Welcome back to another exciting edition to where I’m going to be giving you a flip tip for your business. In this edition that I wanted to cover for you is talking about distressed properties, going after short sales. A lot of people, myself included, we went after a ton of short sales from 2008 until 2011, and we still go after them but in a much different capacity. What I mean by that is let me just explain how people used to do them and how we’re doing them now.
From 2008 to 2011 we would find the individuals that are in a distressed state, the owner of records, and we would find them, we would contact them with a real estate agent, we’d let them know that we would be able to purchase the property at a discounted price and that everything would be negotiated with the bank. We would be doing all the negotiations, getting the bank to come in at whatever price they felt was appropriate. They would have individuals come out from the bank, do what’s called a BPO, a broke price opinion, and from that they would go ahead and give us an amount that they would approve the property at. What we would do is we would have an end buyer already secured, ready to go, and we would do what’s called an A to B, B to C transaction to where we would close on the property same day, we would get paid same day and get completely taken care of.
What happened was right around 2010, 2011 banks started changing things up. They’d like that investors were getting involved, but they didn’t like seeing some of the profits that we were making. What they did was they made some tweaks to their approval letters. A couple of different things happened. Line item number 10 that popped up on the short sale approval letters were for what’s called a deed restriction, meaning that we could resell the property within a certain period of time. What that really meant was, “Hey, we’re really pissed off that you guys are making a crap load of money on these properties, and we’re going to be dicks, even though we just got paid $787,000,000,000 that we don’t have to repay, but we’re going to be really cool about this and we’re going to put these deed restrictions on there.” That’s kind of like an investor term. That’s essentially what it meant.
Deed restriction is most of the banks were putting on that you couldn’t resell the property for 30 days, and some of them nowadays are putting 90 days. That means you have to hold the property. You wouldn’t be able to resell it same day, which was the A to B, B to C transaction. Now you have to hold it until either the 31st day or the 91st day. A lot of people got out of the game once that started happening just because they were like, “I don’t have the capital to do this,” so a lot of investors that really didn’t know exactly what to do got out, which opened the door for individuals like myself that saw an opportunity.
The opportunity was you could still get in. It’s just we were not really focusing on it as much as we did. We weren’t sending out a bunch of letters to folks, we weren’t doing door-knocking. We weren’t just fully going out and finding these folks. We would just scour the MLS for the properties that were already listed. We just put our offer in, and we’d just sit back, wait. While we’re doing that, we’re having other properties coming in. On other videos that I’ve talked with mold damage properties, fire damage properties, estate sales and now we’re discussing on this video short sales, you just sit back, wait and let the rest of your business bring in the deals that you need so that you don’t just wait on one particular source.
Now, obviously you can get the short sales from real estate agents. They have access to the MLS. If you want to kind of go out and do some of this on your own and have a real estate agent be a part of it with you and you give them the listing of the properties, you can go down to the county recorder’s office and look for properties that have recently went into foreclosure. What this is going to be called is notice of default, NOD, or lis pendens. If you’re in a deed trust state, it might be worded a little bit differently, but most of the legal wording, the verbiage, is lis pendens or notice of default. You’re going to have your opportunity to get involved with these properties. The best way for getting involved, there’s three different ways that I would recommend.
You can do a skip trace. You can use a search like Spokeo.com or TLO.com to get their direct contact information. You can get the phone number of these individuals that have recently been served a notice of default of lis pendens. Keep in mind, these people, when they get served with a notice of default or lis pendens, they are going to be at least 90 days behind, so three mortgage payments they are going to be behind. Just keep that in mind.
You could either send them a letter too or you can go and do my leave behind method, which I just leave behind a post-it note that says … The first line says, “Call me!” Phone number, so your phone number, second line. Then third line is going to be your name. Very short, very straight to the point. I do a yellow post-it note. I just post it right on the door. Obviously if the house looks vacant, I’m not going to leave anything, but I’m going to mark that down and do a reverse search by doing a skip tracing search on that particular property to see if I can find the people to let them know, “Hey, you don’t have to just let the property go into foreclosure. We could potentially do a short sale on the property.” Huge opportunity there.
Another opportunity that you could reach out to is attorneys. Some attorneys know right off the bat which amount of their clients are facing difficulty in repaying the mortgage, so they could reach out to you, let you know, “Hey, Mr. And Mrs. Jane Smith, they are in financial trouble right now. They want to file bankruptcy, but I am letting them know they could do a short sale on the property. That would help them out, and then we could do a bankruptcy on the remainder part of their estate.” A lot of people might in credit card debt, car loan debt, and then the mortgage on top of that is just gigantic, and student loan debt is huge as well. It causes a lot of problems for folks. Just keep in mind those are three sources that I would recommend.
You could also, as a fourth here, a bonus, is you could connect with local wholesalers because believe it or not, wholesalers want nothing to do with these short sales. They don’t want anything to do with them, and you could pay them a referral fee to get that taken care of. I would recommend you do something like that. You could connect with the individuals that put up the “We buy houses” signs, and those are folks that you can reach out and connect with, and those could be individuals that could be really good referral sources. Typically what I do is I pay them a 10% referral fee for deals that we do end up closing. If I make $10,000, they’re going to get $1,000 just for sending me that lead because a lot of people do call them, and they only want to work with people obviously they could do quick flips with.
That’s fine. That’s their business model. Our business model might be a little bit different, okay? We may want to take those short sales, have the real estate agent list it and have the real estate agent do all of the negotiations. We just kind of wait, okay? We put our offer in. Our full intentions are to close at the price that we put under contract, okay? Don’t ever put under contract a deal that you don’t plan on full performing on. Once that contact is executed, if you don’t perform, if the inspection is fine, the appraisal is fine, title is fine, then you don’t perform, that’s going to look really, really bad. Legal issues could potentially follow.
I don’t want you to get in any trouble though. Make sure you’re always consulting and having an attorney on your side, okay? I turn it over to a real estate agent because they are licensed and bonded. I would recommend just having them do that. This can be a really great avenue for you. Even though there’s deed restrictions, this is going to be more or less an opportunity for individuals that are doing rehabs. You can do some really cool tricks if you’re looking to wholesale, but that would take up a whole different video, and depending on what type of feedback I get, I could create another video on how to do the A to B, B to C transaction still even if there is a deed restriction on there.
Now, one thing I really want to point out before I go ahead and end this flip tip video, you can still do A to B, B to C transactions, but the problem here is you can’t have the B to C transaction over 20% of what you are buying the property for, okay? It can’t be over a certain dollar figure, so just keep that in mind. You can still do A to B, B to C transactions. It just can’t be 20% over what you are purchasing the property for, okay?
Other than that, I wanted to leave you with that. Hopefully this is something that you’re enjoying, something that you’re getting a lot of use out of. I wanted to bring this to you today right now so that you could start implementing it within your business immediately. Don’t wait. Go out there, make it happen. This is on Facebook, this is on YouTube, this is on my blog. Leave me a comment below please. I am wanting you to do that so that you can let me know if this is good stuff, you’re enjoying it and I’m really giving you something that you could start using in your business.
If you’re extremely busy, make sure you at least leave me a like. Leave me a like. Facebook’s got that, YouTube’s got that, I’ve got it on my blog. Make sure you at least leave me a like. If you’re watching this, you’re getting something out of it, let me know. The more love I get from you, I will start creating even more of these flip tip videos that will be extremely helpful for you and your business. Go out there, make it happen.
Leave a Reply
You must be logged in to post a comment.