Short Sale Manifesto v 2 | Short Sale (Real Estate) | Foreclosure

The Short Sale Manifesto 2.

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The Revolution

Josh Cantwell

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Table Of Contents
Getting Your Head in the Game ....................................................... 7 What is a Short Sale ..................................................................... 9 The Mortgage Meltdown ............................................................... 14 Lender Updates ......................................................................... 16 Step-By-Step: How to Negotiate a Short Sale and Make Money .................. 18 The Option Contract Revolution ...................................................... 27 Notice of Option Contract (or Memorandum) ....................................... 30 Equitable Interest ...................................................................... 30 The Secret ............................................................................... 31 Understanding the Option Contract and Closings .................................. 32 Taking the Wrong Path (about Land Trusts) ......................................... 35 Inherently Flawed ...................................................................... 35 The Top 9 Mistakes New Short Sale Investors Make ................................ 36 The Real Estate Primer & Referral Marketing ...................................... 47 Working with Real Estate Agents ..................................................... 53 The Realtor Renaissance ............................................................... 54 Why Work with Realtors? .............................................................. 56 Short Sales and the FICO Score ....................................................... 58 The Short Sale Revolution ............................................................. 61

Much has changed since March 2007 when the first Short Sale Manifesto was written. . it means the short sales are THE INVESTING STRATEGY FOR TODAY’S MARKET. What else does this mean? It means that short sales are not only an investing strategy for today’s market. At the time of this writing. it’s It means that short sales are not only an investing strategy for today’s market. Are there secrets? Perhaps. Sub-prime loans were drying out and demand for houses was beginning to wane. I’m always suspicious of anything that sounds too 4 . Is there a code to achieving financial success in real estate? Yes . Few people had any idea what was waiting for us around the corner.0 – The Revolution. prices continue to decline in just about every part of the country and in some areas are projected to drop a total of 45 percent from their 2006 high! What does that mean for the market? It means there are a ton of houses upside down. Since early 2007 there have been a record number of foreclosures. it means that short sales are THE INVESTING STRATEGY FOR TODAY’S MARKET. and a record decline in housing values.0: The Revolution Introduction My name is Josh Cantwell and on behalf of my business partners Jeff Watson and Greg Clement I’d like to welcome you to The Short Sale Manifesto 2.The Short Sale Manifesto 2. When that report was written the mortgage market and housing values were topping off but not yet plummeting. called hard work and diligent study. The original manifesto has been downloaded ten of thousands of times and was responsible for launching Strategic Real estate Coach. The purpose of this report is to provide an outline that many have found useful in building their own real estate investing businesses. At last count there were over 10 million homeowners who owed more in mortgage debt on their houses than what their properties are worth. .

This report will give you structure and help you to shorten the learning curve if you decide to invest in shorts sales. I hope that you do. lenders. is faced with some tough decisions that will make each of us individually accountable for how we live day to day. The U. That’s also exactly why more real estate millionaires have been made in down cycles rather than up cycles. Those days are over. Those who are resourceful and creative will enjoy the fruits of their It’s human nature when one gets fat and happy to get a little lazy. and that’s where we as investors step in. buyers. they become resourceful and they create solutions to problems that demand attention. and I couldn’t be more excited. sellers. Today’s real estate industry has a few problems that need fixing. When people become accountable. 5 . Those days are over. brokers and agents: there’s a lot to know. so let’s call them insider information that you would know only after spending several years working with banks. Things are changing fast on many levels.0: The Revolution dramatic.S. the market will self correct and put you on a diet whether you want one or not. when millions of Americans lost their homes. The changes in the real estate market are akin to those of the Great Depression. I’ve called this latest version of The Short Sale Manifesto the “Revolution” because that’s what we are experiencing. It’s human nature when one gets fat and happy to get a little lazy. The reassuring (yet painful) thing about a free market is that if you get too fat.The Short Sale Manifesto 2.

few investors or real estate agents knew anything about short sales. Instead of forcing my business model on my market.0: The Revolution creativity and become real estate millionaires through this down cycle. the only way to make money was to find houses in foreclosure. When the original Short Sale Manifesto was written. 6 . Where were all these gurus a few years back when making money in real estate was easy? When I began buying short sales in 2003 I did so not because I wanted to. buy them from the bank at a steep discount. since July of 2007 I have coached and trained over two thousand real estate agents and investors.00 Resale: $165.00 Total Discounted Payoff: $145. but after several months in the business. Likewise. In my town.09 then I have bought and sold several hundred short sales.000. I may have started out with a few extra pounds.The Short Sale Manifesto 2. With the dramatic changes in the real estate landscape during the past few years. I let the market show me the business model I needed to achieve success.000. You see.138. it’s now rare to find an agent or investor who isn’t an “expert” in this area. my community led the nation in foreclosures long before the word “sub-prime” became the bogey man that popped yet another economic bubble that people thought would go on forever.00 Profit: $24. and sell them below market value to an end buyer. I was starving and I needed to find a way to make money outside of what the gurus at the time were teaching. Since Woodbridge Case Study Number of Mortgages: Two Total Payoff: $234. but out of necessity.395.

Josh. Dee Reller where property values and demand are still increasing. they will never go away.S. chances are you are coming across quite a few leads . they actually respond! I highly recommend their coaching. from 2003-2006. And while foreclosures will at some point decline (hopefully). you will acquire many skills that will easily translate to other areas of real estate. Greg. I had a bad experience in another coaching program.. Getting Your Head in the Game In any job it is easy to get caught up in the day-to-day struggle and forget where it is you 7 . and using in their business.S. This was a major factor for me since I’d been having some trouble in Ohio with closings. Ohio. are in some state of foreclosure. you stand a good chance of making some great money along the way. you need to know about short sales to be a successful real estate agent or investor. more complete program with more sincere or giving people and more knowledge in the short sale business than SREC..nearly 1 in every 6 properties with subprime loans across the U. exceeding my expectations once again. What was once a niche for a few investors who enjoyed the problem solving aspect of short sales has now become ubiquitous in the real estate profession. I was so impressed that I signed up for their coaching program. Their concern and sincerity in helping their students is very real and genuine. Even if you have no interest in short sales. Prior to getting involved with SREC.The Short Sale Manifesto 2. Each coaching event gets better and better and this past weekends event was no exception. . I got more than a few gold nuggets. When you’re in the midst of a deal and need a life line.. Jeff and the whole SREC crew really embody the saying “Tis Better to Give Than Receive”... They are constantly giving more and more to their coaching students.. This is a business that if you learn. are in some state of foreclosure.. Not to mention. they may even be the majority of leads you are obtaining. Either the homeowner has missed their first payment and they are in default or they are being sued by their lender or the property is already bank owned. Keep in mind that I started investing in short sales during the up turn in the market and I had many friends who were investors doing short sales in hot markets . They are an open book and tell us everything they are working on. planning. However. I went to their training event in Las Vegas in January with very high expectations. They give more away for free than most give in their paid programs overall. As we sit right now nearly 1 in every 6 properties with sub-prime loans across the U. . The community they create among their students is amazing as well. I had heard really good things about them and they were operating out of my state. You’d be hard pressed to find a better. So.. They don’t hold back. they are actually available to answer questions.0: The Revolution Unless you are working in one of three communities in the US I was really skeptical about joining another coaching program.

It’s also too easy to forget the reasons why you undertook the responsibility of running your own business – for that is what you are doing.0: The Revolution ultimately want to go. In beginning any business.The Short Sale Manifesto 2.00 Resale: $192.923. For many investors. Bellflower Case Study Number of Mortgage: Two Total Payoff: $315.00 Profit: $13.000.000. You may have also heard that more people across the U. In other words.00 Total Discounted Payoff: $177.20 Is it to achieve financial independence? • Is it to create a steady source of positive cash flow? • Is it to leave behind a legacy? • Is it to get out of your job? • Is it to show the doubters that you can do it? • Is it to have the freedom to go wherever you want whenever you want? Once you begin investing full time you will be tested. why are you interested in real estate? You probably heard it’s the very best way to make money quickly and you want a piece of the action. it’s important to ask yourself why you are taking on this responsibility. it comes down to choices we each make in how we wish to live. become millionaires from investing in real estate than any other industry. So you are convinced that real estate can be your treasure chest.244. There will be days especially at the 8 .S. it’s building a large company that will earn maximum dollars with several employees and offer a lifestyle of the “rich and famous. So let me ask you…what lifestyle do you want? For some.” For others it’s building a stable business that generates income with few headaches and plenty of time for family and friends.

This allows the property to transfer to the buyer even though the lenders did not receive the full amount that they were owed. “Why not me?” What is a Short Sale? The easiest way to explain a short sale is to describe what happens when a short sale occurs.The Short Sale Manifesto 2. At this very moment is when you’ll have to ask yourself again “Why am I doing this? What’s the end goal here?” Remember why you got in the game. do you just sit there and stare in envy or do you ask yourself. This has become common in today’s real estate market.0: The Revolution Anyone who is growing is constantly setting their expectations high and trying to achieve things they never thought possible. Set your goal and expectations extremely high. Short sales usually take place during the foreclosure process when a buyer is trying to buy a property and the purchase price will not cover the payoff of the mortgages in 9 . beginning where you wonder why exactly you made this decision to work for yourself and invest in real estate full time. A short sale takes place anytime a property is sold for less than what is owed on the mortgage and the lenders who own the underlying mortgages accept less than full payoff as a settlement. When you see someone driving a sweet car or living in a house on the beach or taking long expensive vacations. The problem with many people is that they set their expectations really low and then they achieve those expectations. Anyone who is growing is constantly setting their expectations high and trying to achieve things they never thought possible.

Those options include short sales. Wells Fargo. Here’s one myth about the companies who service loans. The servicer just collects the payments. FHA. Freddie Mac. The main objective of these departments is to find ways to resolve properties in default other than just foreclosing. In other words they’re responsible for mitigating the bank’s losses and keeping them to a minimum. VA. Washington Mutual and Homecomings work are owned by some other investor. agreements all of which will be explored in this course. Foreclosing on a property is a problem for everyone: the lender. Lenders and mortgage companies have loss mitigation departments whose responsibility is to deal with properties in foreclosure. They would prefer the homeowner make the mortgage payments. the mortgages are owned by some other “big hitter” like Fannie Mae. the homeowner and the community. Lenders and investors who own mortgages on houses in foreclosure do not want to foreclose and repossess the property.The Short Sale Manifesto 2. deed in lieu. Mortgage companies profit greatly by lending money and receiving interest payments in return. This stage is called the pre-foreclosure stage. calculates 10 . Many institutional investors also invest in mortgages to receive the interest payments in return. Rather. Most often these properties are bought and sold after the foreclosure process has started but before the process is completed through a sheriff’s or trustee’s auction sale. About 80 percent of the mortgages that service companies like Countrywide. Option One. Those mortgages are not owned by the service company who sends out the mortgage payment coupons and collect the mortgage payments. a hedge fund or pension fund.0: The Revolution full. loan modifications and forbearance Mortgage companies profit greatly by lending money and receiving interest payments in return.

Greg.000 to $80.000 to $80. after doing a realtor presentation in February. In addition. The proceeds paid to the mortgage company are almost never the full amount they originally loaned. We have about 50 deals in our pipeline and are looking to expand our business. Because I knew what type of loan the first mortgage was. Dale Bjordahl and Michele Apt the numbers and answers customer calls.The Short Sale Manifesto 2. I was able to quit my job on April 9 and we are averaging about 30k-40k for the past 2 months. lenders only retain about 50 percent of their original loan amount when they foreclose and then sell as a REO. By forcing the property to be sold at auction the proceeds from In most cases lenders lose about $60. Once the property is sold to an end buyer the original lender receives whatever monies are left after the sale. As a matter of speech I will mention the word “lender” over and over. Just last week.000 per foreclosure. 11 . we apply things we have learned to our short sale business. I informed the second mortgage holder that they could only get 3k on the HUD. I was negotiating a second mortgage on a property. If the property is not sold to a third party the lender will repossess the property and then sell it as a bank owned property through a real estate agent. That information saved 12k and a whole lot of time negotiating it! A couple weeks ago we got an approval for a short sale from a negotiator that I have worked with before. She called me back 10 minutes later and told me that they would take the 3k as full payoff and they sent me an approval letter within 30 minutes. most sincere group of people you could ever meet much less have the privilege of working with. This number is climbing almost daily. Once a homeowner stops paying the mortgage the underlying lender or investor has no choice but to foreclose. On a weekly – sometimes daily –basis. I didn’t even have to negotiate!! We sent our package in and attended the BPO – the next thing I knew I was getting an approval letter! We closed the deal and walked away with a check for just under 30k! Those are examples of the actual transactions but the real benefit to us in being with SREC is the difference they have made in our “business”. They are not just outstanding coaches but really the nicest. The homeowner owns a property valued at $500. Just keep in mind this pertains to the actual lender or servicer as they are often referred to as one and the same. The 2nd mortgage holder wanted full payoff of their loan. We cannot thank Josh. In most cases lenders lose about $60.0: The Revolution The information we learn from SREC is invaluable. This is the only way the lender or investor can recover their original loan. the sale will go back to the lender. This number is climbing almost daily. The best way to explain a short sale opportunity is to provide this example: 1. not to sound like an infomercial but…. and their whole team for everything they have given to us.000 per foreclosure.000. We have applied the principles we learned in how to build and market the business and.

69 12 . Homeowner is making payments each month on time. 9.000. 17. 3. Lender(s) has a mortgage(s) against the property which were recorded when the homeowner either bought or refinanced the property. The homeowner misses a 2nd and then a 3rd payment. 15. The homeowner receives notice in the mail that the underlying lender is trying to repossess the property by foreclosing. The sheriff or trustee (depending on state law) completes an exterior drive-by appraisal Broken Fence Case Study Number of Mortgages: One Total Payoff: $199. 4. The underlying mortgage company files the foreclosure lawsuit and starts the foreclosing process. 6. 16. 13.000.000 on a 1st and 2nd mortgage. The homeowner uses their extra funds trying to pay the mortgage and other daily expenses.00 Resale: $148.944. The foreclosure notice is posted in public records. The homeowner owes a total of $450. 4. 10. 14. 5.355. The pre-foreclosure stage has begun and property can be bought through a short sale negotiation. 12. The homeowner continues to miss additional payments.00 Profit: $34.000 dollars. 11.0: The Revolution 2. They try to stay afloat by borrowing money from friends and family. The payoffs on the underlying mortgages increase each month a payment is not made. 8. They put down 10% or $50. The real estate market has plummeted in value and the homeowner is unable to find a buyer who will pay enough to cover the full payoffs on all the mortgages. 7.00 Total Discounted Payoff: $101. The homeowner misses the 1st mortgage payment because of a lack of funds to pay the mortgage. The homeowner loses job.The Short Sale Manifesto 2. The lender receives final approval to foreclose on the property and auction date is set.

The total lender loss is over 225. 13 . The redemption period begins. 25. 20. 23. During redemption period.0: The Revolution to obtain value of subject property that is in foreclosure. 19.k. On average 50 percent of original loan amount. a.000 so the amount the lender gets back from the sale is approximately 225. The real estate investor buys the property at auction OR the foreclosing lender buys property back if bids fail to be high enough to satisfy lender requirements. The lenders net proceeds from REO sale are the total proceeds they receive back from original loan amount.000. 24. When public foreclosure or sheriff’s auction has been completed the opportunity to complete the short sale purchase has ended.) 21. (Exception: certain states have a redemption period permitting the sale of the property through a short sale for an additional time. The property becomes Real Estate Owned (REO) by the bank. 18.000 of which the homeowner who just lost their house in now responsible. The sheriff or trustee sets an opening bid price at 2/3 of exterior appraisal (Typical for most states). The bank sells property through real estate agent to end buyer or investor. 28. The redemption period ends and property is transferred back to the bank through a sheriff’s deed. (In 96% of cases the foreclosing lender buys the house back and the property ultimately becomes a bank owned property.The Short Sale Manifesto 2. The property is auctioned off at public foreclosure or sheriff’s auction to highest bidder with bidding starting at 2/3 of sheriff’s exterior appraisal. 26. an REO) 22.a. Lender pursues the homeowner for the total losses the banks experiences thru a deficiency judgement issued through the courts. 27. The original loan amount was 450. the homeowner can pay off back payments or entire loan amount and keep the property (depends on state law). providing a last chance for the homeowner to retain possession of the property (this varies from state to state).

even in my market ––Cleveland.000.00 Total Discounted Payoff: $165.000. all you need to know is that housing values were pushed up by two forces: 1) Lax lending standards.0: The Revolution The Mortgage Meltdown The opportunity to buy and sell pre-foreclosures using the short sale method has been around for dozens of years. The recent explosion of appreciation in residential real estate market was far beyond anything previously experienced in the U. what former Fed chairman Alan Greenspan termed as “irrational exuberance” was fueled by the following factors: Grand Haven Case Study Number of Mortgages: Two Total Payoff: $306.64 14 .The Short Sale Manifesto 2. In keeping things simple. Ohio (okay…so what if it was only 2 percent!). From the years 2000 through 2006 the residential real estate market was hot. and 2) the belief that housing was a fail-safe investment. 236. In addition.00 Profit: $37. Some “experts” thought this would last forever.266.00 Resale Price: $210. For those investors who are just starting to invest in this arena the timing couldn’t be better. Value appreciation was fueled by several factors. stock markets and our economy as a whole are cyclical in nature with run ups and downturns that can be tracked over the past 100 years. Real estate markets. What goes up must come down is true to some degree with these markets and our economy.S. Property values were increasing in nearly every market in the country.

S. I would recommend SREC to anyone who is serious about getting “on top” of there short sale business. I had never closed a deal with the other two seminars and theirs were a year long.0: The Revolution • • The dot-com bubble and bust and its subsequent effect on the stock market.marketing systems and ways to keep your business organized and moving forward. thousands of homeowners were left with zero equity or even negative equity and were unable to refinance or get out of their exotic mortgage they used to buy their overpriced homes from 2000 to 2006. The stock market crash in 2001 that forced investors to look for alternative investments. fees and prepayment penalties to offset the higher risk of default because of the mortgagees previous history of not paying their bills on time. These investment portfolios were backed by mortgages that were supposed to give interest back to the investor who bought into the portfolio. The coaches are hands on and available whenever you have questions or need motivation. increased. No matter what the economic status they will help you find a way. interest only loans and option arm loans allowed consumers to buy houses outside of their price range. • The availability of financing through sub prime mortgages: Mortgages sold to home buyers with bruised credit. In 15 . Also. adjustable rate mortgages. such as real estate. packaged them and re-sold them for handsome profits. • • The demand for housing in the Sun Belt and coastal areas throughout the U. These loans carried higher interest rates. When the residential housing market crashed in 2007. I have tried two other coaching seminars and have not even come close to the amount of “FREE” info let alone the networking that SREC has to offer. they keep up to date on the most innovative technology. SREC is only 6 months and I closed my first deal after three months and made over $15K. The mortgage pools were packaged into investment portfolios that institutional investors like banks and pension funds bought and sold. • The availability of financing using exotic mortgage products like 100% financing. The reduction in mortgage lending standards by almost all major lenders fueled by Wall Street financial institutions who took these loans. Marty & Deb Wisniewski Investment banks on Wall Street packaged these exotic mortgages along with traditional mortgage products like 15 year and 30 year fixed mortgages into mortgage pools.The Short Sale Manifesto 2. These products allowed home buyers to afford monthly payments on properties they previously could not afford.

The lenders who created the run up in values from 2000 to 2006 because of lax lending standards have now created the greatest foreclosure boom in history and for those who understand how to negotiate.. New Century Mortgage –– once the biggest sub-prime mortgage lender –– folded in 2006.we are experiencing the Lender Updates During the past few months we’ve heard a ton about greatest opportunity for short sale investing that has ever been created. Many more homeowners were left with no equity in their homes even when they were current on the mortgages because housing values plummeted.The Short Sale Manifesto 2. many fell behind on their mortgage payments. Bear Sterns was bailed out by the government 16 . Even some of the biggest hitters in the residential mortgage industry are reeling. we are experiencing the greatest opportunity for short sale investing that has ever been created. as you read this report. With the housing market in a slump and homeowners without options to sell for what they owed. Now lenders are looking for options to get out from under all these bad debts (mortgages). Fannie Mae and Freddie Mac are in trouble. Even more homeowners fell behind forcing lenders to begin foreclosing on a record number of houses. big lenders in trouble.. the investors who bought these mortgage pools and funds were left with almost nothing in return for their investment. Right now. buy and sell short sales the opportunity to create their desire lifestyle through real estate has never been better than it is today. .0: The Revolution addition to homeowners having no equity.

0” use of the Internet to build & succeed in our business . & Noah’s presentations. As always. Recently they created a triage department just to analyze short sale offers before they can get past the gate keepers and have someone negotiate them. I learned that under accounting rules Freddie and Fannie have to anticipate a possible level of loss. negotiating and selling short sales. In several reports I have seen statistics that indicate housing prices are falling back to the same levels they were at in 2002 and 2003. but it’s good for us. (2) the testimonials people gave of their successes .ml-implode. Over 273 mortgage lenders have imploded since late 2006 according to www. yet. That’s five years of gains that have been wiped out because of the mortgage disaster. Either way it has created an avalanche of opportunity for foreclosure investors and for those investors who are skilled at acquiring. Greg. (3) the “web-2. The highlights for me were as follows:(1) the breakout sessions where we worked on each others individual problems in a group setting. With some digging. A couple weeks ago I saw a story where there was a line two or three people thick stretching around the corner 17 . Trouble is. Ohio for the Diamond (beginner’s level) coaching students. Fannie Mae and Freddie Mac haven’t been lost. I was very encouraged by Josh. and then they have to create reserves to cover the loss.com. Prices are still going lower in most parts of the country. Jeff. Bank of America said they’d buy Countrywide to protect their investment only when there was blood in the water. It’s bad right now for these guys. Fannie Mae and Freddie Mac haven’t been lost.especially the party back at your offices. Thanks for a great Friday & Saturday conference 2 weekends ago there in Cleveland. They did and now are working hard to adjust to the demand for short sales and workout plans from their mortgage holders. Some say it’s down and out for a decade. The good news is that the biggest players. but to get the support we all desperately need that is right around us was also eye opening Gary Moses The good news is that the biggest players.0: The Revolution last year. yet.from getting sellers in foreclosure to actually selling the R/E to the end buyer. no one can be sure where the housing market is going to go. (4) Noah’s revolutionary way of examining our life to not only make it better. IndyMac bank filed for bankruptcy and was taken over by the Federal Reserve creating IndyMac Federal Bank. others say for just a few years.that is always encouraging to those of us who are still working on completing our 1st short sale deal.The Short Sale Manifesto 2. your company events are well organized & enjoyable .

We’re not there yet. .. Dour faced people in shorts stood waiting for the bank to open so that they could get their money out –– just like those old black and white photos of the Great Depression. depending on your market (we all can’t be San Francisco). Anyone remember the S&L Crisis of the late 1980s? Why can’t we seem to remember why things are regulated to begin with? Step-by-Step: How to Negotiate a Short Sale and Make Money As I mentioned earlier.. short sales were once considered too much work for the money.. so something has to be done. .The Short Sale Manifesto 2. especially if you don’t know what you’re doing –– but we’ve proven that a highly profitable. 18 . you’d be hard pressed to find a Realtor or even an investor who knew anything about short sales.0: The Revolution in front of an Indy Mac Bank branch. but with housing values plummeting each month. We’re not there yet. Why? With housing values appreciating and easy money being had. almost everyone who took out a mortgage the past couple years is underwater. grow and prosper no matter what’s going on with the market. almost everyone who took out a mortgage the past couple years is underwater. they’re still a lot of work. full-fledged short sale business can be built.. The banks upon which we depend can’t sustain such loses . several years ago when we first got in the business. but with housing values plummeting each month. Today.

motivated sellers also are usually inclined to sell their properties for a discount. “Equity” deals are tougher and tougher to find. real estate agents. Most houses in foreclosure these days 19 . For the real estate investor. Real estate agents must be fully educated on the short sale process to regain lost commissions.0: The Revolution Today. investors and homeowners must have a full understanding of exactly how to negotiate and process a short sale.” Individuals who are behind on their mortgage payments are usually motivated to sell to avoid foreclosure. The homeowner. in a short sale situation homeowner’s owe much more than what the market will bear. Investors looking for solid investment opportunities are now obtaining a growing number of leads that are over-leveraged and in foreclosure. Homeowners in default should educate themselves on this process to avoid the financial pitfalls that go with having a foreclosure on their credit report. A vast number of listings that real estate agents see are now “subject to lender approval” and require a short sale be negotiated. Likewise. marketing revolves around finding “motivated sellers. with banks defaulting and homeowners under water. the purpose Most houses in foreclosure these days have zero equity. the real estate agent and the real estate investor need to team up to proactively and aggressively solve this foreclosure problem.The Short Sale Manifesto 2. however.

You can obtain these lists from a 20 .0: The Revolution have zero equity. Are you ready? Here we go. step by step process I use and teach to my students on how to successfully profit from short sales. As a result. In over five years of short sale experience I have seen few if any houses in foreclosure that had equity.The Short Sale Manifesto 2. I have watched as they close on properties they otherwise would have never been able to close –– so I know this stuff works. You asked. To construct a profitable real estate transaction the real estate investor must pair up a motivated seller with a successful short sale negotiation. Identifying your sweet spot is fairly easy. I delivered. 2. houses resell the quickest. So many people have asked me the exact. 1. Find the areas where You must identify your “sweet spot” and stick to it. Obtain the list of pre-foreclosures in your sweet spot. then go market and buy properties there. Avoid areas where you know buyer interest is low. You must identify your “sweet spot” and stick to it. Try to stick to areas near your office or house where houses are selling the quickest. I have seen real estate agents earn large commissions on houses with no equity while real estate investors earn even bigger profits all from having a better understanding of short sale investing. Below is a guide to the exact steps in the short sale process that I have used to coach hundreds of investors and real estate agents. A sweet spot is an area in your town where you want to buy and sell houses.

address. Skip tracers have access to databases where they can find updated information. com and accurint. postcards. state. 5.com. You should also be a pro-active marketer and reach out to these people in foreclosure and not just sit and wait for them to call you. Paid services include lexisnexis. cold calling. run comps and score property with the Realeflow’s Deal Filter.0: The Revolution courthouse or a list provider. door knocking. 3. I am working with a group of people who truly care about me! Tammy Maffei free services include: w3data. On each “buy call” you must qualify the property and the situation. you would think. mortgage brokers and title companies. The idea of marketing for the real estate investor revolves around finding “motivated sellers. voice broadcasts.The Short Sale Manifesto 2. Centers of influence are other professionals like attorneys. 6. “Buy calls” are simply the phone calls you will receive from seller who you have marketed.” The goal is to qualify the homeowner and the property to see if it’s worth your time to go look at the house and attempt to buy it. Marketing can consist of direct mail. The addition of Noah St John has been great. and whitepages. letters. city. The SREC staff has not only given me the tools for a successful business but they have had a profound impact on my personal growth and development. com. Make sure your list includes the following information: name. If they call you it’s a “buy call. zip. individuals who are behind on their mortgage payments are motivated to sell to avoid foreclosure. Some Every event provides more knowledge and insight into the short sale business.” Typically. The best properties to pursue include FHA 21 . Try to avoid condos. “Scrub” the list with a skip tracer for updated addresses and phone numbers. lender. and free recorded messages. Market to the list of names and addresses in your sweet spot. townhouses. Also.com.com. 4. To advertise to these homeowners in foreclosure you’ll want the most updated information including address and phone number. You can also use referrals from centers of influence. Your marketing efforts should generate calls to your office from sellers in pre-foreclosure looking to sell. new construction and new loans when prospecting for short sales.com. zabasearch. real estate agents. 411. and the date the foreclosure was filed.

Set an appointment to view the property and meet the homeowner for the first time. 7. make sure to note major repairs. pay attention to the appearance of the neighborhood.0: The Revolution loans. I could not have asked for anything more! Excellent! Scott Nelson Set up an appointment to meet the homeowner a second time in your office with a notary. and the property condition. 12. You can read “The Positive Results Conversation” in the original Short Sale Manifesto. 10. working together to solve some the problems of today’s market. Likewise. During the second appointment with the homeowner the option contract and other legal docs will be signed. 8. When viewing the property.The Short Sale Manifesto 2. If a short sale makes sense for all parties involved. I expected to have many speakers giving a small. The option contract also allows the investor to resell the property for a profit. Does the subject property conform to the area? Is it above or below community standards for that street? 9. The short sale package is a compilation of documents that lenders require to begin a short sale on a house in pre- 22 . and the homeowner gives the go ahead. large 2nd mortgages. and how to set expectations regarding how the short sale process works.” This conversation in an educational talk given to the homeowner by the investor. then start the short sale process. token amount of information and then trying to sell their full programs. solid resale neighborhoods. vacant houses. the conference was not what I expected. Moreover. additional information will be collected to complete the seller portion of the short sale package. I have to admit. The purpose is to explain the seller’s options. Discussion with the homeowners should be guided by the “Positive Results Conversation. and any loan that is six years or older. This was NOT the case! They give it all away. The option contract is a special purchase and sales agreement used to control the subject property during the short sale negotiations. It’s like having an extension of you’re own business team. Not only that. we also worked as an entire group. the short sale process. any deal where you already have an end buyer. 11.

affidavit. 13. The option contract for purchase and sales agreement d. The short sale cover letter (which explains the offer) c. The Listing agreement (if listed with a real estate agent) f. was instrumental in developing the option contract method for quick-turning short sales and is one the best attorneys in the country regarding this topic. For more information read The Death of the Land Trust… in Short Sales at www. The short sale package consists of the following: a. 2 month bank statements. Legal docs must be notarized and consist of: option contract.com). 15. Homeowner’s Last 2 paystubs i. property disclosures.freeshortsalestuff. Jeff Watson. Hardship Letter h. Homeowner’s last 2 bank statements 23 . notice of option. Develop the short sale package to submit to the lender. FDMC financial form. disclosures and the bill of sale. Authorization to release loan information b.0: The Revolution foreclosure. Record the Notice of Option Contract in the public recorder’s office. This includes: 2 years tax returns. (My attorney and business partner.The Short Sale Manifesto 2. Other docs include mortgage statements. The HUD 1 e. 14. and repair estimates. and a listing agreement. Gather the short sale documents from the homeowner mentioned above. Many real estate trainers have switched away from using land trusts and are using option contracts for short sales because of Strategic Real Estate Coach and Jeff Watson. hardship letter. last 2 pay stubs. Financial Statement (FDMC form) g.

00 Resale Price: $121.155.” (more on this in the original Short Sale Manifesto.300. The BPO is a third party report of the value of the property. Order payoffs from the mortgage holders 18. the comparables that are near the offer price. The real estate investor should meet the BPO agent to try to validate their offer price.47 This is the most crucial part of the entire short sale process.831.000. Fax the authorization to the customer service department to make sure you are authorized to talk to the lender about the account 17. For a short sale offer to be accepted the interior BPO needs to come in near the offer price. The goal of the interior BPO is to have the agent or appraiser value the property as low as possible. This is the most crucial part of the entire short sale process. the listing history. See “Art of the BPO. Homeowner’s last 2 year’s tax returns k. Interior BPO completed. See www.00 Profit: $11. The file will be reviewed by the loss mitigator (LM) and they will order an interior BPO. 20. Pre-approval letter for buyer’s financing 16.shortsalemanifesto. Fax the short sale package to the lender(s). Your short sale package will then be assigned to a loss mitigator (LM) at each lender. This will allow for the most options for the homeowner and investor. Send this package to each mortgage holder and then just send the purchase and sales agreements and the HUD 1 to any lien holders. the construction repair estimate. A BPO is short for Broker’s Price Opinion. 21. The investor should bring the purchase and sales agreement.00 Total Discounted Payoff: $104. 19.com) Sleepy Hollow Case Study Number of Mortgages: Three Total Payoff: $152. 22.0: The Revolution j. This value could be determined by either a real estate agent or an appraiser.The Short Sale Manifesto 2. 24 . and the hardship letter written the homeowner who’s trying to sell the house.

buyer’s lists. The buyer. If the preferred exit strategy is to resell the property and structure a back-to-back purchase and re-sale then the property must be re-marketed at this stage.00 Profit: $38. or investor. Send counter offers to each lender. Pull title with a local title company. 24. If title is not clean you must negotiate additional liens. 1st Mortgage (80-100% of the BPO). the Internet and flyers. 29. 2nd Mortgage (520% of balance owed). The following is a general outline of what each lender will accept via a short sale.00 Resale Price: $202.000. If the property goes to sheriff’s auction lien holder typically receive zero proceeds. has an “equitable Detroit Road Case Study Number of Mortgages: One Total Payoff: $262. who is the option holder. Lien holder should accept around 10% of their balance.068. The option holder.72 Total Discounted Payoff: $145.000. has the right to list and sell the property for a profit.23 interest” in the property through the recorded notice of option. 28. If the exit strategy is to resell the property the house should be listed for resale with a real estate agent on the MLS as well as marketed using signs.0: The Revolution 23. Was the BPO low enough to buy outright or possibly do a resell quickly (quick-turn)? The property must then be re-marketed to find the end buyer if the exit strategy is to resell the property and structure a back-to-back purchase and resale of the property. Learn the value of the interior BPO by contacting and asking the loss mitigator “Where did the BPO come in?” You can also call the agent or appraiser who performed the BPO and ask the same question.The Short Sale Manifesto 2. Liens (5-10% of balance 25 . 3rd Mortgage (5-10% of balance owed). If the property cannot be purchased at 65% of the as-is value then the investor should plan on quick-turning the property (buy & resell) for a profit. 25.903. Begin to clarify your exit strategy. 26. If an investor is going to buy the property outright they must be able to purchase the property near 65% of the as-is value. 30. 27.

The Short Sale Manifesto 2. The counter offer should include the option contract with an adjusted offer price and the HUD1 along with a cover letter explaining the counter offer. Were VERY close now to closing on the first of many deals. especially the way I needed it the most: process flow/organizational structure. questions & issues that get answered. Being a coaching student and coming to SREC events in Cleveland has been a great experience for me in so many ways! The updated information.0: The Revolution owed). its just all positive and well worth it! The team of coaches and staff members are super nice and very accomodating! Being in this coaching club has helped my business in so many ways. Counter offers are done via fax. ambiance of the friendly environment. Fax the counter offer to the loss mitigator at the bank. Commit to an exit Strategy: Buy – Fix – Sell. 26 . A back-to-back quick-turn must have an end buyer at a higher price than the short sale price. the gross offer price. The counter offer should include the Option contract with an adjusted offer price and the HUD1 along with a cover letter explaining the counter offer. Then fax the purchase and sale and the HUD 1 to the loss mitigator for approval. For both the HUD 1 and purchase and sales agreement the price must match. Tie down an end buyer with a purchase and sales agreement at a higher price Negotiate the final purchase price. Negotiate the final purchase price. The approval letter will explain the closing date. expansion of knowledge gained. 32. The final purchase price will depend on the negotiations and the BPO value. Thanks for everything SREC! Hands down the best coaching club I’ve ever been involved in!! Ali Kazmi Fax the purchase and sales agreement and the HUD 1 with adjusted offer price to lenders. back-to-back quick-turn. 34. Buy – Fix – Rent. Fax the counter offer to the loss mitigator at the bank. 33. The approval letter will need to be faxed to the title company or closing attorney. the acceptable closing costs and any other lender closing instructions. Increase your offer price through negotiations. Counter offers are done via fax. 35. Approval letters are issued by the loss mitigators when they accept your offer price. All counters must be made in writing with purchase and sales agreement as well as the HUD 1. The final purchase price will depend on the negotiations and the BPO value. 31. the real estate agent commissions. Receive approval letters. the net proceeds that the lender will accept. networking with peers.

End buyer receives the “clear to close” from their funding lender.” 27 . 36. Property transfers – Two deeds are recorded.000. The title company will also issue a profit check to the investor for the difference between what they bought the property for and what they sold it for. 37. the foreclosure is then ceased and real estate agent commissions are paid.000. finish easy. The first deed is from the homeowner to the investor (A-B). End buyer must schedule a closing date. The second is from the investor to the end buyer (B-C). As a kid I remember learning how to tie knots by repeating the mantra “Start hard. The loans (previously in foreclosure) are paid off (short sold). El Camino Case Study Number of Mortgages: One Total Payoff: $142. 1st the investor purchases the property.00 Total Discounted Payoff: $122. On paper is seems to be a linear process when in reality many things can happen. 38.0: The Revolution than the short sale offer you have made through the option contract.00 Resale Price: $135. 39.644. Then they resell it in the same day. mortgages released. Any short sale transaction can get complicated.72 The Option Contract Revolution – This is what everyone wants. This is true for the real estate industry and it’s part of the frustration as well as the exhilaration we all feel when we close a deal.The Short Sale Manifesto 2.00 Profit: $10. 40. Each transaction must be funded and each closing have it’s own escrow. The title company files the deeds and funds each closing.128. Close both transactions back to back.

. After some trial and error. a notice of option contract. Many investors use a land trust for short sale transactions –– something that we disdain because of the smoke and mirrors involved in land trust transactions.S. a release of notice of option contract. and you. in a position of success. where it has been used for decades. These documents include the option contract for purchase and sale. we borrowed this method from commercial real estate. had access to experts. One of the ways we insure that we always start easy. and finish easy is by using the right paperwork needed to successfully close a deal. In truth.0: The Revolution In short sales. The right paperwork puts us. When successfully putting a short sale transaction together stuff can happen there. direct. as well as collaboration with various title companies and one of the largest underwriters in the U. BEST SHORT SALE TRAINING I HAVE SEEN TO DATE!” Bob Deschnor we pioneered a method of structuring back-to-back transactions using an option contract. When doing a big construction job stuff happens. Again. but each case does involve several moving parts and things can pop up along the way that may threaten the success of the deal. it’s the reverse. 28 . More often you will start easy and finish hard –– not on every deal –– but if you have this mindset you won’t be caught off guard when a closing doesn’t happen when you expect it to. If you’ve ever done a rehab of a property then you understand this. and when appropriate. too. Instead “(the event was) straight forward. 3 days of solid training! Good information… no bait and switch or tease and sell a second deal.The Short Sale Manifesto 2. short sales are linear as outlined above in the step by step process. Strategic Real Estate Coach (SREC) developed the appropriate documents that are needed to provide the best opportunity for a successful transaction.

It should also state that the buyer has an opportunity to inspect the property. escrow and closing.The Short Sale Manifesto 2. The opportunity to buy the property in the future is contingent upon the successful negotiation of a short sale. easy to read and complete with all the appropriate real estate disclosure forms and addendum such as The option contract is a contract for the sale and purchase of real estate contingent upon the operation 29 .0: The Revolution Note: These documents are now on their third version as we’ve adapted to the marketplace.000. usually a business entity by which the investor is choosing to do business. This option contract will be part of the short sale package submitted to the loss mitigator so it needs to be neat.949.000. Parties to this option contract are the seller and or homeowner (who is probably in default or foreclosure) and the buyer.011. The option deposit is nonrefundable and represents a small sum of money given for the opportunity to buy the property in the future. Cromwell Case Study Number of Mortgages: One Total Payoff: $160.00 Resale Price: $99. the investor may use a small option deposit (this may vary from state to state).27 Total Discounted Payoff: $71. Instead of earnest money. The option contract should clearly define the terms and conditions of the short sale. and then it should cover matters related to title.00 The option contract is a contract for the sale and purchase of real estate contingent upon the operation of a certain fact.00 Profit: $19. The mutual consideration between seller and buyer should also be set forth in the option contract. If you happen to have a copy of these documents make sure you are using the most updated versions.

000. This is important so that during 30 .000. Various states have timelines regarding when documents can be filed. As a result of recording the notice of the option contract you have also now become part of the chain of title on the property. Devonshire Case Study Number of Mortgages: One Total Payoff: $300. the investor. you can then choose to exercise your option and go ahead and complete the purchase of the property. equitable interest in the property.00 Total Discounted Payoff: $220.663.. Notice of Option Contract (or Memorandum) The second document in this process is the notice of the option contract.00 Resale Price: $307.000.00 Profit: $76.effective way to make money on short sales is to conduct a double closing The option contract and the notice of option contract gives you.0: The Revolution the lead-based paint disclosure. You have an option to buy the house: You are not committed to buying the house. This document needs to be properly completed by the investor and needs to be witnessed and notarized before being promptly recorded at the appropriate County Recorder’s Office. Please be mindful of any state laws that may exist in your jurisdiction regarding the recording of documents regarding pre-foreclosure sales or foreclosure purchases. but may choose to do so if the terms are favorable.00 Equitable Interest . The notice (memorandum) of option contact lets the world know that you have an equitable interest in the property. When you negotiate a discount that is acceptable to you. Please pay attention. it allows you to re-list.. market and sell the property because you have this equitable interest. Moreover.The Short Sale Manifesto 2.

The end buyer. Their honesty and integrity shines through the presentations and the work they do. Their lender orders a title commitment. They are innovative and they think outside the box! Mary Ann Heindorf: The Secret Now. The most common and effective way to make money on short sales is to conduct a double closing using two separate transactions funded by two separate escrows.The Short Sale Manifesto 2. C. by satisfying your option. then B to C. while you. The title commitment is prepared and sent to them showing that you as the option holder are an exception on the title. insurable title. Your option can be removed in one of two ways: First. the investor. In essence. where you are B the seller. The easiest way to “satisfy” your option is by having a deed from the homeowner in foreclosure 31 . providing (us with) much detail and they really retain (our) interest. and second.0: The Revolution the negotiation process an end buyer can be found who will buy the property once the bank has agreed to an acceptable short sale price. are negotiating with the bank to complete the first transaction and buy the property. The transactions are scheduled to happen on the same day at about the same time. You have two transactions set up: A to B where you are B the buyer. This means that your option needs to be removed or satisfied for the buyer to have clear. you are at the same time looking to find a buyer to buy the property from you to complete the second transaction. Josh and Greg are very good speakers. by releasing your option. is getting a loan to buy the property. the secret to how the option contract works with the notice of the option contract is as follows. marketable. It is obvious that they spend much time preparing for the weekly coaching calls and have a deep commitment to their coaching students.

000. it is open and transparent to everyone so that the transaction can go forward.The Short Sale Manifesto 2. they are told that you have an option on the property which is consistent with the contract that you have used for the B to C transaction. Please note that the end buyer’s lender is being told that it is a short sale and is also being told who is the current vested owner (which is not you) but the homeowner who is in foreclosure. there may Colinas Case Study Number of Mortgages: Two Total Payoff: $321. Depending upon the end buyer’s criteria and their closing instructions. You get paid and resell the property. Any title agent that is doing this is violating a number of regulations from their underwriter as well as various state and possibly federal laws.703.00 Resale Price: $275.0: The Revolution transfer title to you and then you deed the property to the end buyer.000. The term “back-to-back” is a far more favorable term to use rather than the term “simultaneously. This type of pass through funding is no longer legal without the consent of all the parties in the second transaction. the first thing to realize is that there are two closings that are going to be done back-to-back.755. All of this makes sense.00 Profit: $37.00 Total Discounted Payoff: $210. either the same day or on two consecutive days. The back-to-back recording of deeds that is disclosed to the parties in the B to C transaction. but that is the general idea of how a transaction would look.79 be various subtle changes to this scenario. 32 .” The term “simultaneously” implies funding is being used for the second transaction in the first transaction. is the way your option is completed. Understanding the Option Contract in Closings In understanding the closing process when using the option contract. Moreover.

One is a release and the second is by completion of it.000. That closing occurs between the vested party (A) and the optionee/investor (B) in the A to B scenario.0: The Revolution In the option contract method the two closings are done in the following manner. That transaction must be closed and funded prior to and independently from the second transaction.000.00 Total Discounted Payoff: $55. Title will be transferred from the vested party to the optionee/investor. The investor who holds the option to buy is the optionee in that transaction.729. There are two ways of removing that option from the record of title. By completing it there is a deed transferring title It is important to understand that the option that has been recorded is a matter of public record from the vested homeowner to the optionee/investor. Since title vests for even a few moments in the name of the optionee/investor that party is then able to extract whatever profits they have earned by negotiating the discount and reselling for 33 .602.The Short Sale Manifesto 2. thus satisfying the option. State Route 225 Case Study Number of Mortgages: One Total Payoff: $154. The first transaction which is referred to as the A to B transaction is where the vested party (A) usually the homeowner in default is selling to the optionee/investor (B). It is important to understand that the option that has been recorded is a matter of public record and it needs to be released or removed from the public record for the end buyer to receive marketable insurable title or to get it off the record of title.00 Resale: $87.00 Total Profit: $28.02 That transaction is closed in accordance with the terms set forth in the option contract. Then title will transfer from the optionee/investor to the end buyer. They have the right to go ahead and buy the property provided certain conditions are met.

Grant 34 .0: The Revolution more. THANK YOU for the Property Launch Formula info! John H. the B to C transaction will close and fund. new content In understanding the transactions it is important to note that subsequent to the A to B closing. The proceeds used for the A to B transaction are not the funds from the B to C transaction. You always have fresh. equity skimming or undue influence of appraisers. The end Buyer’s lender will be funding this transaction. each transaction will have its own separate HUD-1 and what is disclosed on the HUD-1 will be the true essence of the deal with the numbers being accurate. Each transaction of the back-to-back closing must be an independent stand-alone transaction. thereby transferring title from B to C. In addition to each transaction being an independent stand-alone transaction. at every event! The information is always on point.The Short Sale Manifesto 2. When the property is resold by the optionee/ investor for an amount less than what was owed by the vested party there can be no argument regarding mortgage fraud. It is important to understand that the property will be resold by the optionee/investor for an amount less then the original indebtedness owed by the vested homeowner. The first transaction will be funded by the Optionee/Investor (B). The B to C sale price must be less than what A owed on the property.

Always consult a local attorney if you have any specific questions.The Short Sale Manifesto 2. while at times complicated. otherwise known as a simultaneous closing. Inherently Flawed Always consult a local attorney if you have any specific questions. In recent months. many real estate investors have been taught to use land trusts to facilitate their short sale either for privacy purposes or as a way of using it to assist in the quick-turn transaction.0: The Revolution Taking the Wrong Path (about Land Trusts) For years. increasing legislation and greater regulatory scrutiny from many state governments. The problem created when trying to do a simultaneous closing is that most people buying the short sale from the investor are going to obtain a loan to buy the property. is being set forth as informational material to inform the prudent real estate investor. Just about all lenders providing loans to buyers have a seasoning requirement. title insurance companies. The following information. various attorney general’s offices. and lenders have caused land trusts to become difficult or impossible to use in short sales. Most investors are trying to create a simultaneous purchase and resale of the property. Seasoning requirements 35 . Land trusts are used in short sale transactions for one specific reason.

you’re going to make mistakes.00 Total Discounted Payoff: $79.0: The Revolution state that the lender will not loan money on the property unless the homeowner has been on title for at least 6.freeshortsalestuff. Land trusts have seemingly provided a perfect foil to this obstacle –– when in fact they are deeply flawed. was a “smoke and mirrors” tactic used by the short sale investor that allows them to pull all the strings behind the scenes to gain the profits from the transaction when actually they are misrepresenting to the end lender the true nature of the transaction. Likewise. Phillips Case Study Number of Mortgages: Two Total Payoff: $138.000. The land trust. Since the investor has not been on title this creates a problem. The issue here is that this assignment was never disclosed to the end buyer’s lender. No matter how much you prepare in this business.000.500. In the above outline I took you 36 . In using land trusts investors are able to show that the homeowner or seller is still on title when in truth they are not. especially the assignment of beneficial interest. The homeowner initially is the beneficiary.com to download The Death of the Land Trust in Short Sales for more information on this topic. The Top 9 Mistakes New Short Sale Investors Make No matter how much you prepare in this business.00 Resale Price: $105. investors using the land trust as a method to conduct a simultaneous close are committing actions that border on bank fraud.511. 12 or 24 months.The Short Sale Manifesto 2. As soon as the seller has assigned their beneficial interest in the property over to the investor they have broken the chain of title because the investor now has the interest in the property though the assignment. you’re going to make mistakes.53 Check out www.00 Total Profit: $20.

we were brimming with confidence and so excited about buying houses that our optimism got in the way of sound judgment. The problem is.000. I wanted to do this so that you could avoid these mistakes and allow my learning curve to shorten yours. The following list was compiled not only from mistakes I made as a rookie. These mistakes may not cause you to lose money on a deal but they will cause you to make less money on a house or not make any money at all which isn’t so much fun.011. Below I am going to give you a list of all the places where mistakes can be made along the way. Thanks for sharing so much real and applicable info.70 1) Paying too much for a property What’s the golden rule about real estate investing? You make money when you buy. and energy. This is the single most common mistake investors make that ultimately causes them to get out of the real estate business and find work at the local hardware store. it can drive your business into the ground. keep them in mind.00 Total Profit: $12.The Short Sale Manifesto 2. that one mistake can EXCELLENT INFORMATION! You’re approachable.00 Resale Price: $171. but from mistakes I’ve seen from countless students in our coaching program.00 Total Discounted Payoff: $154. Christian Case Study Number of Mortgages: Two Total Payoff: $282. It’s amazing how we all make the same mistakes! Read through these. and that’s cool. NOT when you sell. When we began our business.000. and do your best to avoid ‘em.0: The Revolution through a step-by-step process on how to successfully put together a short sale transaction. mistakes can really hit you in the pocket. You’re all GREAT! Paul Vyhnalek wipe out the profits of three properties that you got right. The one thing about real estate. When you pay too much for a property. and the monthly holding costs were like a dagger constantly pressing in 37 .000. And the mistakes tend to hang around month after month –– in some cases it took us over a year to sell our problem houses. strategies.

Here’s an example. That would equal 126. Subtract the amount of repairs needed. Remember. c. In some markets you will want to be extra careful. Through a back-to-back purchase and resale we can almost remove this risk entirely. That’s your maximum buy price. a new roof. and landscaping. 38 . then multiply by 60 percent. Maybe 60% or 64% or 67% of the AS-IS value. this is a negotiation with the bank. You need to be conservative. and that the purpose of your offer is to get the ball rolling and have the lender order a BPO. So your initial offer would be less than this. Take the after repaired value. carpet. So the AS-IS value = 180k (200k – 20k repairs).The Short Sale Manifesto 2. b. What’s great about short sales and the option contract method is that they provide the ability for the investor to re-sell a property immediately after the initial purchase. It needs 20k in repairs including kitchen and bathroom updates. a. This should be your maximum offer.0: The Revolution our backs. however. All told it adds up to 20k including labor. This removes the possibility that we may have offered too much. Here’s good calculation that is sure to help you buy smart.000. Multiply 180k times 70%. I have never lost money on a short sale when I used the option contract method and a back-toback transaction. paint. a new furnace. I have lost my shirt on several occassions buying and holding real estate. You should always consider what you think the house will sell for in three to four weeks at that moment. Multiply times 70%. A house is worth 200k once it’s fixed up.

. you need to be conservative and build in additional dollars for all the things that may go wrong during the project. I once had three estimates on a house all around $10. . the odds are against you.000 to $5000. My total cost of repair easily doubled the initial estimates. you are buying a property well below market value. just include enough 39 . Then the boiler caught fire one Thanksgiving Day morning in the basement. You do not need to go overboard. you’ll have no problem selling your properties. You just never know . You really leave the seminar more equipped to be successful in the short sale business. then you know that no matter how good you think you are at getting the cost of repairs correct. The SREC team RULES! Florissa Regnoso 2) Underestimating the cost of repairs If you’ve done any rehab work.The Short Sale Manifesto 2. Rent some furniture from Cort and keep the costs down. Remember. 3) Neglecting to stage property If you want to give your property the best chance for a quick sale. It was also great to have a loss mitigator from a bank join us. Total expenses should be no more than $3. Here’s the good news: If you learn how to conduct back-to-back transactions for short sales you will limit your exposure to these type of incidents. If you are doing full rehabs. The goal is to suggest what the house might look like if it were being lived in. If you do.0: The Revolution It was great that Josh and Greg were up on stage often to teach the material. The most rehab you will do will be minor paint and carpet –– just enough to make the house presentable. then consider staging it. Sometimes you need to leave a little fat on the bone for the end buyer. and selling it well below market value.000.000 to $13. I loved this seminar.

This means that you will need to learn The purpose of staging is to make the house look.00 Profit: $17. how to work with real estate agents.00 Resale Price: $139. there will be times when you have properties that would be ideal to wholesale and it‘s a good idea to draft a list of potential buyers.500.00 Total Discounted Payoff: $113. The purpose of staging is to make the house look. 40 . This list is generally made up of those investors who either specialize in rehabs or rentals. Short sale or no short sale always. However. feel and smell new.456.500. feel and smell new. W 16th Case Study Number of Mortgages: Two Total Payoff: $217. It’s a good idea to go to REIA meetings and to network with other investors in your community.0: The Revolution furniture or accent pieces in different rooms to create a positive energy for those potential buyers doing a walk thru. Stage the outside to give the property an attractive curb appeal. a topic of discussion found later in this report. Unfortunately. Moreover. always stage your properties to get the maximum re-sale value. so profits will be smaller than short sales that are sold to buyers who want the house for their home. you will want to sell your properties to end buyers who intend to live in the house.The Short Sale Manifesto 2. Retail buyers pay retail prices which means more profit for the investor. you can also create a list of buyers fast by placing and advertisement in the classifieds stating that you are liquidating a portfolio of properties and need to sell fast. Stage the inside to make the property look feel and smell new and roomy.64 4) Failure to build a workable buyers list As a short sale investor. this group often needs to buy as steep as you to make the deal work.609. Landlords will buy at a higher margin.

5) A failure to secure private money If I could go back to the first day I decided to buy and sell real estate for a living. the idea of not holding any facet of this business back. This BMS includes a buyer and seller matching component that does exactly what it sounds like it would do. After all.The Short Sale Manifesto 2. Just enter the properties into the system that you are selling and enter the buyers from your list and their criteria and they automatically match up. All you have to do is make the phone calls to see if they are interested. Go to REIA meetings. Pass out business cards. The concept of revealing the nuts and bolts of your company.” Let people know that you need large sums of 41 . When we were quick-turning one or two houses per month. The second thing I would do is to make raising private money and finding partners to team with a top priority. the first thing I would do is study the most effective marketing techniques to fill my pipeline. But anything more we simply didn’t have the money to buy the property and quickturn with any confidence. Google “hard money for real estate.0: The Revolution An issue of importance is how to create a workable list that is organize and used effectively. and the feeling that you want us to SUCCEED! Dania Fadeley So how do you find private lenders and partners? Spread the word. haven’t we all done the spreadsheet and failed to use it when we need it most? Our preferred method for keeping track of contacts is through Realeflow – a fantastic business management system for real estate investors. no problem. When we started we thought we could do all the deals ourselves.

In order to structure a back-to-back short sale transaction you’ll need money to fund the first transaction. they have to wholesale everything. effort and risk you put into the deal. Buying a house and selling it for a profit does always mean you have to sell to a retail buyer who has great credit and can get a loan for the asking price. or they have to lease option everything. it doesn’t always mean you have to sell on lease option when you have a buyer right now. wholesaling and lease option. Likewise. Retail: Give you the best chance to realize the greatest profit. wholesaling and lease option. income taxes need to be paid and if using a real estate agent. 6) A failure to plan multiple exit strategies Many investors think they can only do it one way: They have to retail everything. Use other people’s money if you don’t have any of your own. 42 . The three most popular are retailing. Use the exit strategy that will make you the most money commensurate with the time. The only downfall is that full The three most popular are retailing. you will be responsible for paying commission.0: The Revolution money for short periods of time ranging from a day to a few days and that you will pay them a point (1%) on what they loan.The Short Sale Manifesto 2.

911. Wholesaling: This is seemingly a simple and fast way to make money. Irish Hills Case Study Number of Mortgages: One Total Payoff: $491.66 flow.00 Resale Price: $280. How 43 . however. Then if they buy you out down the road you have more profit to cash out from the equity that remained in the house.547. the floor may be dropping on housing values.00 Profit: $28.The Short Sale Manifesto 2. they will want the property to be significantly discounted. depending on your particular market.0: The Revolution Lease Option: This is a good way to build for long term wealth. Seldom will we wholesale to investors simply because we target our marketing efforts in areas where we know there is demand for retail.000. profits are considerably smaller than retailing or lease options.000.296. Expect to make $5000 to $7000 per transaction in today’s market. since they are taking the risk. Wholesaling is a matter of finding a buyer who buys at a discount. using a lease option you can cash out some of the profit immediately through refinancing and leave some of the equity in the property to build wealth.00 Total Discounted Payoff: $285. Then a lease option buyer or a renter will pay the mortgage for you along with generating some positive cash North Cove Case Study Number of Mortgages: Three Total Payoff: $417. It could be an investor or an owner occupant.000. it may be worth our time to buy. Ultimately. Unfortunately. however. rehab and either sell or keep in a rental portfolio. When conducting a short sale back-to-back transaction we will always look for a retail buyer.00 Resale Price: $340.000. so be careful. If you buy right. if we love the property and know we can get it cheap from the lender.808.27 7) A failure to focus on revenue producing activities Your objective each day needs to be focused on spending as much time as possible doing revenue producing activities.00 Total Discounted Payoff: $235.00 Profit: $23.

cleaning the office. setting up referral systems and apprentice groups to bring in leads (typically for free).The Short Sale Manifesto 2. Each short sale case you work will involve plenty of paper. that revenue producing activities do not include such tasks as organizing your files. and phone calls that seem to number in the hundreds. All of this is manageable when you only 44 .0: The Revolution much time do you spend right now doing revenue producing activities? The short sale business is divided into three main areas: acquisition. Each of those area includes tasks that we’d define as revenue producing activities. 8) A lack of a coherent system to organize your business A Business Management System (BMS) is essential for establishing a business that you run. Focus on tasks that will create short sale opportunities such as marketing to find or to sell houses in your sweet spot. instead of a business that runs you. improving the efficiency and response of the marketing programs. negotiation. and disposition. A Business Management System (BMS) is essential for establishing a business that you run. The administrative responsibilities should either be outsourced or hire an office manager. or playing solitaire. instead of a business that runs you. Please note. managing money making projects like marketing and BPOs. and creating scalability in your business. improving the effectiveness of your marketing.

deal evaluation. leads. 45 . too. but for me I just want time to spend with my family and to enjoy those activities that charge me up.0: The Revolution have several cases. sellers. utility companies. excel spreadsheets. account numbers. No need for sticky notes. I don’t know about you. The point of building a real estate business for me was to create a business that would allow me to design a lifestyle. estimated rehab costs. 50 or 80. Many real estate investors use a combination of Outlook and Excel spreadsheets –– and don’t forget manilla file folders covered with yellow sticky notes. tasks. outlook. Toys are cool.com. title searches. Our business management system. you will get jammed up. If you don’t have a system to effectively keep things organized and streamlined. An effective systems needs to track case notes. contacts. manilla files. but while I love what I do. there are many.realelfow. does all this and it’s web based. stressed out. and the closing process. document creation. Some people want toys.The Short Sale Manifesto 2. and you’ll lose deals. Realeflow. potential exit strategies. but when that number grows to 20. eight hour days become 14 hour days and the weeks seem to never end. buyers. It can be accessed from anywhere in the world on your computer. marketing. payoffs. prospects. many other things that I’d rather spend my time doing. calendars. Check out www. bank contacts.

Simply put.0: The Revolution 9) A failure to implement an effective and consistent marketing strategy This is the number one reason real estate investors fail. Negotiating a short sale can take some time. Real Estate Agent Referrals 2. deals will close. Mortgage Broker Referrals 3.900. The usual process for beginning investors is to begin a marketing campaign.The Short Sale Manifesto 2. When we have leads.00 Resale Price: $299.897. For this reason it is of paramount importance to keep a steady stream of new cases coming into your business to avoid the feast and famine cycle that drives so many investors out of business. get deals. the new investor will begin the process again.043. Bankruptcy Attorney Referrals 46 . in the pipeline and begin working those deals. but without more deals being added to the pipeline. NE 16 Terrace Case Study Number of Mortgages: One Total Payoff: $582. and the advertising becomes and after thought in the face of the struggle to get deals done. Title Company Referrals 4. What happens is that the focus switches from getting deals to closing deals. so they have no leads and little opportunity. So the question is how do you find deals? Here’s a short list: 1. Their marketing is ineffective.085. The short sale business is cyclical. when we failed to make money in the early years.00 Total Discounted Payoff: $226.03 Negotiating a short sale can take some time.00 Profit: $52. we get cases and we make money. Invariably. it was because of a failure to consistently market.

72 or turned around their real estate business. Yellow Letter marketing to the N. Get out and get your hands dirty. You just don’t want to make too many. Go to the courthouse and extract the new foreclosure leads.D. Take the list of new foreclosure lawsuits and market to those people telling them you buy houses 7. dismissal and relief from stay list 10. outsource the basic but essential tasks to someone else and free up your time to focus on those areas of the business that need your attention to grow.0: The Revolution 5. Find a buyer’s agent who can go scour the MLS and network with other agents for you to find short sale opportunities 6. it’s okay. The ideas in that e-book have changed the lives of thousands of investors.The Short Sale Manifesto 2. (notice of default) list 9. Sometimes it’s easy to forget the challenges of the past when faced with the challenges 47 .00 Profit: $17. Postcards marketing to the N. but as I heard from more and more people in the real estate investing industry.O.000. The Real Estate Primer & Referral Marketing I have received emails from many investors who have credited the original Short Sale Manifesto as the reason they either created Nassau Case Study Number of Mortgages: One Total Payoff: $171. The conversations and the emails were great.00 Total Discounted Payoff: $64.971.D.415. then once you understand what needs to be done.49 Resale Price: $80. Create business opportunities by using Web 2. Learn the business by doing it. . Direct Mail Marketing to the Chapter 7 discharge. please take each point into careful consideration and know that if you make a mistake.000. (notice of default) List 8.O.0 techniques So that’s part of my list . . it dawned on me that we had completely overlooked a significant issue common to everyone who buys and sells houses.

The Short Sale Manifesto 2.0:

The Revolution

of the present, and this is exactly what happened to us. You see, in working hard to build our investment business, and then our coaching business, we lost sight of a critical issue not only important to the survival of our business, but the survival of investors everywhere.

That one issue, and overcoming it, makes the core of this report and it will be the core of your business . . . it has to be ––– it’s that important. After working one-onone with hundreds of investors over the past four years, I have seen this single problem deleteriously affecting the businesses of our students and associates time-and-time again, regardless of experience.

Sometimes it’s easy to forget the challenges of the past when faced with the challenges of the present...

What I hear from new investors: “I don’t have any deals in my pipeline to make a profit. How do I get new deals into my pipeline and not kill myself with expensive direct mail marketing campaigns? What other things can I do to find deals besides the same old direct mailers? How do I find motivated sellers who want to work with me? How do I find the right marketing programs to get sellers to flock to my phone and email? How do I get my first deal closed before I go bankrupt?”

What I hear from experienced investors: “I don’t have enough leads and deals in my pipeline to consistently pay my employees and to make a consistent profit month after month. I experience these wild and drastic ups and downs in my business and I struggle to create consistency. It seems like one month I love this business and the next month I am doubting if I’ve made the right decision. One month I have five deals that close and I make 100k plus and I am flush with cash and I feel like a king. The next month I don’t close any

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The Short Sale Manifesto 2.0:

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deals except for a small 8k wholesale deal and I am right back where I started. I want to be in a position where I can cut back on my marketing expenses. I want to be able to shut down my billboard campaigns and my expensive direct mail marketing –– BUT I need to create profit checks each month with consistency. How do I do it?”

The rub is stability and consistent cash flow–– how do you achieve it?

I have coaching students all across the U.S. who have a jam packed pipeline of pre-foreclosure and short sale leads AND THEY’VE SPENT ZERO MONEY ON MARKETING.

How did they do it you ask? It’s simple. They have solid sources in their local markets who force feed them referrals to these properties. AND THE LEADS ARE FREE.

Below is a list of potential referral sources.

They have solid sources in
Attorneys:
• • • • Bankruptcy Divorce Real estate General Practice

their local markets who force feed them referrals to these properties. AND THE LEADS ARE FREE.

We will occasionally get referrals from attorneys. Attorneys can and do accept referral fees. The strongest potential lies with bankruptcy and divorce attorneys. Attorneys who focus on divorce are able to refer short sales and preforeclosures as a side part of their regular law practice. They come across clients who are going through a divorce and neither spouse wants to pay the mortgage so the property goes into foreclosure. Neither spouse wants to take the responsibility for staying in the house and paying the mortgage and the lender has no choice but to start the

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foreclosure process. Same with bankruptcy lawyers. A client who is filing BK has many financial issues to work though. They most likely have a huge amount of credit card debt and other outstanding bills. A good bankruptcy lawyer knows that if a client files BK the client should still sell the property to eliminate the foreclosure from their credit report once the BK has been discharged. Referrals are infrequent from this group because they are not really in the residential real estate game unless as a hobby. Most real estate attorneys work on commercial real estate. There just aren’t many attorneys who incorporate residential real estate into their law practice.

Prairie Case Study
Number of Mortgages: Two Total Payoff: $260,000.00 Total Discounted Payoff: $160,000.00 Resale Price: $184,000.00 Profit: $10,524.00

Mortgage Brokers

Since so many mortgage brokers have put people into houses that they couldn’t afford, they often feel some sense of obligation to help distressed homeowners who were once their clients. The first common recourse is to an attempt to refinance the home, but with so many homeowners over-leveraged, and with falling house, refinancing is usually impossible. Many mortgage brokers use the phrase “65 and alive.” This indicates that if a client has 35% equity in the property and the house has 65% loan to value or less then the client can usually refinance because the bank has little risk. The mortgage broker can bring in leads. Consider structuring a promotion with the mortgage broker where the two of you promote each other. For example, the mortgage broker

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see if that person can act as a “bird 51 . and you send them business. Conversely. the broker can include in his marketing that for those people precluded from refinancing there is another option –– you. they can suffer the same feast and famine cycle that afflicts real estate investing. When a deal closes. Construction Crews The very nature of their profession creates and environment that allows contractors to fall behind on payments. Make sure that the mortgage broker pays for the direct mail campaign. If the title company is aware of the work that you do. After all. Title companies are also staffed with people who are in the real estate business. Title Companies Title Companies work with mortgage brokers who are attempting to refinance a person facing foreclosure. they will send you leads for those refinance deals that failed. Ninety percent of attempts to refinance end in failure.The Short Sale Manifesto 2.000. You can market the option of either selling the house or trying to refinance. so the lead will come back to the investor. but with a twist. They hear things going on throughout the area and the industry. If you are working with a contractor. pay the mortgage broker $200 to $2.0: The Revolution can create a direct mailing campaign to generate possible leads for refinancing. If they are aware that you want those leads and will also pay referral fees they will send you these leads when they come across them. however. the you as the investor can do the same thing.

and pick up several additional leads each month. always ask for referrals and testimonials. we were focusing on short sales.make sure to advertise your referral fee of $200–$2. You don’t need to come across like an insurance salesperson.The Short Sale Manifesto 2.000 and continue to create relationships. Bird of a feather flock together! People in foreclosure know others who are in foreclosure. Contractors.. but a quick elevator speech with the GRIP Flyer or card for them to hold onto is always a good idea. It happens all the time. We got the word out to these investors that we wanted those deals and would pay them a fee if it closed –– usually $1000 to $2000.. Friends and Family Keep your GRIP (Gift Referral Incentive Program) flyer and business card handy. 52 .. This was a great way for us to meet other investors.0: The Revolution dog” for leads with other contractors. and the goodwill of the homeowner is at a peak. We quickly realized that many investors didn’t know what to do with properties that were over-leveraged and heading to foreclosure. Sellers When a deal closes. Other investors . They come across other people who may need your help or know someone who might. builders and odd jobbers are surrounded by people who are in the real estate business. When most of the real estate investing community was into rehab. Just ask and see who they know. learn about their business.. Again make sure to advertise your referral fee of $200-–$2.000 and continue to create relationships with these people and they will bring you opportunities.

“Why do they just work for a small commission when they could be making the big profit checks?” 4. What group of people represent 75% of all real estate transactions across the US? 5. What group of people have to continue to complete Continuing Education (CE) each and year to keep their licenses? Do you have an answer? Realtors. As an investor what group of people were you taught to completely avoid at all costs? 2.The Short Sale Manifesto 2. What group of people are required to go through hours and hours of training just to get their license? 7. We have developed through a great deal or trial and error 53 . As an investor what group of people were you taught killed more deals than they closed? 3. What group of people have one of the strongest lobbyists in the country? 6. As an investor what group of people did you just laugh at and think.0: The Revolution Working with Real Estate Agents Let me ask a few questions: 1.

.470. but also as a general nuisance and source of endless real estate scams and deception. In one camp are those individuals who have attended formalized instruction to become a licensed real estate agent and earned a Realtor’s designation. . keep reading. If you still don’t know what I am referring to. Using this approach you’ll get free leads with a built-in Realtor that brings you deals and also helps to sell them –– you just have to make the offer. The best part. and did I mention cheap? Did I say cheap? I MEANT FREE! Did I say cheap? I MEANT FREE! The Realtor Renaissance The residential real estate profession has for many years been a house divided.000. both groups have regarded the other with suspicion and disdain. Conversely.The Short Sale Manifesto 2. Number of Mortgages: Two Total Payoff: $260. and in so doing have committed themselves to being part of a regulated industry.00 Profit: $15. the standard opinion investors have of real estate agents and Realtors is that they understand little about real estate beyond how to list and market a property on the MLS. In the other camp is the investor. . do the BPO. Realtors have long regarded investors not only as competition.000. .0: The Revolution a marketing program that we know will have an impact on your business the way it had an impact on ours ––– and take you to new heights.00 54 . whose real estate training is experiential in nature and whose actions represent both the best and worst practices in the capitalist paradigm.000. they are qualified and they are consistent . Lamotte Case Study At times. For instance. negotiate the short sale and manage the process.00 Total Discounted Payoff: $170. oh .00 Resale Price: $199.

marketing skill and access to the MLS with the investor’s innovation and problem solving ability – an opportunity exists for both groups to enhance their businesses while making a positive affect on the community at large.. one filled with depreciating values and stagnation.0: The Revolution In today’s market. Both groups represent a blend of skills. By combining what both do best – the Realtor’s knowledge. 55 . many of whom only have cursory knowledge about short sales. In approaching Realtors. This report is written from the perspective of the investor. The objective of the SREC Realtor Renaissance is to provide a template for how both groups can successfully work together on short sale opportunities. both the real estate investor and the Realtor have much to gain by working together as a team instead as rivals. The effort to compile what we’ve learned about working with Realtors is important because of the myriad complexities that can arise in any potential case.. Both groups represent a blend of skills. experience and understanding that together can solve the riddle of a market. it is important that the investor is well armed with the information that a Realtor will need to make an informed decision. although we have many coaching participants who are themselves real estate agents and Realtors. experience and understanding that together can solve the riddle of a market that is forcing record numbers of members in both groups out of business.The Short Sale Manifesto 2.

First. 56 .The Short Sale Manifesto 2. While approaching Realtors requires more effort for the investor than implementing a direct mail campaign.0: The Revolution Why Work with Realtors? Working with Realtors benefits the investor in two important ways: 1) as a source of leads to problem properties. it makes sense to go after the remaining 75 percent. As a result. however. Investors can continue to cold call. Likewise. estimating how long it would take the bank to approve an offer or what commission the bank would pay often led to unhappy clients and colleagues. door knock. Third. they found them to be a waste of effort and time when an acceptable discount could not be achieved. including short sales. Second. In the past. three out of four properties in default are under the control of a Realtor. real estate agents were reluctant to pursue short sales for several reasons. the investor is also creating the possibility that his or her pipeline of deals may be filled by enthusiastic individuals who will pursue short sale opportunities and work as a team. Lenders are now asking homeowners facing foreclosure to list the property with an agent. agents are naturally hesitant to submit a short sale hardship package or make an offer when a buyer has not yet been secured and/or a buyer was secured but the offer not approved. and 2) as a source for buyers. and send direct mailing pieces to gain access to a small portion of the 25 percent of properties that are not listed. by building a network of relationships with Realtors. the payoff can be huge and much less expensive.

• • • • Realtor does not understand the importance of the interior BPO Realtor is not present for the BPO appointment with the BPO agent Realtor expects the process to be much shorter than is realistic Realtors often list property above market value to cover full payoff What investors offer to Realtors who are interested in collaborating on short sales is the following: • • • Realtors can quickly sell properties that have no equity Realtors will find new opportunity in a growing market that has little competition Realtors can earn full commissions on sales that would have been lost without a short sale • • Realtors can outsource the time consuming task of negotiating the short sale offer Realtors now have a way to help people in financial difficulty who otherwise could not be helped • • Realtors can easily demonstrate the benefits to sellers in need Realtors can receive strong testimonials and referrals from people who could not be helped by anyone else. they tend to make the following mistakes: • Realtors will approach a lender and send the short sale hardship package before a buyer is secured • Realtor may waste time waiting for lender specific documents. otherwise known as a short sale package from the lender • Realtor will send the purchase and sales agreement to the lender without including a complete short sale package. 57 .The Short Sale Manifesto 2. Often what is missing is the estimated HUD-1 settlement statement.0: The Revolution Since the majority of Realtors have received little training.

investors have claimed that a foreclosure would greatly harm one’s credit while a short sale would allow the homeowner to move forward to enjoy a faster recovery. when in fact there may be little credit preservation advantage of a short sale over a foreclosure. brokers will begin establishing their own in-house short sale service.0: The Revolution If investors fail to get involved with Realtors early in this housing crisis. even if it were the same. In the flurry of articles and Realtor training sessions now being offered in every city. Frankly. The savvy investor has an opportunity to establish relationships today that will mutually benefit both parties in years to come. there is still a great deal of misunderstanding about the foreclosure process and short sales. As a homebuyer you need to be sure to explain the benefits to the homeowner if you are able to buy their house. the majority of real estate agents did not know what a short sale was or how it could be used to help their clients. 58 . as well as the negatives if the house should be sold at auction. Shorts Sales and the FICO Score It’s not hard to find chatter on the blogs concerning how a short sale or a foreclosure affects a FICO score. the differences between a deficiency judgment and a negotiated note are considerable: There’s no gray area here. In the past. What has been implied in this statement is that the overall damage to one’s credit in terms of points would be greater in a foreclosure than a short sale. The good news for the investor is that until the past few months.The Short Sale Manifesto 2.

2008.0: The Revolution As a result. Likewise. Make no mistake. only three communities in the U. if not more. 59 . be aware that Fannie Mae recently established a 2-year elapsed period for reestablishing credit for homeowners who sell their homes through a short sale. but compare this to what happens if the homeowner goes through the foreclosure process. this is what they hope to do for each of their clients.S. Two years may seem like a long time to wait before being able to get a new loan. a homeowner who has filed a foreclosure will be “ineligible” for a loan for five years. houses are over valued and markets will no longer support asking prices. the best outcome for the homeowner is to sell the house for what they owe on the balance of their mortgage. This was wrong. According to the Fannie Mae guidelines. but it has little to do with how many points a short sale will drop a FICO versus a foreclosure. Unfortunately. Only three! If the homeowner is unable to structure a workout or a forbearance agreement with the foreclosing lender. there are definite advantages to a short sale beyond allowing the homeowner move on emotionally from the foreclosure. Naturally. The benefits are twofold. For real estate agents. as of this writing. strong sales and few if any foreclosures. then a short sale is the next best option. effective May 31.The Short Sale Manifesto 2. in most communities. First. currently having rising appreciation. many homeowners have been advised by real estate professionals who saw little benefit in a short sale to allow the house to go into foreclosure.

a deficiency judgment is obtained when a property is foreclosed and sold (usually at the courthouse by the clerk of the court) to the highest bidder. 60 . As investors. New car? Forget it. When a house is sold at auction.com/sf/guides/ssg/annltrs/pdf/2008/0816. They are an albatross around the neck of the debtor and can only be removed by paying it off or by bankruptcy. (See https://www. Deficiency judgments are just that: judgments.The Short Sale Manifesto 2. the chances of the foreclosing lender filing a deficiency judgment increases dramatically. but often the negotiation process used to achieve a short sale with the bank gives the homeowner their only shot at avoiding a deficiency judgment.pdf) The other benefit involves something called a deficiency judgment. guess what? They won’t be able to buy anything using credit.efanniemae. The higher of the two is taken to determine the difference from the judgment amount. Usually the court determines which value is higher. In most states a deficiency judgment can be obtained for the difference between the high bid and the higher foreclosure judgment amount. In Florida right now that rate is 11% a year ––better than the bank by far! If a homeowner is saddled with a deficiency judgment. While in the past Did you see that? FIVE YEARS! Two years or five years…? That’s something definitely worth considering. deficiency judgments usually earn interest until paid. New house? Forget it. the high bid or the appraised value of the property on the date of the public sale. Furthermore.0: The Revolution Did you see that? FIVE YEARS! Two years or five years…? That’s something definitely worth considering. A quick review… As many of you know. we’re in the business of buying properties. and this difference is the deficiency judgment (what was owed subtracted by what the final sale price).

which is true ––they sell the judgments for 5 to 10 cents on the dollar. we are all included in the reordering of priorities and a restructuring of the 61 . In a certain sense.0: The Revolution we have seen few deficiency judgments filed against Again. Here’s the deal that the bank has to consider . The Short Sale Revolution Remember when I said I am always suspicious when I read something that seems a bit over the top? Then. The word originates from the Latin revolutio. the same is true. What do you think they are going to do? For those unsecured promissory notes you negotiate on some of your deals. as investors we offer homeowners a way out. Again.000 in return just for pushing paper. Whatever effect a short sale has versus a foreclosure on one’s FICO score pales in comparison to the long term harm of a deficiency judgment and the inability to be approved for a loan for years to come. today that landscaped has changed. This can make the deficiency huge.” While we are not storming the Bastille. overthrowing the Russian Czar. The banks do the same thing –– getting 5 cents on the dollar. the meter keeps running on the costs incurred by the bank until the REO department sells the house. please forgive my use of the word “revolution” to describe what’s happening in the housing market. meaning a “turn around. if the house goes into foreclosure and is taken back by the bank to be listed as an REO. We once were under the impression that banks seldom enforce deficiency judgments. as investors we offer homeowners a way out. using “revolution” to describe what is taking place in the housing market may be not be so extreme.000 deficiency judgment they invest $500 in attorney fees and get $10. . . or declaring independence from the British.The Short Sale Manifesto 2. Another point of consider.for a $100. foreclosing homeowners. and allow me to have a little fun.

too many topics and too many things to share in a report this size. there is just too much information to cover. the apples are falling.” When discussing socio-political revolutions like what we’ve seen in the past.0: The Revolution way we’ve lived our lives in the U. For a broader perspective of the short sale business. Che Guevara stated that.The Short Sale Manifesto 2. We need to turn some things around. shortsalemanifesto. The housing market is a definite part of this trend. By reading both you will have a macro and micro perspective that I believe accurately represents the short sale business. when it comes to what’s taking place in the U.com . however. please read the original manifesto.S. which you can find at www.S. “The revolution is not an apple that falls when it is ripe. or will you give way to other who are willing to invest the time to learn how? I wrote this second version of The Short Sale Manifesto to provide for more of a meat and potatoes experiences for those new and experienced investors. Concerning revolution. Unfortunately. 62 . housing market today. Will you be there to catch them. you have to make it fall. Guevara may be right.

Jeff. and kept himself open for easy communication. and it makes me feel more confident in my business with the supportive SREC team on my side. and he was the epitome of professionalism. Susanna Mardjuki Here’s to your massive short sales success. I would highly recommend Jeff Watson. Josh Cantwell and Strategic Real Esate Coaching Team www. and stayed on the phone with them well past office hours. Jeff spoke with the title company on my behalf to clear up the confusion regarding the closing. and am writing this letter to commend him for his commitment to excellence. Jeff was easy to work with. I recently met with some unexpected complications with one of my closing. who is a fulltime lawyer. he spent the majority of his Friday evening mitigating the problems with the West Coast title company. and set out to rectify it as fast as possible. and kept me updated on the progress of the situation throughout the entire weekend. who contacted Jeff Watson immediately. Thank you again. At a loss for what to do.com www.strategicrealestatecoach. He understood the problem immediately. was scheduled to appear in court that day. I am glad that I have had this opportunity to work with Jeff Watson.shortsalemanifesto. You can do the same. He stayed on top of every aspect of the the issue even with his own work pressing. and the rest of the SREC team to anyone who wants to be successful in the short sale business. made so much money. The consummate professionals at SREC truly care for their students.freeshortsalestuff. and look forward to doing so in the future. I am one of Jeff’s coaching students under the Strategic Real Estate Coaching (SREC) program. Jeff always stood true to his word. never considered that I’d be able to impact so many lives in my community and beyond.com www. Because he is located on the East Coast.com 63 . I called Ted Cowan. Ted Cowan. His focus and expertise have exceeded my expectations.0: The Revolution I’ve also never had so much fun. Jeff. and his infectious positive attitude made the entire process even more enjoyable. and before entering the business. but he took the time to speak with me and talk through the situation.The Short Sale Manifesto 2. Jeff Helped to resolve all the issues and we were able to close the short sale transactions. for your commitment to helping your coaching students to succeed.

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