Forbearing For Motivated Sellers!
By: Scott Rister
Many times your ability to turn a lead into a
bona fide deal takes time, perseverance and outside-the-box
thinking. In the arena of pre-foreclosures and short-sales it is
definitely to your advantage knowing how to facilitate forbearance
agreements.
What is a forbearance agreement other than
your ticket to BIG deals? All a forbearance agreement boils
down to in real estate is a lender working with an individual
defaulting in part or whole on their mortgage obligations. Your
goal as a real estate investor is all about creating
"win-win" situations and this technique fits that
criteria very uniquely.
Forbearance
Here's how this works and the first thing you
need to know right now....you're not going to make it to
financial freedom facilitating forbearance agreements. See, you'll
come into sellers along the way that are trying desperately to
hold onto their houses and some very well may be able to but the
odds are against it by the time they call you the investor to come
and bail them out of the financial perils.
Sammy Seller will call you stating he is a
couple of payments behind on his house and for you to help. In
your initial conversation with Sammy, its evident that he feels
like his job situation is about to change and he's just fallen on
some temporary hard times. Even the most sincere people trying to
work out their financial hardships will still know the foreclosure
process first hand.
Let's get it down to what it means to you and
Sammy Seller. First off, you're running a "FOR PROFIT"
real estate business and you need to make a buck or two (few
thousand would be nice). Sammy wants to stay in his house and in
most cases this is NOT the best case scenario you need to work
with.
Before getting into working out a forbearance
agreement with Sammy, if there's a chunk of equity in the property
then it is MUCH more acceptable to work with liquid funds if you
have them available to make Sammy's loan current. However, you
will definitely be keying into making sure you have recorded
interest on the property.
Think in terms of worst-case scenario and Sammy
defaults to you and/or his lender again... then you're in a
position to foreclose and capitalize on a property with a chunk of
equity. I mention this part to show "yes" that is an
option but it still is not the primary focus on this backdoor
profit centered angle I want to teach you here.
Let's get back to the main focus of working a
forbearance agreement and how it relates to a quality acquisition
angle. In this scenario there's little to any substantial equity
in the property and Sammy's behind on his payments but he's still
very set on staying in his house. Let us just assume he can't see
the writing on the wall that in most likelihood his house will
eventually be in foreclosure within the year.
Sammy comes to you and after evaluating Sammy's
situation and noting his position to stay in the house, leaves you
with this angle of "FORBEARANCE FOR MOTIVATED SELLERS!".
Your reply to Sammy will be something like this, "Sammy I
know you want to stay in the house and I buy properties to resell
for a profit as I am an investor.
This situation doesn't really fit my scope of
being a real estate investor, HOWEVER I can help facilitate a
forbearance agreement with your lender if for a fee of $500 with
$250 up front and $250 due upon final forbearance worked out with
the lender".
Now don't get too far ahead here in your
thinking. This is NOT about road to riches collecting $500
facility forbearance agreements. Just stay with me here for a
while and I'll explain more detailing on the real scoop. Right now
though Sammy feels pretty comfortable he can put together that
type of money in order to possibly save his property from
foreclosure. So Sammy says "yes" and now what? Now is
time to get something in writing.
You will assimilate a simple one-page document
with Sammy of what your expectations and limitations are. Some
general points of reference are:
1) You do not guarantee in any condition that
the lender will grant Sammy terms that will ultimately work out
for him.
2) Your position is simply to gather the facts
of the loan in its current default and will find out exactly what
the lender requires in order to reinstate the loan to current
status.
3) Payment conditions are that Sammy will pay
you $250 up front and another $250 upon conditions ultimately
agreed upon between Sammy and the lender.
4) VERY IMPORTANT that you state very openly
that you are not presenting legal advise but are acting in good
faith to assist Sammy to communicate with lender.
After signing your agreement with Sammy and
collecting your first $250, then its time to move on. At the same
time you will also obtain from Sammy an "Authorization To
Release Information" which will allow you find out all the
specifics of the loan and what the lender requires to reinstate
along with all forbearance stipulations the lender MAY
provide.
Remember that lenders in good faith will work
with most homeowners to reach some agreement but if the homeowner
is WAY into the foreclosure process then they may play hardball
and require full satisfaction of funds including late payments to
satisfy loan obligation.
Here is what you'll be doing and that is
contacting the lender to find out current loan status and then to
simply inquire on possible forbearance options. See, lenders DON'T
WANT TO FORECLOSE!! Most lenders will work with the homeowner in
some type of modification of existing loan in order to avoid fore
close....this is call FORBEARANCE !!!
Just a couple of examples of how lenders may
modify existing loans would be:
1) Rolling existing payment in arrears along
with late fees into an entirely new loan---sort of like a
refinance.
2) Allow for payment plan of 3-6 months in order
to catch payments up.
In any circumstance though you must note and it
will be stressed to Sammy that most certainly in order to work out
a forbearance agreement he needs to come up with some extra cash.
For example if his payments are $800 a month and he's three months
behind then his next payment would need to be the $800 plus
another $400 to start the forbearance plan. You just want to help
facilitate what the lender will accept and works out in Sammy's
budget.
Why will Sammy agree to all of this....his
motivation is high to keep his house but he knows he just needs
help to get it back on track. Sometimes homeowners just get
intimidated or flat out frustrated in dealing with the lender and
they need to speak to someone who can help them understand more
clearly their options.
This someone is YOU and when Sammy can talk and
meet you personally, it can relieve the anxiety they may have put
off on just dealing with the lender. And as well all know being an
ostrich and sticking one's head in the ground doesn't make the
situation go away and especially when an impending foreclosure is
at stake.
A large majority of loans when closed are sold
off within months to other lenders. This means that when Sammy
originally closed on his house two years ago with a bank down the
street, the loan is now serviced by someone three states away.
This is frustrating to some homeowners when they get behind the
8-ball of payments and don't have anyone face-to-face to talk to
about their struggles and how to possibly work out of the
financial mess their in.
All right, NOW let us talk about what my whole
focus is here to you. Collect some bucks along the way helping
people out but making it worth your time monetarily by collecting
a fee from the homeowner. Let me save you the heartache right now
as I've experienced and you will too that "yes" you will
get stiffed on that last payment at times. What makes you think
that if they've been in default on their mortgage and other
creditors before that they can afford to pay you the remaining
$250 fee?
What you're really in this for in working out
forbearance agreements is this: THE MAJORITY OF THOSE WHO YOU WORK
OUT FORBEARANCE AGREEMENTS WILL END UP IN FORECLOSURE ANY WAY!!
With some the inevitable will happen and they will not be able to
save their house from the foreclosure process. Other than
Ghostbusters, who are they going to call?---YOU!! The person who
went out of their way to help them and who they have a personal
relationship with now.
See, the entire process of facilitating
forbearance agreements with individuals is to be first in line to
take your best shot at the property while it is in
pre-foreclosure. You now can fit in your best profit-centered
technique and what would work best for the situation. Go for the
short-sale first and also evaluating on the feasibility of taking
over the property subject-to the existing financing. Heck, there
may even be enough equity in there to buy out right (would be rare
though).
Even when successfully facilitating a
forbearance agreement for a seller....it has only just started. I
recommend contacting the homeowner AT LEAST every other month for
the first year just to touch base and see how things are going.
When that house goes into all out foreclosure, you want to be
first in line.
Some of the other great aspects about working out forbearance
agreements with sellers is your now "inside" track. This
means you know intimately the seller's financial condition on the house along with key relational contact information of the lender.
This can make all the difference in the world when it comes down
to getting a quality deal put together or being just another average real estate investor wondering where all the deals
are. I'll tell you where the deals are and they are right under
your nose in working out forbearance agreements.
The initial process of working out forbearance
agreements does not sound that glamorous but it can pay HUGE
dividends. So, instead of chunking all the leads you get for
people in financial distress with little equity you now need to
take serious consideration into working out forbearance agreements
with sellers.
It now all comes down to this in that you CREATE
your own deals by taking different approaches and working smarter,
not harder. Lastly...as you well know its coming, "Good
hunting as luck has absolutely NOTHING to do with it!".
Free
Articles by Scott Rister - Find Motivated Sellers (Here)
Click
Here to learn more about Scott Rister - Find Motivated Sellers
Home Study Course
|
