  Your criteria of course… fixer-upper, transfer, first time home buyer, needs TLC.  All these kind of things are tip offs, bank REO’s, foreclosures, must sell quickly, motivated seller, all these sort of things.

You set up your parameters that searches the MLS on a daily basis and gives what’s called the hot sheets or the latest things that match your criteria.  Then they can actually do all that work for you Nat, and send those to you.  You can take this as deep as you want to.  Some realtors will actually go out and do all of the work for you.  I’ve got one right now that works with me, who does exactly that.  Every day he gets the hot sheets, he sees which ones may be potential good deals, submits the offers,  goes out and inspects the properties determines what needs to be done, makes the list of repairs, makes the offer to the bank, gets an acceptance and of course ____20.29 fund the deal and we partner on it.

This is something that can work for you too if you find a motivated realtor…  and you’re right, nondisclosure states do make it more difficult to get information.  But if you get a realtor like that on your team then they will be glad to work on other deals to that they don’t get a piece of just because they are getting your other business.  Now, if you do go down the road of getting the real estate license, then it’s easy, all you have to do is find one of these realtors that I was just talking about, who says that they will hang your license.  What that means is you pay them a monthly fee.  Anywhere from $20-$150 a month for basically their basic services.  Being a broker cost some fees to them, and so they just want to make up their fee in that way and sometimes they even provide a desk and a phone.  It just depends on who you get hooked up with as to what they’re willing to provide.  I’m seeing brokers now working out of their home and hanging licenses and working with people who work out of their homes and that lowers the overhead even more.

John says; Hi Lou, I was considering investing in a condo unit in Florida.  That is attractively priced at $30,000 thousand for a three-bedroom unit.  I am considering and an offer between $1000 to $10,000.  My problem, a condo sale is different than what I am used to.  I am told this complex has some big problems.  I am told the homeowners association dissolved in July.  Bills are generally not being paid.  ____22.17.  I am told one investor is pulling some money for lawn care only.  The other known problem is the main water line in some of the buildings are cracked and therefore have no water.  The unit I am considering as utilities in this eight unit subdivision.  I guess you mean building.  The realtor wants me to sign a contract where the bank does not have to disclose anything.  My biggest concern I have is some credit government authority taking over the entire complex, and I would lose the unit.  Assume a title search would disclose all outstanding liens on the complex.  What things should I be aware in this scenario?  In your opinion… possible opportunity or too risky as a single unit owner.

John; great questions.  First of all understand that a condominium is a small government and that government is run by the homeowners association.  Usually a separate corporation established just for that purpose.  Now, what is important is the homeowner associations do dissolve.  Why?  Because people have not been paying their association dues and because the association does not have enough money to go after them and to pay for legal fees, and so on.  What are we going to do?  We got to be really careful, because somebody is going to have to deal with what’s going on there.  Usually the homeowner’s association.  For example, it is possible to pay the water bill.  If people aren’t paying their association dues then the water is not being paid.  If the water is not being paid, then guess what, they can cut off the entire complex.  This could present a huge problem of course if you move in a client.  The other thing is that this complex is in such turmoil that it’s likely to stay in turmoil for a while.  Now, that’s good news for you because now you could find out one unit but many units in here.  I got to be honest with you John, $10,000 for an apartment unit…a three-bedroom apartment unit is not bad money.  That is really, really, really, really, really cheap, and if you could buy it for even less that’s even better.  You want to look at the condition of the property.  Absolutely.  You want to look at these cracked pipes may be the responsibility of the association.  It really depends on the condominium association, established guidelines or rules they recorded on public record.  You can get that pretty easily.  You can find out what they have agreed to do and you can even find out what the fees are.  You may even want to be the one to resurrect the association.

You can charge huge fees as a manager of a condominium association.  In any case I want you to be very, very careful John and only put money up that is money you can afford to put at risk and afford to put out long-term.  Now here’s the other thing to consider, because it’s a condo association they have the ability to essentially tax everyone that’s in the building by saying we are going to replace all these water lines, we are going to fix this landscaping, we are going to paint the buildings.  We are going to do all these wonderful stuff and everyone whose in the association has to pay $10,000 fee.  Basically a capital improvements fee.  Guess what, a few people can vote on that and all of a sudden everybody have to pay it.  So be careful when you get involved in condo associations.  Because that little government can tax you in a way that you might not want to be taxed.  Look at the other aspect of this too John, how is the neighborhood.  Is the neighborhood going up or down?  Does the neighborhood have a good future?  If it’s a bad future?  It’s probably not a good idea to go there because your management is going to be much more than the value that you get for it.

We’ve got a money to fund question from Brian Moussa, who says; Hi Lou, hope all is well.  One, why does a lender charge points instead of increasing the interest rate.  Example:  $100,000 thousand loan at 15% versus 12% +3 points.  Brian, good question.  The 3 points are paid upfront.  That’s essentially upfront profit.  The interest rate is earned over time for however long that loan is out.  Let’s say that someone lends at 15% but you pay it off in six months.  They didn’t make much money at all.  However, if somebody lends at 12% +3 points.  They got a guaranteed income instantly when you buy and then they got their 12% for however long the loan is out.  Two, you say currently I get a line of credit through Brookview at 14.99% + 4 points and a pre-pavement of 1 point per year.  I had personally done over 20 deals.  At my day job I do several multi-billion-dollar real estate deals every year.  In addition to my experience I have an 810 credit score.  Can I get a better deal elsewhere?, and if so where?  Brian, absolutely you can get a better deal elsewhere.  First of all you heard what I said earlier in this call about getting very proficient at raising money.  At your job you’ve got folks right there that have IRAs and 401(k)s, who can move that into a self-directed account.  I want you to talk to them about your business.  What you do and show them a few property acquisition worksheets, where it shows how much profit you’re going to be able to make on that deal or that you have made in the past on other deals and then ask them.  Do you want to continue to have to keep your money in the risky stock market or would it be better for you to put your money to work in safe secure real estate, where you know what your return is going to be?  Ask the question.  Let’s see who shows up.  But I guarantee you… you just keep flapping your lips and talking to people, and you’re going to find some people with some cash, and it’s going to be a lot cheaper than 14.99% + 4 points.  The third thing I would suggest is go and place an ad in the newspaper that says note for sale, or mortgage for sale.  Just see who shows up because whoever responds to that has cash otherwise they wouldn’t be responding.  Then you say, well let me tell you a little bit about my business, and then when can we get together and so on and show the whole thing.  Don’t even mention the note again.  Because the note is the new one that they’re going to give on the property that you’re about to buy.

Now, Carol Holcombe says… a question about paying bird dogs.  Hi Lou, I have a couple of bird dogs helping me out.  One thing is that they have magnet signs on their car advertising my business.  Oh yeah.  I love it.  I need some help figuring out the best way to compensate them.  Are there laws in Georgia that affect this?  Somewhere, I learned that I can’t pay based on a deal that closes since I am not a licensed agent.  I look forward to hearing your answer on this.  Thank you for all the great info on these calls.  Absolutely Carol.  First of all, we have determined what you are really doing.  A real estate agent is a transactional person that deals with a seller and with a buyer and they get a commission in between.  What you’re doing is different.  You’re an investor.  Investors buy property and sell property, and you get a profit in between.  That’s a different position.

We have the right to have people go and market for us.  Just as realtors can market by running ads in the newspaper, and putting signs in the yard and so on.  We can do the same thing.  Folks that are promoting us are essentially promoters or marketing folks, and therefore we don’t pay them a commission, we pay them a marketing fee.  Essentially as if they had a little magazine, and we were paying them to put our ad in their magazine.  No different than if Pepsi paid you to wrap your car in one of those auto wraps that said Pepsi all over it.  You are driving around town promoting Pepsi.  Well, this is the same thing.  They are driving around town promoting you and your business.  What I recommend is a fixed dollar marketing fee that you pay for each deal that you buy.  That to me is not the same as a real estate commission.  Now different rules apply in different state.  There could be some specific restrictions to what I just said in your state.  Carol, I know you’re in Georgia so those restrictions don’t exist for us.  Folks in other states, I want you to know that there’s typically no restrictions to paying someone a marketing fee.  If there were then that means we could not advertise in the newspapers.  We could not buy billboards.  We could not advertise on the radio or the TV.  So generally that’s going to work for all of you.

Terry Moore Miller has a question on marketing.  He says; Hi Lou, I am doing a few marketing campaigns, so I can work on actual deals when I get to MDM in October in Georgia.  You got that right, Terry Moore.  A lot of my mailings are being returned because the property owners have abandoned their properties.  I was almost about to discard these post cards when I said to myself.  Self, you must know how to capitalize on these.  You should ask him.  So I’m asking.  See you at MDM.  Terry Moore is from Massachusetts.  Here’s what I recommend you do, those folks obviously as you say have abandoned their properties.  So now all you want to do is go on your comp wiz, which is the backside of your Web Wiz Websites from Street Smart and click on your comp wiz, and let’s find out about that property.  Put in that address, and let’s find out what comes up.  Who the lender is, and as much information as you can find out.

You can even find out who the owner is.  Well, if it’s an abandoned property, guess what they still have the deed on that property.  They will have that deed until the day is actually foreclosed on by the bank.  What you don’t know is whether it already has been.  It may have already been foreclosed, and therefore you could be wasting your time talking to the seller.  If it hasn’t been foreclosed on then you’ve got a chance to still work a deal through the owner of that property.  Get control of the deed to it and then go back to the lender and do a short sale.  Now this is a lot more work, Terry Moore.  I got to tell you that there are different levels of work with each type of offer that you make.  This is one of the hardest sides of the business yet.  There’s an awful lot of profit available on deals like this that you can short sale with the bank.  The bank, guess what probably  already knows that that property has been abandoned because they send folks out to confirm what the condition of the property is his changed the locks if it’s been abandoned and so and.  If you’re working with the seller then you can go back to the lender and say well, if we are able to work something out my customer will be able to move back in.

So if you are able to modify that existing loan, that’s the real goal.  But if no amount of modification is going to make that deal work, then you are only going to be able to do a short sale where the banks going to accept less than they are owed for their mortgage.  Then we are going to play that game for a while.  Let’s see if you can’t create something from those leads and the first place as I said, you are going to start is go on your comp wiz to find out who those owners are and if you’re going to be able to find them.  How else can you do it?  First start talking to all the neighbors is a good way.  Because the neighbors often know where the people moved, their telephone numbers and so on.  If not, you will wait until it is foreclosed, and then you will be able to know that that’s already a vacant property and start watching for it to come up on the foreclosed and then you can even bid at this steps to purchase the property, or after the steps… shortly after the steps.  I’ll be talking a lot more about that at MDM October.  By the way those of you…

Terry Moore has already signed up for it… if you are on the call and have not yet signed up for Millionaire Deal Maker in October, be sure and do so.  October 23rd through the 26th, because we cover a tremendous amount of information about how to structure deals, which is the most profitable part of this business.  I am amazed at how many leads get thrown away simply because people didn’t have another way to structure that deal.  We are going to together create deals and structure deals in fact, I want you to bring leads to class.  We are going to work there are in class and expect you to make some serious money while you’re there.

Now, the next one is about paying off liens.  Hi Lou, how do you pay off someone else’s liens on a home if they are not your liens?  Do you always be there written authorization, or will the creditors negotiate with you if you’re willing to pay if they released the lien.  The lien is really the creditors’ lien.  The lien owned by the creditor.  The creditor can do anything they want to with that lien.  They don’t need any permission of the person who owns the money.  They just want to get paid.  You can essentially purchased that lien at a discount and leave it against the property.  Then when you’re able to work through all of the liens then you can close on the property.  One thing is for sure, I want you to be careful not to release any money until you know exactly where you are going with that deal.

For example: what if one person had a $10,000 lien, and you get them down to $1000, but all the other lien holders do not accept any discount at all.  Did you really get anywhere with this deal?  The answer is probably not.  You want to be very careful that you don’t commit to anything until you get everything.  You can put an option to buy the lien (option).  Option from volume nine and just merely put the option against the lien that you are optioning to purchase it for $1000 subject to getting acceptance from others.  Then you exercise your option when the others agree to their numbers.  By the way,  I wouldn’t start at $1000 either.  Probably start at a couple of hundred dollars and go up from there depending on the quality of the property and the amount of equity that you’re going to create by getting rid of these liens.

_____ 38.28 Janice has a question.  Hi Lou, what do you see happening in the short sale industry with regards to deficiency judgments?  That is whether or not, the banks pursuer them.  Do you see any changes, i.e. more or less banks pursuing them.  Also, do you see Country Wide softening any with regards to short sales?  As always, thankful for your thoughts.

Okay, Janice here’s what I see.  Banks are right now are in complete turmoil.  They can’t even deal with what’s on their desk.  They can’t deal with anything that’s in front of them.  Do I see them pursuing deficiencies?  Absolutely not.  With that said, all lenders are different, and some lenders are in a much better position in today’s market than others are.  But generally speaking, I’m going to say no.  They just aren’t going to do that and the sellers should understand that too.  It’s very unlikely that they will submit.  Understand this too, that in most states receiving a deficiency judgment is not an easy task either.  There actually has to be a lawsuit filed.  They have to get it heard.  It has to be done in Superior Court.  There are delays, there are costs, and there are all kinds of things to be able to obtain that deficiency judgment in the first place.  In most states, the deficiency judgment is not automatic.  Therefore there has to be a legal proceeding.  Now is the lender going to tell you that?  Absolutely not.

They are going to do everything they can do to threaten and cajole the borrower into paying off that lien.  They are definitely going to threaten the deficiency judgment.  But you’ll want to look up your laws to find out just how easy it is to get a different judgment.  I bet if you picked up the phone and called five realtors attorneys they will tell you, they’ve never don a deficiency judgment, and don’t even know how to do one.  That’s how rare they really are unless it’s an automatic in your state.  To finish you question about Country Wide softening with regards to short sales… absolutely.  They are actually making out bound calls now to try to work out short sales.  So yes, that has now started.  There are a lot of opportunities for deals coming down the pike.

Alright, we’ve got ____40.58 from Fort Mohave Arizona, who says; dear Lou I’m stuck on HUD…  and no that is not old Paul Newman movie  HUD one settlement statement in regards to a short sale.  I don’t want to blow all my work by getting this paperwork wrong and looking like I don’t know what I’m doing.  I can see what the sections of for… to paint a picture of what buyer and seller need to bring to closing to transfer the title of  property.  But, then I’m totally lost.  If you want to short the second at your ____41.40, it would be them who are named in section F…right?  The lender name and address section, patients, mine, etc.  Help.  Reductions in amount due to seller.  Sounds like subtraction.  Reduction again is repeated near the bottom on 520 and asterisk is not the same as line 600.  Note that is it again.  Something else down there.  Okay 501 through 507.  507seller is scraping the mayo jar.  This one is zero.  He has no excess deposits.  Before I continue on with this lets  first get this clear.  When you are submitting a short sale to the lender, they don’t care about interest pro-rations they don’t care about property taxes.  They don’t are about any of those things.  You can use these letters…POC.  Which is paid outside of closing.  Use it over in the section that is not the columns section, but you can even spell it out on page 2.  But on page 1 over in the rows section you can just merely put POC and then not put an amount in the adjustments for the property taxes and all that sort of thing.  In other words its going to be a really clean HUD one closing statement.  It’s going to show contract sales price, which happens to be the amount that you the buyer are paying for the property and then any deductions from that.  Which would mean property taxes that have been paid by the seller.

You are going to put POC there so you don’t even have to figure that number out.  Don’t worry about anything thing else.  Just show a pretty barren closing statement.  If you are trying to short the second, you’re also going to need to shows the first.  If you are buying subject to the first, then you will fill out subject to line.  But if you were buying the first for cash, then you would merely put pay off to Country Wide and then put that amount in the column that adds up.  Lets say that you’re paying Citibank $1000 for their second you are paying Country Wide for $110.000 for their first.  It would say Country Wide $110.000 on the first and then it would say pay off Citibank $1000.  Then you would add the two together, and _____ 44.31 that would be $101,000.  That should make it clear that you don’t have to over complicate this process for yourself.  To go on you say seller shows that the seller is receiving zero.  That is absolutely correct.  Some lenders will allow the seller to get, say $1000 maybe $2000 but no more.  Be careful to show that as a zero.  Now, Lou, is this not the playground area of short selling arena right here.  On the first one I send to the second lender as the shorting of $87,000.  Would I put zero?  No.  You got to put an amount that you’re going to pay them.  They are likely not going to short for zero dollars.  Along with the story of that is what they are getting because they are getting foreclosed by the first.  I already learned that I want slam dunk them and go for the game point.  I came to you… always Lou… could you please expound on this section.  There is only $1000 to kill it off with.  Then 601 gross amount due to seller,  line 420, is at the picture zero again in here.  Yes.

So the second doesn’t want seller to profit.  Right.  Exactly.  Actually the first doesn’t want the seller to profit.  The second doesn’t want to seller to profit.  You can’t show the seller as receiving anything.  The other question you’re asking is the 600, 601, 602.  What _____46.26 is mentioning is that HUD1 one closing statement is split down the middle into two parts.  There’s a sellers reconciliation, and then there’s a buyer  reconciliation.  The purchaser’s reconciliation is on the left-hand side of the HUD1 and the seller’s reconciliation is on the right hand side.

So what happens is, for example, if the seller has already paid property taxes for the rest of the year.  Then they are entitled to a credit for the property taxes that they pay, but have yet earned.  So, that becomes a credit on the seller or right hand side of the statement, and it becomes a charge on the left hand side of the statement to the buyer.  Essentially, the buyer is paying the seller for the pre-paid property taxes, which are now being prorated.  That is what you are looking at.  You are looking at …okay who I’m I today, I’m I the buyer , okay I need to pay attention to the left hand side of the HUD1.  If I’m the seller today I pay attention to the right hand side.  Those adjustments of course at up things that are on page 2 of the HUD1.  It may be a list of all the closing costs that it may cost to close that property out that showed up on  page 2.  That’s added up and then all of that comes over onto the front side of the closing statement.  Where it lands on the front side depends on whose paying the closing cost.  That is why it is split up on page 2 between buyer and seller so that the amount can land on page 1 wherever it needs to land based on whose going to pay the bill.  This sounds like it’s going to take care of you _____48.27.  Thank you for calling me the cutting edge.  I think based on the rest of your question I’ve covered that for you.

Lou and let me add back in volume 6.  Starting on page 93 in volume 6, which is borrowing.  We discuss the HUD1 settlement statement and starting on page 96 we go ahead and we tell you what every line on the whole HUD1 means.  Go to volume 6, starting on page 93, and it runs through page 99.  It is not that long.  It is about six pages… gives you a lot of information.

John has a question, Hi Lou, I am considering my first section 8 resident in Florida.  Does your lease work with section 8 residents?  Some things to consider are being paid on the 25th, rent discounts, maintenance etc.  Okay, here’s what you do John.  The public housing authority there has their own lease agreements, but here’s the good news, they use that only when the landlord doesn’t have their own lease agreement.  So you’re going to use mine.  In fact, you could submit it in advance, and if they object.  You can take out anything they object to.  Do they read it?  No.  Do they even know what it says?  No.  Generally speaking, section 8 says look, the deal really is between you and the tenant.  As long as the tenant will sign it, we have absolutely no problem with it.  We just want to make sure that there is a rental agreement and that one has been executed on the property.  So you either use mine or you use yours.  That is why I suggest that you go ahead and start with mine.  What do I use on my section 8 rentals?  Guess what, mine… and I don’t have any problem at all with PH8.

Next question, I am advertising at $1250 and her award is $1300.  Can I upgrade in some way to get the higher amount, such as a storage unit, microwave, etc.  Also, I normally charge $50 a month if a resident has a guarantor.  Is this permissible with section 8?  Well John, I hate to welcome you to the world of reality, but let Lou be your savior and coach and guide you through this process.  Section 8, while the award might be $1300 they deduct from that.  Now let’s say that in the area where this property is located that the going rate, and what they call market rants are thousand dollars.  Guess what, you’re not going to get your $1300.  They are going to adjust the rents down based on market rent.  Then welcome to another part of the world, they are going to adjust down some more.

For example, if you are not providing the refrigerator.  They are going to take off for that.  If you are not providing the electricity to the unit.  Then they’re going to take out the amount of charge against the $1300 for utilities, and if you’re not providing water, if you’re not providing gas, if your unit is a electric versus gas heating, and so on and so on and so on.  What you want to find out from the public housing authority is, what is the net rent they are going to pay on your unit.  It’s usually based on the number of bedroom.  You are just going to have to find out what their deduction are against someone’s award.  How much exactly is that?, and How much are they going to pay?  Sometimes you can give them the address and they can tell you what they’ll pay in that neighborhood.  But other times, you literally don’t find out until after you accepted your new client, and section 8 sends you the contract back that says, what they are going pay.  I suggest very strongly that you go to the public housing authority, or call them on the phone and interview them at length about exactly how much you are going to get paid.  Here is a little tip John.  I don’t do any two or three bedroom properties on section 8.  I only put four and five bedroom properties on section 8, and only in the neighborhoods I want to do that in.  Why, because I can more from section 8 than I can get from the market.  That my friend is the only reason you should consider doing section 8, is when they will pay you more than you can actually get from the market.

We have a trust question from, no name.  Umbrella Liability Insurance.  Lou, how would you say is the best way to have an umbrella policy in place to cover us from any liability on properties held in trust?  Before holding the properties in trust, the insurance companies would list the property on the policy, and now there seems to be a little resistance since they are held in trust.  What are you finding is the best way to approach the insurance company on this.  Their argument is that we do not actually own the property, the trust does.

Well that is correct, however, you are the beneficiary of the trust.  While there may be a claim and a loss, then it would be the trust on your behalf filing for the claim, and that you as the beneficiary would recede the money from the claim.  It is merely that you have a third-party trustee.  You set up your estate so that if you were to die, then the property would pass to your heirs and avoid probate.  Therefore, you’ve got this third party that actually is the titleholder to the property.  But you are the one whose actually qualifying for the insurance and again, if there were to be a check it would not go to the trustee it would go to you.  Tell them that you would be glad to give them the last page of the trust showing that you have signed the trust agreement as the beneficiary to prove to them that they should have absolutely no problem in putting all of the properties under one umbrella policy, which is your umbrella policy.  Because you have actually dealt with all of the disclosure to the insurance company and they should have no problem with that.

___55.13 has a question.  How do I buy umbrella insurance for the rental.  I think we probably covered that one.  When I call Beth she does not sell car insurance if I have a trust for car who is in their name of the insurance and the trust or someone else if they want a real person.  Okay, the insurance would be in the name of the trust.  But then, on the insurance it will be in your name as well as a driver of that vehicle.  So they are going to be insuring the vehicle and you.  The same way would happen on the real property.  When you have real property then,… and that’s realistic that is, then you’re going to be listed personally ____56.10 as their interest may appear.  ______56.13 third question is, how do I handle a check that is payable to the trust.

Oh.  Okay, first of all you are going to have set up a trust Bank account.  When you set up the trust bank account you are going to advise the bank that from time to time, as a trustee you do have checks come in, that have another name on them and you are trustee for various trust and therefore want them to accept those for deposit purpose.  If it is for deposit and the check clears the bank is typically okay with that.

Brian says, my state of Massachusetts requires certificate of trust to be recorded when transferring a property into trust.  What is the same equivalent form in your paperwork?  Can I change the name of affidavit of land trust to a trustee certificate.  Okay, what we have that’s equivalent in our paperwork is, the affidavit of trust.  Just as you suggest, it could be a replacement for a certificate of trust.  I kind of do both.  We mentioned the affidavit of trust in the deed.  But then, your state also has a certificate of trust.  Go ahead and file that too.  So it takes the affidavit of trust takes care of putting the trustee’s powers on public record and giving the trustee authority to sell.  But the certificate of trust is something else merely from a recordation standpoint.  The state wants to know more about who the folks are involved in the trust.

Then you say, on your auto-fill trust documents, what do we type in, if we are not going to use a director?  Again, you say on your auto-fill trust documents, what do you fill in?  Just leave it blank and it will print blank.  It doesn’t require that field to be filled in, in anyway.  Then, three, when using your auto fill docs they create large spaces in between words when I enter text, and I do not want this to happen.  How do I prevent this.  Am I doing something incorrectly, or is there an option I need to change.  Brian, what I want you to do is go to the directions for your auto fill, and it tells you exactly how you can customize your trust documents.  You’ll go to the top, you’ll unlock the documents.  You’ll go in, you’ll make your changes just the way you want them.  You’ll go back you’ll lock it and then you print it out.  That should do it for you.  Again, your instructions are pretty clear.  They are on your disk, so all you have to do is open up the instructions, and it tells you exactly what to do.  If you have any problems other than that.  Please fax us directly and we will have Bruce respond to you to give you any further answers.  But it’s likely the answers are right there.

We had a few questions left over that will be put on to the next call.  We’ve come to the end of this call.  My goodness, we covered a lot of distance today didn’t we.  I’m so glad that you asked me about today’s market and all the excitement that we are going to have in taking advantage of this market.