The Million Dollar Foreclosure System - Part 9 11-
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Chapter Twelve
MANAGING RESPONSE
Once your direct marketing program is well under way you must be ready
for that eventful day when you will receive a call or postcard from a prospect.
Keep in mind that it is unlikely that your telephone will ever be ringing off the
hook. Even though you are sending out a high volume of mail you will be
receiving a low volume of response.
Most homeowners will find a way to bring their payments current. Few
properties actually go to sale on the courthouse steps. Unless you are in an area
of extreme economic distress, seldom will more than 10% or 12% of the homes
in default end up with a completed foreclosure. In some counties the sales rate
is just 1% or 2%.
Not to worry, buying properties in the pre-foreclosure period can be so
profitable that you don’t need to find dozens of deals.
Your first rule should be to determine the minimum profit you will accept
from any deal. This will vary from area to area. If you are living in a section of the
country where the median home price is $200,000 you will expect to make more
profit on each deal than in an area where the median priced home is $80,000.
As a starting point consider a minimum profit of $10,000 for upper end
areas and $5,000 for the lower range. Based on these numbers learn the
median price for homes in your area. It will appear from time to time in your
newspaper or you can contact the Board of Realtors in your area for the figure.
The median price will give you just a general profit target.
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Your average profit is likely to be much higher than the minimum you
establish. It may run closer to $15,000 to $20,000. Every once in a while you will
scoop up a super buy that will net you a profit of $50,000 or more. How many
deals of that size do you need before you dance all the way to the bank?
Yes, you want each deal to be lucrative, but don’t be greedy. Remember
you are in a numbers game. Your direct mail marketing program will be working
to supply you with a steady flow of leads. Your cost per lead will be the same for
the good ones and the bad ones. The more deals you can do the better. Once
all of your systems and procedures are in place it is just as good to do ten
$8,000 deals as it is to make one $80,000 deal.
Of course, not all of that will be pure profit. You have the cost of overhead
just as in any business and that must include the cost of your direct mail
campaign. The costs of your mailing will be your primary expense. If you have a
home office about your only other on going expense will be for telephone
service.
RING, RING!
Finally the phone rings and it is a homeowner calling to ask about the
material he has been receiving from you. Be prepared! This is the moment you
have been waiting for. Have you carefully planned just how you will react?
Remember this person is under a great deal of stress. His financial
problems have probably created friction in his personal relationships and it may
be that he really hasn’t had anyone to talk to until he encounters you. Be a good
listener. Much of what he says may have no bearing on your interest in buying
his home, but to build rapport you must be a patient and understanding listener.
The more you listen and sympathize the better your chance of making a
personal connection with the caller and winning his confidence.
It helps to pause for a second when the phone rings and put yourself into
the right frame of mind. Remind yourself that this call might be from a prospect.
Take a deep breath, relax, smile and answer with a gentle, friendly voice. Speak
slowly and clearly. This is your first personal contact with the homeowner and
you want her to form a very positive image of you through the sound of your
voice. Never allow a child to answer!
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Don’t try and present yourself as something you are not. Don’t risk
sounding false or insincere. Be yourself, but be your warm, friendly self.
Remember that this could be a $10,000 phone call!
In your letters and audios you have told prospects that it will be you who
answers the phone when they call, so be sure to do so – "Hello, this is Lloyd."
These may seem like small points, but personal relationships under these
circumstances can be a very delicate matter. It is very important to get off to a
good start with a prospect. It makes it so much easier to build the rapport you
will need later as you guide the homeowner into a deal that works for both of
you.
Even if you are using a company name in your letters always give the
name of an individual (you) the caller should expect to talk with. If there is more
than one person handling these calls instruct the homeowner to "Ask for Lloyd or
Mark."
The homeowner will indicate why he is calling, "I got a letter from you." Or,
"I’ve been getting your letters and CDs." Or, "Are you the guy who buys
houses?" Or, "I’ve been having some problems and I got a letter that says you
can help me."
Start the conversation by asking for his name. Just his first name will do
(Tyrone?). Be sure he knows your name, "Please call me Mark. May I call you
Tyrone?" He may not want to give his name and at this point that's OK.
Start him talking by asking; "Tell me about your situation, Tyrone?" The
caller will often pour out his troubles in much more detail than you want to know.
You will pick up some valuable information here, so listen and take notes while
he talks. After he has gone on for a while you move in and start getting the
information you need.
Some will be tight-lipped and say something like, "Well, you’re the one
who sent the letters asking me to call!" Then you can go right into your
questions, but be ready to listen if he starts to volunteer information about his
troubles.
Next you say, "Tyrone, I’m an investor who works with people who are
in foreclosure situations.
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I do it for profit and I try to make it a good deal for both of us. If you’re
interested I may be able to help you, but I need to ask you some questions.
Is that OK?"
Be Honest & Truthful
Right up front you have let him know what you are about. You do this for
profit. There can be no surprise about that later. The other thing you have done
is to ask his permission to gather information from him. He should object to very
few questions after he has given you his OK. If he does object to something
explain that you will be risking a great deal of your money to help him and you
can only do so if you have the answers to these questions.
He doesn’t want to sell his home! That is what you will often learn in this
conversation. He is only going to sell as a last resort and maybe not even then.
You must lead him towards a sale very slowly and carefully. Explain, as you
have done in your letters, why it can be his best course of action. That he may
save some of his equity to help with a new start. That he will avoid the stigma of
a foreclosure on his credit history. That for the sake of his health he needs to put
an end to the stress and anxiety he has been experiencing.
Even if you can bend him towards your way of thinking you must be aware
that most homeowners are still going to be suspicious and maybe even a little
hostile. Maintain your warm and friendly manner no matter what they say or how
they say it. Being an understanding friend to all is just part of the job. You will
find that after you get to know the prospects that most are very nice people, but
taking a bit of abuse now and again is all in a day’s work. It won’t happen often.
If you will train yourself to always be warm and friendly you will be
rewarded at the rate of thousands of dollars for every phone call. Once they find
you really can help them many will become very grateful and friendly.
Try to get the prospect to the point where he will at least consider the sale
of his home. Explain that he should have selling his home planned as an option
if other efforts at finding money fail. Explain that you are ready to buy right now
and selling would put a quick end to many of his troubles.
Will every prospect accept this line of reasoning? No. Some will want
nothing from you other than a loan. Leave the door open for those prospects to
contact you later. Some will, if you have done a good job of building rapport.
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The trick is to get as much information as you can without sounding like
you are pumping the prospect. This comes with practice, but you will find it is
much easier if you just show real concern and interest in the homeowner’s
predicament.
Do your best to ask leading questions. Ask questions that get him talking
and keep him talking. Ask, "How do you feel about that?" "When did that start?"
"How long ago was that?" And so forth. Ask and listen -ask and listen! The old
saying that you have one mouth and two ears, so listen twice as much as you
speak is certainly the rule here.
It is not necessary to gather your information in the exact order indicated
on your “Property Information Sheet” (sample just ahead), but do use the
sheet as a guide. Always have a supply handy by the telephone. You will soon
train yourself to reach for an Information Sheet every time the phone rings. Don’t
ask the caller to wait while you get paper and pen.
When the time is right in your conversation start asking the questions that
will help you determine if this might be a profitable situation. Explain that you
won’t know if you can help until you’ve done some research and have checked
with his lenders to learn the exact amounts owed, so will he please be as
accurate as possible with his answers.
Do not trust the information you receive from the prospect. He may try to
make the situation look as attractive as possible. At this point he may actually be
considering selling to you and, like any seller, may be trying to get the best deal
possible. As in any deal use what he tells you as a guide to see if you should
proceed.
With what you have learned from the prospect, the value of the home and
the amount of the loans against the home, you can determine if this could be a
profitable situation -one that you should investigate further.
Remember you have established a minimum profit figure that you will use
to qualify each property for possible purchase. To reach a valid conclusion you
must have an idea of the loan amounts outstanding against the property. Here is
an example:
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Market value of home $130,000
1st mortgage balance 50,000
2nd mortgage balance 15,000
Total 1st & 2nd mortgages 65,000
Other liens 000.000
$130,000 -$65,000 = $65,000 Equity
The information you have gathered from the homeowner indicates that he
has equity of some $65,000. This would easily make it a candidate for further
investigation.
Equity! Let’s stop here for a moment and talk about equity. Equity in a
home is the difference between the amount owed on mortgage loans and the fair
market value of the property. If the home is valued at $100,000 and there is a
mortgage debt outstanding of $50,000, then the homeowner has equity of
$50,000.
$100,000 Value -$50,000 Mortgage debit = $50,000 Owner’s equity.
Theoretically the $50,000 is what the owner would receive if he had the
time to sell the property through normal means, in an average real-estate
market, less selling expenses. Equity can be transformed into hard dollars under
normal conditions.
When you are prospecting for pre-foreclosure property you are really
looking for EQUITY! You want to buy equity and you want to buy it at a discount.
It is important to understand this. Yes, you are buying houses, but only because
that is where you find the equity and you can turn that equity into real cash.
You don’t buy a gold mine because you want to own a hole in the ground.
You buy a gold mine, because that is where the gold is! The same holds true
with real estate and equity.
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In the example above you want to buy the owner’s $50,000 equity, but you
only want to pay $25,000 for it. Why would he sell his equity for just half of its
value? Because he stands to lose all of it if he doesn’t!
That is why you are searching for these foreclosure situations. You must
find the prospect that has his back to the wall and is facing the loss of his entire
equity – created through years of payment. He should be thankful that you have
gone to the effort of being there, so he can save half his equity and you will find
that many are.
You must carefully determine the real value of the equity. This is crucial to
your success. With a property facing foreclosure it is not uncommon to find liens
and debts against the home other than mortgages.
There could be an IRS lien for unpaid taxes. The owner may have lost a
court case that resulted in a judgment lien against his property. Property taxes
could be past due and the county has placed a tax lien on the home.
These are all debts against the property that must be paid before you
would be able to take title. The money to pay them must come from the
prospect’s equity. The cost of fix-up must be factored into the purchase price. You will have
to pay to have the house brought up to neighborhood standards. 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. |
