The Million Dollar Foreclosure System - Part 13 14-8
Seller hereby represents that there is no licensed real estate salesperson or
broker representing Seller in any way in connection with this purchase and sale,
and Seller agrees to hold Buyer harmless and defend Buyer from any claim to
commission in connection with this purchase and sale.
* * *
Seller agrees to vacate the property within _____ days of the signing of this
agreement. Seller agrees that he will be entitled to receive no proceeds from the
sale until after he has vacated the property.
* * *
Seller agrees to allow representatives of the buyer reasonable access to the
property upon notice prior to the closing.
* * *
This offer is contingent upon representatives of the Buyer inspecting the
property and the Buyer’s approval of those inspections.
* * *
Seller hereby represents that all negotiations and dealings with Buyer have been
and are at arm’s length and that no duress or undue influence has been exerted
by Buyer over Seller or Seller’s family in connection with this purchase and sale.
* *
*
Buyer agrees to accept the property "as is"
.
* *
*
Buyer to execute in favor of the seller a Straight Promissory Note due in full on
__________(date of payoff) together with ___________% interest per annum
simple.
* * *
Purchaser shall execute and deliver to the Seller a note in the amount of $
_________ calling for quarterly interest payments of $______________, with the
full principal balance due in _____ years.
14-9
Purchaser to execute a note secured by a mortgage on the property, in favor of
the Seller, in the principal amount of $__________________, payable at
$________________ per month, or more, including interest at _________% per
annum, until paid.
* * *
The note executed by the Buyer shall call for a moratorium as to payments and
interest for a period of ________________, at which time payments shall
commence in the amount of $ ____________________ payable
_____________ together with interest in the amount of ________% per annum
until paid.
* * *
The maker of the note reserves the right to miss one such periodic payment per
loan year and failure to make such periodic payment shall not be a default of the
said note.
* * *
The maker of the note reserves the right of first refusal if the note is ever offered
for sale and or trade, and expressly reserves the right to match any offer
acceptable to the holder of the note.
* *
*
The Seller agrees to subordinate this note and mortgage to any new financing
the Buyer might secure with the property at some time in the future. Furthermore
the Seller agrees to execute any forms necessary to effect such subordination.
* * *
The Buyer reserves the right to substitute other collateral for the note, from time
to time. The Seller herein agrees to execute whatever documents are necessary
to effect said substitution.
* * *
The property shall be the sole security for the note, and there is no personal
liability on the part of the maker.
14-10
The maker reserves the right to extend the due date of the note for an additional
year with the payment of $_________________ to the holder of the note 30
days prior to the due date.
* *
*
The payment of the earnest money deposit herein is consideration for the Buyer
to have the option of extending the closing by ________ days.
* *
*
The Buyer reserves the right to pay the Seller’s real estate brokerage fees with
any such payment to be deducted from the NET amount due Seller.
The authors are not qualified to give legal advice, but you may find some
of the above clauses to be helpful as you draft a purchase agreement.
On any pre-printed purchase agreement form you may cross out and initial
anything you don’t wish to agree to, or that conflicts with the clauses you write in
an addendum.
Typed or handwritten additions to any contract have priority over printed
passages, but it is always best to keep things as simple and clear as possible.
Any blank piece of paper can become an addendum to your agreement.
Just write or type "Addendum" at the top of the page, write in your clauses and
then attach the pages(s) to the agreement.
Most of your agreements will be similar. You may consult a real estate
attorney on any clauses that you don’t completely understand.
You must research the foreclosure laws in your state to fully understand
any special requirements the law imposes on someone contracting with
distressed sellers.
14-11
Chapter Fifteen
NOW THAT YOU’VE BOUGHT IT?
You should have a plan for every property before you buy it. What are
your choices?
1. Keep The Property. If it is a good property in a good neighborhood you may
want to add it to your own portfolio. Real estate appreciation and tax shelter are
great wealth building opportunities. You should be watching for the very best
properties to keep after you’ve built a cash reserve. You want homes that will
produce some monthly positive cash flow and are in areas where they will grow
in value. There will be points in the business cycle when interest rates are quite
low. These periods present great opportunities for putting affordable financing on
property and holding it.
2. Sell The Property. Sell the property as quickly as possible after the
purchase. You will want to sell to a buyer with down payment money and the
ability to get new financing. This will allow you to quickly pull out any cash you
have put into the property, plus your profit from the adjusted equity.
You won’t find many assumable mortgages any more and when you do
there is usually so much equity built up that you can’t afford to put up the amount
of cash needed to keep the mortgage in place. You will need new financing.
3. Trade The Property. You could trade the property for another that presents
more profit opportunity. With a 1031 exchange there should be no tax
consequences.
4. Sell The Contract. You could sell the purchase contract. This is how you can
profit from pre-foreclosure deals with no cash of your own.
This is a very powerful technique that can remove the financial limitations
that would normally slow your wealth building efforts.
15-1
You can use it if you are starting with very little cash. Or after you have
your system humming along and you uncover more deals than you have the
money to handle. What do you do? You do all of the negotiating and contracting
and then sell the purchase agreement to an investor.
There are many people with money who would love to earn the kind of
profits available with foreclosure property, but they don’t have the time or
expertise to hunt out the good deals. You can capitalize on this situation by
being the finder/deal-maker.
Your direct marketing program will produce a steady stream of prospects.
You contact the prospects, make the deals, get the sales agreement signed and
then sell the agreement to an investor. This allows you to get to a profit quickly.
The investor takes over the purchase agreement, arranges financing, takes title
at the close of escrow and does the fix-up. He either sells the property or rents it
for the income, appreciation and tax shelter. You give up some profit, but you
save time and can move on to other deals.
No real estate license is needed for this activity, because you are not
working for a commission or on a contingent basis. You are a principal who is
making the deal in your own name and then assigning the purchase contract to
an investor. This is possible because you put the words "and/or assigns" after
your name in the purchase contract. You will find a clause in the previous
chapter that can be added to the contract, so that there can be no
misunderstanding about your right to assign the contract.
Now you know it is absolutely true that you can profit from foreclosures
using no purchase money of your own!
After you have a signed agreement with a seller you contact an already
identified investor. Put together a well-organized package of paper work that
includes the purchase contract, a description of the home with photo, your
estimate of the cost of any repair work that needs to be done and the monthly
rental income the home should produce. Go through the numbers with the
investor and explain exactly how much adjusted equity is in the property and
how much he will be paying for it. Then what his profit would be if he offered it
for sale.
15-2
There has been so much written about the great deals that can be found in
foreclosures that you should have no trouble finding interested investors. Your
challenge is to find serious people who can be counted on to buy the deals when
you have them ready to go.
Let the potential investor know that time is of the essence and you will
never offer them another opportunity if they refuse to act when you bring them a
good deal.
Advertise in your local newspaper under Money Wanted, Real Estate
Offers, Investments, Partners Wanted, or the like:
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.
If there are any investment clubs in you area you might be able to find
people with money to invest who will jump at the chance to work with you.
Contact the real estate editor of your local newspaper and ask him about any
investment groups meeting in your area. Or do a Google.com search for real
estate investor clubs.
A personal interview with each potential investor allows you to size each
other up. You can explain what you are doing and why you are sharing the
opportunity with others. Let them know that there are just more good deals than
you can handle alone.
Explain that each deal will provide the investor with a minimum net profit of
a certain figure ($5,000)? Assure them that you will provide them with numbers
and documents to examine and check out before he puts up any money. Let him
know that you do business with all parties in an open and honest manner.
Prepare a sample deal to show each potential investor. Have it well laid
out on a few pages of good quality paper. Show the fair market value of the
typical home that you will be offering. Explain how you will be determining the
adjusted equity and the types of deals you are putting together – delayed
payments to the seller, etc.
15-3
Let him know he will have to arrange financing for the property either from
his own resources or with a mortgage lender.
Then detail how buying the purchase agreement from you can provide him
with a quick and easy profit. Do all of this just as you would make any important
sales presentation.
Let him know that there are no guarantees. You will do the very best you
can to be sure there are no mistakes made, but there will always be at least a
small risk. Urge the investor to always get title insurance on the property. That
will protect him from title errors. His other primary concern would be the cost of
any fix-up work that needed to be done. Your purchase agreement must have
the clause that allows for inspections, so the investor or his contractor can
double check you estimates.
You will find that after you explain the profit opportunities many investors
will say they are interested in doing a deal with you. Then, when you call them,
they always have a reason why they just can’t do a deal right now.
You must have investors you can count on! You are promising to help
people in distress and these investors become part of your plan. If they aren’t
willing to act the moment you need them they can cause serious problems for
you and the distressed homeowner.
In the beginning you may find just one or two investors interested in your
plan. Get them into the act early by telling them that a profitable deal may be
taking shape.
When possible let them know how negotiations are progressing and what
the numbers appear to be. Get one to reaffirm his willingness to buy the deal
when it is ready. This will reduce the chance of him backing out at the last
minute. Let him know that you won’t give him another chance if he lets you down
when you are ready for him to buy.
After you are well established and have made money for a number of
investors you can require any new investor to put up a deposit to show their
good faith. This deposit would be applied to the first deal the investor found
acceptable.
15-4
At this point you should have two or three reliable investors on your list so
you always have someone ready to step in and do the deal.
Instead of selling the sales agreement you can just have the investor put
up any needed cash. Then sell the home quickly and split the profit with the
investor.
In the beginning, when you have little money and no track record you will
have to find deals that don’t take a great deal of cash. Yes, this is possible.
Some prospects have just given up and will sell their equity for very little quick
cash. True, you have to sift through more prospects to find them, but they are
out there.
The foreclosure clock is running. You need a little more time. Contact the
mortgage holder and explain you are purchasing the property. Ask for some time
to get the home cleaned up, sold and the mortgage loan paid off.
Let the lender know you plan on having it sold within three to six weeks.
The mortgage holder’s prime concern is to get the money he is owed. He
doesn’t really want to own the property through the foreclosure. That just means
more time and expense to him. If you tell him that you need just a few days to
get the property cleaned and sold, he may be willing to delay the foreclosure.
In most cases you will have to bring some of the loans current to stop a
foreclosure. Since you plan on selling the property quickly you will recover this
money in a short period of time. That means you may be able to borrow the
needed funds on credit cards, a short-term personal loan or a willing investor.
Quickly clean-up and fix-up, put the home up for sale at slightly below its
market value, sell fast, all mortgage and foreclosure debts will be paid in escrow,
pay back your short term loans and pocket your profit.
You will work hard and fast, but it only takes a couple of deals to get
started and establish a winning record that will attract investors.
After you have your system up and rolling you will find that using investors
lets you tackle most any situation that comes your way. This document and accompanying materials are designed to provide authoritative information in regard to the subject matter covered in it. It is for illustration purposes only and presented with the understanding that the author and publisher are not engaged in rendering legal, accounting or other professional opinions. If legal advice or other expert assistance is required, the services of a competent professional should be sought. |
