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REVISED EDITION Breakthrough to Mastery An Agent’s Guide to Short Sales, Foreclosures, and REOs Master the Market of the Moment.

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Presentation on theme: "REVISED EDITION Breakthrough to Mastery An Agent’s Guide to Short Sales, Foreclosures, and REOs Master the Market of the Moment."— Presentation transcript:

1 REVISED EDITION Breakthrough to Mastery An Agent’s Guide to Short Sales, Foreclosures, and REOs Master the Market of the Moment

2 2 An Agent’s Guide to Short Sales, Foreclosures, and REOs Main Ideas 1. Perspective 2. The Foreclosure Process 3. Short Sales 4. Foreclosures 5. Real Estate Owned Properties (REOs) 6. The Bottom Line

3 3 An Agent’s Guide to Short Sales, Foreclosures, and REOs Perspective Opportunity Exists  Dropping home prices can lead to defaults and foreclosures  Foreclosure creates needs » Homeowners » Investors » Financial institutions » REO listing agents  Look to your local market Pages 7-8

4 4 An Agent’s Guide to Short Sales, Foreclosures, and REOs Perspective (continued) Are You Able, Ready, and Willing? “These skills can be mastered— but they will take time.” Dave Jenks Keller Williams Realty International Page 10

5 5 An Agent’s Guide to Short Sales, Foreclosures, and REOs Perspective (continued) Short Sales, Foreclosures, and REOs Require » Leveraging systems, tools, and people » Time » Acceptance of risk Page 10

6 6 An Agent’s Guide to Short Sales, Foreclosures, and REOs The Foreclosure Process Three Phases of Foreclosure Process and Three Areas of Business Opportunity PreforeclosureShort Sales Public AuctionForeclosures PostforeclosureREOs Page 11

7 7 An Agent’s Guide to Short Sales, Foreclosures, and REOs The Foreclosure Process (continued) Phase 1: Preforeclosure Short Sales Phase 2: Public Auction Foreclosures Phase 3: Postforeclosure REOs 1. Homeowner misses loan payment days 2. Late charges begin accruing. 4. Notice of Intent to Foreclose publicized. 5. Auction 6. Redemption Period 7. REO 3. Lender sends Notice of Default. 0 Pages 12-13

8 8 An Agent’s Guide to Short Sales, Foreclosures, and REOs Defining the Three Areas 1. Short sale 2. Foreclosure 3. REO The Foreclosure Process (continued) Page 14

9 9 An Agent’s Guide to Short Sales, Foreclosures, and REOs The Foreclosure Process (continued) Why Do Properties Go into Foreclosure? 1. Subprime loan 2. Unable to refinance 3. Zero-down loan 4. Loss of income 5. Unexpected events 6. Market shifts Pages 15-16

10 10 An Agent’s Guide to Short Sales, Foreclosures, and REOs The Foreclosure Process (continued) Potential Challenges and Rewards How can you set yourself apart from the myriad of ads and calls proposing questionable schemes? What challenges and rewards do you foresee? Page 16

11 11 An Agent’s Guide to Short Sales, Foreclosures, and REOs The Foreclosure Process (continued) Other Options 1. Forbearance 2. Mortgage modification 3. Refinance with an FHA-backed loan Advise the homeowner to contact their lender immediately. Page 17

12 12 An Agent’s Guide to Short Sales, Foreclosures, and REOs Short Sales  The Win-Win  Six Key Sources  Qualifying Short Sale Candidates  Additional Considerations  Eight Steps to a Short Sale  After the Short Sale  Are You Able, Ready, and Willing? Page 18

13 13 An Agent’s Guide to Short Sales, Foreclosures, and REOs Short Sales (continued) The Win-Win Truth A short sale can be a win-win for the agent, the homeowner facing foreclosure, and the lender. Pages 19-20

14 14 An Agent’s Guide to Short Sales, Foreclosures, and REOs Short Sales (continued) Six Key Sources 1. Your Solutions-Based Unique Selling Proposition (USP) 2. Notice of Default Lists 3. FSBOs 4. Listing Appointments 5. Lenders 6. Public Notices of Auction Pages 21-23

15 15 An Agent’s Guide to Short Sales, Foreclosures, and REOs Short Sales (continued) Qualifying Short Sale Candidates 1. Market pricing must be less than the loan amount. 2. The homeowner must be financially insolvent. 3. The homeowner must demonstrate a hardship. 4. The homeowner must be cooperative. Pages 24-26

16 16 An Agent’s Guide to Short Sales, Foreclosures, and REOs Short Sales (continued) Additional Considerations 1. Bankruptcy 2. Private Mortgage Insurance (PMI) 3. Imminent foreclosure date Page 27

17 17 An Agent’s Guide to Short Sales, Foreclosures, and REOs Short Sales (continued) The Eight Steps to a Short Sale Step 1Gather Information Step 2Open Communication Step 3Develop the Proposal Step 4List the Home Step 5Obtain an Offer Step 6Submit a Proposal Step 7Negotiate the Deal Step 8Close the Deal Page 28

18 18 An Agent’s Guide to Short Sales, Foreclosures, and REOs Short Sales (continued) “The selling and communication cycle in a short sale is long and tenuous. You cannot wing it. But if you stay with it, if you nurture this skill set, you can become an Opportunity Warrior in a challenging market.” Dave Jenks Keller Williams Realty International Page 28

19 19 An Agent’s Guide to Short Sales, Foreclosures, and REOs Short Sales (continued) Step 1: Gather Information 1. Proof of income and assets 2. Proof of hardship 3. Property information 4. Loan information Short Sale Checklist– Information Gathering Pages 29-31

20 20 An Agent’s Guide to Short Sales, Foreclosures, and REOs Short Sales (continued) Step 2: Open Communication 1. Obtain and submit authorization 2. Initiate communication with lender a) Short sale application packet b) Name and direct number of decision maker in Loss Mitigation Department c) Information about their policies 3. Systematize communication Short Sale Contact Record Pages 31-33

21 21 An Agent’s Guide to Short Sales, Foreclosures, and REOs Short Sales (continued) Step 3: Develop the Proposal 1. Information from “Step 1: Gather Information” 2. Business case for accepting a reduced price Short Sale Proposal Packet Checklist Pages 33-34

22 22 An Agent’s Guide to Short Sales, Foreclosures, and REOs Short Sales (continued) Step 4: List the Home  Develop a pricing strategy  Educate the seller  Considerations » List home “as is” » Enter “Short Sale” in the agent remarks on the MLS (if optional) » Indicate “variable commission–split with buyer” on the MLS Pages 35-36

23 23 An Agent’s Guide to Short Sales, Foreclosures, and REOs Short Sales (continued) Step 5: Obtain an Offer  Determine lender’s requirements  Ask potential buyers for their best offers  Give the lender the best offer  Seller should approve offer  Lender will order a broker’s price option (BPO)  Educate the buyer Short Sale Disclosure Example Pages 36-38

24 24 An Agent’s Guide to Short Sales, Foreclosures, and REOs Short Sales (continued) Step 6: Submit a Proposal  Add the offer to the proposal » Create a proposal for each loan  Send it by registered mail to all appropriate contacts  Follow up  Be persistent Page 38

25 25 An Agent’s Guide to Short Sales, Foreclosures, and REOs Short Sales (continued) Step 7: Negotiate the Deal  Balance negotiations between lenders if more than one lender  Create systems for communication  Consider leveraging help » Services are available to negotiate Short Sale Contact Record Pages 39-40

26 26 An Agent’s Guide to Short Sales, Foreclosures, and REOs Short Sales (continued) Step 8: Close the Deal  Complete the deal within thirty days of lender acceptance  Prepare so there are no surprises at the closing » Seller cannot bring cash to the closing » Alert the closing company Pages 40-41

27 27 An Agent’s Guide to Short Sales, Foreclosures, and REOs Short Sales (continued) After the Short Sale  Ask the seller for a testimonial  Put the seller in your Met Database  Put the seller on a 33 Touch Page 42

28 28 An Agent’s Guide to Short Sales, Foreclosures, and REOs Short Sales (continued) Are You Able, Ready, and Willing? What systems, tools, and people can you leverage to master short sales? Page 43

29 29 An Agent’s Guide to Short Sales, Foreclosures, and REOs Foreclosures  Develop a Criteria Filter  Buying at Public Auction  Are You Able, Ready, and Willing? Page 44

30 30 An Agent’s Guide to Short Sales, Foreclosures, and REOs Foreclosures (continued) Develop a Criteria Filter 1. Location 2. Type 3. Economic 4. Condition 5. Construction 6. Features 7. Amenities Pages 44-45

31 31 An Agent’s Guide to Short Sales, Foreclosures, and REOs Foreclosures (continued) Buying at Public Auction  Benefits » Great deals » Possibly one lender  Challenges » Pay at sale or soon afterward » Sold “as is” Pages 45-46

32 32 An Agent’s Guide to Short Sales, Foreclosures, and REOs Foreclosures (continued) Are You Able, Ready, and Willing? How can you leverage systems, tools, and people to increase your knowledge of foreclosures, and to solidify your relationships with investors? Page 47

33 33 An Agent’s Guide to Short Sales, Foreclosures, and REOs REOs  Breaking into the Business of REOs  Services That Listing Agents Provide in Working REOs  Leverage Great Administrative Help  Break into the Business of Servicing REO Buyer Leads  Educate Your Buyers  Are You Able, Ready, and Willing? Page 48

34 34 An Agent’s Guide to Short Sales, Foreclosures, and REOs REOs (continued) Breaking into the Business of REOs 1. Apply to a lender or asset management company 2. Leverage relationships Pages 49-51

35 35 An Agent’s Guide to Short Sales, Foreclosures, and REOs REOs (continued) Services That Listing Agents Provide in Working REOs 1. Put a notice on the front door 2. Negotiate “cash for keys” or CFK 3. Accompany the sheriff on evictions 4. Secure and rekey the property 5. Clean the house 6. Repair the home 7. Pay utility bills 8. Manage the property Pages 52-53

36 36 An Agent’s Guide to Short Sales, Foreclosures, and REOs REOs (continued) Services That Listing Agents Provide in Working REOs  Complete tasks quickly  Watch your accounts receivable Pages 53-54

37 37 An Agent’s Guide to Short Sales, Foreclosures, and REOs REOs (continued) Leverage Great Administrative Help “There is a lot of pressure in REO that you might not get in the residential side. We have very demanding clients who are always threatening to take our business away. But we love it.… Once you get your name out there, the business just starts coming.” Angela Larson Roseville, Minnesota Page 55

38 38 An Agent’s Guide to Short Sales, Foreclosures, and REOs REOs (continued) Break into the Business of Servicing REO Buyer Leads  REO listing agents focus on REO listings  Get into relationships with REO listing specialists Pages 56

39 39 An Agent’s Guide to Short Sales, Foreclosures, and REOs REOs (continued) Educate Your Buyers  Buyer may have to be patient  Lenders don’t consider emotional letters  Lenders are looking for the cleanest and easiest deals  Contract requires additional paperwork  Title will be clean Pages 56-57

40 40 An Agent’s Guide to Short Sales, Foreclosures, and REOs REOs (continued) Are You Able, Ready, and Willing? What systems, tools, and people can you leverage to master REOs? Page 57

41 41 An Agent’s Guide to Short Sales, Foreclosures, and REOs The Bottom Line  Some markets have a growing need.  You can succeed!  Prequalify yourself first. » Can you leverage systems, tools, and people? » Can you devote time to developing these skills? » Can you accept a level of risk? Page 58

42 42 An Agent’s Guide to Short Sales, Foreclosures, and REOs Productivity Boosters  Market With Your USP  Stay in Touch After the Short Sale Page 59

43 43 An Agent’s Guide to Short Sales, Foreclosures, and REOs My Action Plan  Don’t put away this guide without developing a plan to put what you have learned into action!  Refer to the Action Plan on pages of the guide to assess your strengths and areas for improvement.  Write down steps you will take to improve your skills—complete it, share it, and commit to it! Pages 60-63

44 44 An Agent’s Guide to Short Sales, Foreclosures, and REOs Take the other courses in the Breakthrough to Mastery Guide series!  Gaining Mind over Market  Upshifting Your Lead Generation  Seller Pricing Strategies  Seller Staging Strategies  Lead Capture and Conversion  Internet Lead Capture and Conversion  Creating Urgency to Buy  Bulletproofing Transactions  Expense Management  Effective People Leverage  Financing Solutions

45 45 An Agent’s Guide to Short Sales, Foreclosures, and REOs Thanks for being here! Please complete an evaluation for this session.


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