Pre/Forc Article Just Submitted Today (Articles Sec.)
TRADING APPRECIATION POTENTIAL FOR FORECLOSURE RELIEF
Bill J. Gatten
So much has been written about how to capitalize on the misfortunes of those in foreclosure, that the subject is--all too often--associated with greed, or with taking 'unconscionable advantage' of good people in distress.
And...why do you suppose that is?
Well...not to offend anyone, but...it’s because all too often those who work foreclosures are in-fact greedy and in the habit of taking advantage of people in duress...when they really don't have to.
Q: So what's the solution to working foreclosures, staying fair and never hurting anyone or taking advantage of their misfortune?
A: Well...how about truly 'helping' the guy in foreclosure (i.e., you catch more flies with honey…and all that). Why not honestly offer to save his home; to preserve his equity; to reduce his payments; to restore his mortgage credit…and do all of this while dealing only at the full value of the property?
The fact is that one needn't take a bunch to get a bunch...there's always a better way than that. OK...then...put another way: "All of a thing is seldom more valuable than several parts of a lot of things."
So, how about a flyer (or letter or??) that says something like the following? Would it go over?
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SAVE YOU HOME BY SELLING SOMETHING YOU DON’T EVEN OWN (YET)
Dear Mr. and Mrs. Smith,
Regarding your property, which the public record shows to be in arrears, may I offer to SAVE YOUR HOME FOR YOU while leaving you and your family in the property; stopping your foreclosure; bringing your mortgage payments current; and even reducing your payments for at least the first year of our agreement.
However, should you prefer instead to vacate the property and make no further payments, I will then...fully at your discretion...be happy to simply purchase the property from you at its full value and still preserve as much of your equity for you as possible.
Our program requires only the following:
• That the existing mortgage financing remain in place for the term of our agreement (note that our program does not violate a lender’s ‘due-on-sale’ clause)
• That the property’s title be held in a third-party, co-beneficiary land trust for the term of our agreement (for the personal and legal protection of all parties)
• That the two of us share together in future appreciation potential (usually by 50%) should such appreciation have occurred by the time the property is sold or refinanced by you at termination
• That my initial investment be eventually returned to me (without interest) from proceeds received upon the disposition of the property (sale or refinance) at termination
• That you will have thoroughly reviewed and become wholly comfortable with our program
• That you agree (should you opt to remain in the property) that in the event of a future uncured default, you will sell me your equity in the property at its then full fair market value.
Respectfully,
Bill Gatten
Please call me at my private line at 800 207 xxxx
503 228 9113
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Q: Now, you say: Ok, which walnut is the pea under? How do you do all that and still make a profit?
First--'full value' means the value that we mutually determine to be fair when my expenses, anticipated costs, and reasonable margin of profit are subtracted from the FMV.
Second--placing a property into a land trust does not violate the due-on-sale clause within itself, and does indeed shield the property from myriad legal and personal problems that could otherwise arise and attached to the property.
Third--in sharing future profits with the borrower-of-record, I am getting half of the appreciation, as well as half of the loan's principal reduction and a full refund of my initial investment…and my ‘reasonable margin of profit’ at termination.
Fourth--I add $1,200 to my initial investment so as to reduce the homeowner's payment by $100 for the first year. After that, we agree that his payment will increase to $200+ for the 2nd year; $300 plus for the third year; and so on.
Fifth - Regarding the buy-out provision re. default, my offer of FMV will be: the loan amount, plus missed payments, late fees and a $2,000 default fee (as per our agreement). Then...if my offer is challenged, the contract provides that any deficiency must be proven--at the defaulting party's expense. If it can be proven that he is owed more than my offer, the amount owed will be paid in full…in the form of an ‘unsecured promissory note’ to be retired only when the property is finally disposed of (should there be sufficient fund to do so)
FOR THE READER: My motto has always been that “Thinking BIG is great: but thinking small a whole bunch of times can yield the same result a lot more safely.”
Bill Gatten
Bill,
I was advised in the past many more than once that letting home owners in default stay in their house is sure way to get into trouble. After all, many of those folks are not responsible people and that is why they are in trouble. (Of course, many of them are just unlucky) I worried about this especially in California, which seems to have strong bias against greedy old investors. (I’m not greedy, I think.) What extra measure do you take to protect yourself, if any?
Thanks in advance.
GREAT LETTER BILL G!!!
You are the Best and Most giving guru I know!
!!!ALERT!!!
To: ALL TCI Members.
Just a little under 4 Years ago BILL GATTEN helped me to close on a $850K Trust Property Deal located in Olympia Fields Illinois for FREE!
It was a $345K Pre-Foreclosure listing I sent a letter plus voicebroadcast call to following Bill's Advice and the owner responded.
Before I even paid him (BILL G) a dime for his landtrust course program; he helped me to close this Owner, His RE Broker, and even his ATTORNEY !!!
BTW - the ATTY wanted me to remove a couple of paragraphs from my option agreement before his client (the owner) signed it...
After talking over the phone with BILL G the Attorney Faxed me the Original Option agreement i sent with the Owner's signaturew!
---end
NOTE to Bill G:
Due to Your valuable assistance, free-giving support and SPECTACULAR creative REI system you have truly CHANGED both MY and MY ENTIRE FAMILY'S LIFE.
BILL I am forever grateful to you for providing us the TRUE NO DOWN NO CREDIT ZERO MGMT REI SOLUTION!
Sincerely from Your indebted Student-Mentee.
Derrick Ali
sometime Pre-Foreclosure Guru
Full-time PAC/NEHT(tm) Junkie!!!
cheers :-D
Bill,
Thank you for detailed response. (Sorry my response is rather short.)
Now how do you handle, if they subsequently refuse to pay and will NOT kick themselves out when they supposed to? I would imagine they try to make as big as mess as they could make. Even if you win at the court, going there is no fun. :-(
Also since they are not paying more than before, there is no cash flow to you, but only the backend profit. How long of the wait are you talking about here? Initial investment to cure the loan could be good chuck of money …
Thank you.
If they default they are automatically evicted. They already made that decision and gave the order when they put the property into the trust and became lease tenants. The trustee must follow the contract to the letter unless all beneficiaries would be in agreement to alter the terms.
The default by the resident beneficiaries within itself is their constructive notice of their intent to sell their interest to the non-defaulting beneficiary. And no, they don't trash the place, as they most often still have money coming to them and any trashing would come out of what's owed to them. If they don’t have money coming to them, they still stay in line to avoid being sued for all the remaining payments in their lease along with any damage done…and an IRS recapture of all tax benefits up to that point.
Remember that after vesting the property with the third-party trustee and naming a co-beneficiary, unilateral control no longer exists. All decisions, directions and order must be unanimous from that point on, unless I were to have taken a Power of Attorney from them in the beginning, but I don’t do that or recommend that others do either (there is comfort in knowing that I have not positioned myself to be able to hurt them in any way…should we ever end up in court).
Bill Gatten
Bill,
.
Thank you so much for your post and article. It is one solution to one of my investing dilemmas that has kept me from moving forward. It is an absolute must for me to feel like I've done my best for someone and can make a living too. To be able to offer some choices to folks, especially those want to stay in their home and can under these circumstances, is a serendipity indeed
Regards,
Terry
Wow! This is definately thinking out of the box...like it never existed! I'd like to know more abou this. In fact, I emailed you with more details. Cool idea. Dennis