eCourse for Flipping Short Sales Module 12 Checklist
Seven Streams Flipping Short Sales MethodTM Lesson #12 Checklist – The 7 Income Streams for Your Highly Profitable Business ***This condensed version of the main lesson is for review purposes only. For an in-depth explanation of each of the items listed here, please refer to the main PDF file or the MP3 audio version.
This week we’re going to talk about: The many scenarios the Seven Streams Flipping Short Sale MethodTM creates for you to take the most money from the closing table. As a real estate professional you’re expected to be versed in the options available to sellers and buyers alike. As a specialist in the distressed property field, you have the additional responsibility to present sellers with all of the options they might have available to resolve their situation. You inform them of their choices but you don’t give them advice. You strongly recommend they seek the advice of an attorney or financial expert.
Seven Streams Flipping Short Sales MethodTM Lesson #12: The 7 Income Streams For Your Highly Profitable Business
Being fully ethical will bring you more business than working in any other way
But that doesn’t mean you can’t profit in one of many ways after the seller makes a decision how to proceed. In this eClass you will learn about the many options you have to earn referral and other commissions even if the seller doesn’t choose to do a short sale at first. Selling the house and moving out is seldom the owner’s first choice. Some will attempt to do a loan modification and others might seek to refinance the mortgage into something more affordable. The sad truth is that even if they do this, many will still not be able to pay the mortgage. By performing in a highly ethnical manner and not pressing the homeowner into short sale before they have explored all their options, they will remember you when the time comes for the short sale. You will be the one they cooperate with to get the lender to say “yes”.
By the end of this week’s eClass you’re flipping short sales tool box will be complete. Specifically, you’ll have the following things in place… There’s a lot to learn this week
How to ethically present homeowners with all the options
they should explore How to quickly gain credulity with clients Which business entities you need to setup Which business entities to use for each transaction A detailed understanding of how to combine the seven
income streams to maximize your profits on every deal An understanding that no one using traditional flipping short
sale techniques comes close to your profit level When and which income stream applies to specific deal
types A full understanding of the many types of deals that will
come across your desk How to quickly grow your business once your foundation is
built © 2009 SevenStreamsFlipping.org. All rights reserved.
2
www.sevenstreamsflipping.org
Seven Streams Flipping Short Sales MethodTM Lesson #12: The 7 Income Streams For Your Highly Profitable Business In some parts of the country, such as Bakersfield, Calif., Las Vegas and Lakeland, Fla., distressed properties constitute half or more of all sales. So far this year, there have been nearly 411,000 sales of U.S. properties in some stage of foreclosure, according to RealtyTrac. More and more short sales are happening every day
Lenders say they are stepping up their efforts to handle short sales. J.P. Morgan Chase & Co. has doubled the number of employees handling such sales, while Bank of America Corp. recently began allowing real-estate agents to submit short-sale documents online, reducing the chance a sale will be stalled. At Wells Fargo & Co., efforts to speed up short sales helped produce a 145% increase in these transactions in August compared with the same month a year earlier, the bank says.
Special Consideration For Real Estate Professionals These are trying times for the many owners that find they are trapped in distressed houses. It’s times like these that require true professionals to perform with the utmost ethics and honesty. While it’s impossible for you to give legal or financial advice to these people (unless you are an attorney), you do have a responsibility to make sure distressed homeowners are aware of all their options before going forward with a short sale. The listing broker on your team has a fiduciary responsibility to the seller. In a short sale, this responsibility includes protecting the client’s credit rating. That means being sure the client has all the information needed to understand that avoiding foreclosure or bankruptcy is almost universally better no matter how it’s accomplished. The short sale is often the last choice before foreclosure or bankruptcy. Once the short sale decision is made, the broker has a responsibility to make every effort to close the sale. The Seven Streams Flipping Short Sales MethodTM earnestly encourages brokers to be sure all sellers are fully aware of their options. A separate file briefly describing the most common © 2009 SevenStreamsFlipping.org. All rights reserved.
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Seven Streams Flipping Short Sales MethodTM Lesson #12: The 7 Income Streams For Your Highly Profitable Business options is included with this lesson. It can be handed out to prospective clients to encourage them to study what else might be done before resorting to a short sale. Options Brokers Should Present Sell the property to repay the loan in full if possible Refinance into a new affordable loan Consult with a mortgage broker Reinstate the current loan Forbearance agreement – repay arrears with installments Loan modification Short sale Deed in lieu of foreclosure Foreclosure Bankruptcy
Legal Options They can have a forensic audit conducted on their mortgage These options paperwork by an accountant and/or attorney. A substantial cost amount of predatory lending occurred. The borrower may have money in been taken advantage of. The audit will examine the paperwork the form in regard to local, state, and federal laws. of attorney fees
Produce the note is another legal option. Many mortgages have been packaged and repackaged so many times that the paper trail has been lost. The lender may not be able to prove they own the loan or that the borrower owes money. There are attorneys specializing in this technique they can consult with. Getting Credible With the Client At the initial meeting with a distressed homeowner, discuss all of their options but don’t assume responsibility for providing professional advice or suggesting what decision they should make.
© 2009 SevenStreamsFlipping.org. All rights reserved.
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Seven Streams Flipping Short Sales MethodTM Lesson #12: The 7 Income Streams For Your Highly Profitable Business If they ask what you think they should do, remind them that you can’t provide legal or financial advice. You are only making them aware of their options. You can add both another layer of protection and assure them that you are not trying to scam them by offering to sit down with their attorney to discuss the best solution. It tells the homeowners that you are comfortable enough with your process to openly discuss it with their attorney. Leave them some thing to refer back to
Create a Handout Use this information to create a handout that can be left with the homeowner. Have the handout reviewed by your attorney. If you are an attorney, have it reviewed by another unbiased attorney. Decide what role you want to in the process and consult with an attorney. Also consult with your local bar association. Your “Assignment” for Stage #1 Start working on your own handout for homeowners based on the sample provided. Have it reviewed by your attorney before giving it to any homeowners. Send any questions or comments about the material to me by logging into the Lesson page at: www.sevenstreamsflipping.org/e-classes2
The Seven Income Streams The seven income streams are: Mix and 1. Loan Modification fees or to make referrals to loan mod match to specialists maximize 2. Capital gain flipping the property your profits 3. Real estate commissions
4. Short sale negotiation fee 5. Loan / mortgage broker commissions 6. Document preparation fees © 2009 SevenStreamsFlipping.org. All rights reserved.
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Seven Streams Flipping Short Sales MethodTM Lesson #12: The 7 Income Streams For Your Highly Profitable Business 7. Garbage fees (processing, document preparation, administration, and other fees) Loan Modifications Some There are many scenarios of how your services can be used in states different combinations. One might be consulting for a loan have very modification for a client. They are pleased with your services and strong think of you several months later when they find they are still laws on having trouble making the mortgage payment and the house has this subject - lost another 12% of its value. The house is now underwater and know they want to do a short sale instead of struggling to pay a loan for yours more the house is worth. If you don’t want to do loan modifications, you can work out a referral relationship with someone that does. You refer loan modification clients to an attorney in exchange for the attorney referring short sales to you. It’s not directly income but referrals certainly do lead to income. (If your state allows it you can refer clients to loan modification specialists for a fee.) You can then market for loan modifications to create deal flow for short sales. People want to try saving their house before deciding to short sale. Almost everywhere in the US you can legally do loan modifications if you follow the laws closely. And the laws do vary from state to state significantly. So be sure you do fully understand the laws. Check out If you want to get into the business of consulting for loan my loan modifications you can get in touch with me and I’ll help you with mod the training you need. course
Capital Gains Capital gains are the net difference between what you paid for the property and what you sell it for. The bottom line on the HUD-1 form at closing. It reads “Cash to Seller”. You are the seller on the B to C transaction of short sale. © 2009 SevenStreamsFlipping.org. All rights reserved.
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Seven Streams Flipping Short Sales MethodTM Lesson #12: The 7 Income Streams For Your Highly Profitable Business This is the big one
The capital gain should always be your biggest paycheck from flipping short sales. How big depends on how good your team is. The team needs to put the right package together and market the property to sell it quickly. You want a team member that is a high volume listing agent. Someone that knows the market. Someone that can price the property correctly. Ideally between 85% and 90% of market value or less if the spread from the purchase price is big enough. Have the short sale agreement in place and sell it fast. A good broker should bring in multiple offers.
Sell it fast for maximum profit
In an industry with falling prices, you don’t want to get caught chasing those falling prices. Get rid of the property for the asking price in 35 days or expect to be lowering the price in a couple of months. The strategy is to buy for 60% or 65% of market value. The bank approves because it costs a lot less than foreclosure. Sell for 85% and make 10% after all costs and commissions are paid. Repeat this 4 or 5 times each month and you’ll have a very good income stream. Commissions Anyone involved with real estate investing should have an agent’s or preferably a broker’s license. Here are the advantages:
These provide many ways to make an income, some times for very little work
It enables you to receive a commission on anything you
buy anywhere in the USA. Your buyer’s commission can be used as a down payment
when making a purchase. The 3% buyer’s commission on a $200,000 purchase
comes to $6,000. A significant stream of income. Closing 5 deals each month comes to a gross income of $30,000. Take a short sale listing. In the event you come across a
short sale that just is not worth flipping because the profit margin is too small, you can still take it as a listing to earn the commission. Lenders are willing to pay a © 2009 SevenStreamsFlipping.org. All rights reserved.
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Seven Streams Flipping Short Sales MethodTM Lesson #12: The 7 Income Streams For Your Highly Profitable Business commission in short sales because they know a MLS listed house sells for about 15% more than a sale by owner. Another alternative for a short sale with no profit margin
for flipping is to refer it to another agent to list. Typically, you can expect a referral fee equal to 25% of the commission the other agent will earn. Stay in the role of real estate investor, refer the broker
role in a short sale to a broker you want to work with. Collect the 25% referral fee and then come into the deal as the investor. Collect the 3% buyer’s commission and flip the property to collect the capital gains. This one applies to deals with adequate profit margin. Another combination is to refer both the listing agent
and buyer agent in a deal with little profit margin. Your source for buyers is the same as for flips. Just no capital gains. But you collect the 25% referral fee on the entire 6% commission paid to the listing and buyer agents. This is an incredible method for finding interested buyers
The 9-day sale method is a tremendous way to generate a huge number of buyers interested in buying short sales or other discounted properties. If you want to learn more about the 9-day sale method, get a hold of me and I’ll show you how to learn all about it. Negotiation Fees On page one of the HUD-1 there is a section titled “Items to be deducted from the seller’s net amount”. To collect your short sale negotiation fee, you submit a “net” sheet to the closing agent or attorney that completes the HUD-1 form. List it as a business entity separate from your land trust. Probably an LLC. It can be either a set fee or it can be a percentage of the gross sale. Do this when you have a seller and a buyer but don’t want to be a principle in a flip. Something about the deal is too difficult. Or you are not comfortable with the deal. Negotiate the short sale between seller, buyer, and lender.
© 2009 SevenStreamsFlipping.org. All rights reserved.
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Seven Streams Flipping Short Sales MethodTM Lesson #12: The 7 Income Streams For Your Highly Profitable Business Depending on what you are doing, you should still be getting paid for: Loan modification fee Commission for representing the buyer or referral fee Short sale negotiation fee
You can still earn $10,000 to $20,000 without the capital gain. Loan / Mortgage Brokering Commissions Another These can be used as cost offsets. In some states, it’s illegal for very the mortgage broker to pay a referral commission. In others it’s innovative acceptable. way to earn an income
Where it’s unacceptable, a good arrangement is for the broker to apply a portion of their commission towards marketing your short sales business – a form of cost offset. Also on joint marketing for your real estate broker to bring in more deal flow. He places the ads, websites, and other marketing. The expenses are covered by the mortgage broker. You can run ads that say you buy houses without equity. The broker can place a small ad inside seeking refinancing business and ethically pay for the ad. Ask that 25% of their personal commission be applied towards running your business so that you can bring in more money for them. How to Build your Business Once you have a solid foundation and a quality team in place, you can consider running seminars to generate large volumes of very targeted potential clients and deals. Run a Seminar Titled: “Are You Tired of Paying a Predatory Loan and Need to Get Out?” -Or-
© 2009 SevenStreamsFlipping.org. All rights reserved.
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Seven Streams Flipping Short Sales MethodTM Lesson #12: The 7 Income Streams For Your Highly Profitable Business “Do You Have Zero Equity But Need to Sell Your Home” Be sure to read the main text for many other ways to grow your business
Have your mortgage broker pay the cost of the seminar and offer it free to potential clients. These all market directly to homeowners. You want to have a few deals under your belt before doing this. You need to have your process down flat and be prepared to ramp up your business in a hurry when you begin targeted direct marketing. Laminate a pile of (200) of your flyers. Have someone take your region’s foreclosure list and tape the quality flyer to every house that doesn’t have a reality sign posted. Stay away from those already listed with realities. Don’t interfere with the business of others. The Title at the top can read: “Short Sale Specialist” Open with several questions like: Do you owe too much on your mortgage? Are you struggling to make your mortgage payments? Are you facing foreclosure? Thinking of bankruptcy? Want a fresh start? Need to get out from under?
At the bottom, only include a telephone number and an email address.
© 2009 SevenStreamsFlipping.org. All rights reserved.
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Seven Streams Flipping Short Sales MethodTM Lesson #12: The 7 Income Streams For Your Highly Profitable Business Income Stream 6 – Documentation Preparation Fees Talk to your attorney about this. You can charge $500 for preparing your short sale document. Have the fee paid to a separate entity from the principle in the deal. It should be a LLC, not a land trust. Five transactions a month is $2,500 per month or another $30,000 for the year. Even one per month will pay many of your expenses like heat, electricity, and office supplies. What’s in it for $500? Grant deeds warrantee deeds Everything in the A – B transaction except the standard
real estate forms that the broker handles Short sale disclosures Information release authorization Financial statement review Hardship letter review All documents from the short sale package Packaging and transfer to the lender
An independent closing entity handles the B – C transaction. Six separate entities are involved. Nowhere else will you find these kinds of secrets to short sales
1. Land trust buys and sells property using a different one on every deal 2. LLC #1 is used for documentation preparation 3. LLC #2 is for negotiating the short sale – you can use this one over and over again 4. LLC #3 is a separate entity if you will be conducting loan modifications 5. LLC #4 could be a handyman service 6. LLC# 5 is your broker license
© 2009 SevenStreamsFlipping.org. All rights reserved.
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Seven Streams Flipping Short Sales MethodTM Lesson #12: The 7 Income Streams For Your Highly Profitable Business This creates the potential for you to receive up to six checks from the closing table. Income Steam 7 – Garbage fees. That’s the industry term for a lot of loose ends. There is a municipal lien certificate, various other local certificates and documents. Someone has to gather these requirements and deserves to be paid for it. Another $500 check at closing. A Break Down of The 7 Income Streams Here is how a typical deal might come together. Here’s the bottom line for a typical seven streams short sale flip
1. Loan modification fee
$ 2,000
2. Capital gain
$28,000 (average)
3. Buyer’s agent commission (on a $200,000 house)
$ 6,000
4. Short sale negotiation fee
$ 2,500 to $3,500
5. Mortgage broker earns $2,000 spends on your marketing
$
500
6. Documentation preparation fee
$
500
7. Garbage fees
$
500
Total at Closing
$39,500
The way another person does the flip the gross profit would have been limited to the $28,000 capital gain. Using the Seven Streams of Flipping Short Sales MethodTM adds another $11,500 of profit to the average flip. The $39,500 is what you get paid. Others are getting paid also. Like your listing broker that can earn up to a 9% commission. The mortgage broker that netted $1,500 and the contractors that you hired. Four or five other people are really happy also. © 2009 SevenStreamsFlipping.org. All rights reserved.
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Seven Streams Flipping Short Sales MethodTM Lesson #12: The 7 Income Streams For Your Highly Profitable Business As you might expect, now that you’ve reached the end of the eCourse, there is substantial homework to complete. Time to get started on the best business decision you will ever make….
Your “Assignment” for Stage #2 Decide on your loan modification strategy. Find a loan mod team member if needed. Investigate referral commissions in your local area. Contact an attorney about setting up the business entities that you will need going forward. Find a mortgage broker for your team. Create your direct marketing flyer based on the sample provided. Begin the implementation checklist provided. Send any questions or comments about the material to me by logging into the Lesson page at: www.sevenstreamsflipping.org/e-classes2
Congratulations on reaching the end of the eCourse - Seven Streams Flipping Short Sales MethodTM. You now have all the knowledge and tools need to begin your own short sale flipping business. As you go forward, always remember not only will you be making immense profits from short sales but you will be relieving many homeowners of a great burden they cannot accomplish without you. Keep your eye on your inbox because I’ll continue keeping you informed of developments in the always changing real estate and short sale business. Best wishes
Richard Geller Publisher, Seven Streams Flipping Short Sales MethodTM
P.S. Be sure to review all of the materials that are included with this week’s curriculum package. You should have received four other files: © 2009 SevenStreamsFlipping.org. All rights reserved.
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Seven Streams Flipping Short Sales MethodTM Lesson #12: The 7 Income Streams For Your Highly Profitable Business 1. eCourse for Flipping Short Sales Module 12 – 7 Income Streams Explained 2. eCourse for Flipping Short Sales Module 12 – Information for Homeowners 3. eCourse for Flipping Short Sales Module 12 – Direct Marketing Flyer 4. eCourse for Flipping Short Sales Module 12 – Implementation Checklist
© 2009 SevenStreamsFlipping.org. All rights reserved.
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This week we’re going to talk about: The many scenarios the Seven Streams Flipping Short Sale MethodTM creates for you to take the most money from the closing table. As a real estate professional you’re expected to be versed in the options available to sellers and buyers alike. As a specialist in the distressed property field, you have the additional responsibility to present sellers with all of the options they might have available to resolve their situation. You inform them of their choices but you don’t give them advice. You strongly recommend they seek the advice of an attorney or financial expert.
Seven Streams Flipping Short Sales MethodTM Lesson #12: The 7 Income Streams For Your Highly Profitable Business
Being fully ethical will bring you more business than working in any other way
But that doesn’t mean you can’t profit in one of many ways after the seller makes a decision how to proceed. In this eClass you will learn about the many options you have to earn referral and other commissions even if the seller doesn’t choose to do a short sale at first. Selling the house and moving out is seldom the owner’s first choice. Some will attempt to do a loan modification and others might seek to refinance the mortgage into something more affordable. The sad truth is that even if they do this, many will still not be able to pay the mortgage. By performing in a highly ethnical manner and not pressing the homeowner into short sale before they have explored all their options, they will remember you when the time comes for the short sale. You will be the one they cooperate with to get the lender to say “yes”.
By the end of this week’s eClass you’re flipping short sales tool box will be complete. Specifically, you’ll have the following things in place… There’s a lot to learn this week
How to ethically present homeowners with all the options
they should explore How to quickly gain credulity with clients Which business entities you need to setup Which business entities to use for each transaction A detailed understanding of how to combine the seven
income streams to maximize your profits on every deal An understanding that no one using traditional flipping short
sale techniques comes close to your profit level When and which income stream applies to specific deal
types A full understanding of the many types of deals that will
come across your desk How to quickly grow your business once your foundation is
built © 2009 SevenStreamsFlipping.org. All rights reserved.
2
www.sevenstreamsflipping.org
Seven Streams Flipping Short Sales MethodTM Lesson #12: The 7 Income Streams For Your Highly Profitable Business In some parts of the country, such as Bakersfield, Calif., Las Vegas and Lakeland, Fla., distressed properties constitute half or more of all sales. So far this year, there have been nearly 411,000 sales of U.S. properties in some stage of foreclosure, according to RealtyTrac. More and more short sales are happening every day
Lenders say they are stepping up their efforts to handle short sales. J.P. Morgan Chase & Co. has doubled the number of employees handling such sales, while Bank of America Corp. recently began allowing real-estate agents to submit short-sale documents online, reducing the chance a sale will be stalled. At Wells Fargo & Co., efforts to speed up short sales helped produce a 145% increase in these transactions in August compared with the same month a year earlier, the bank says.
Special Consideration For Real Estate Professionals These are trying times for the many owners that find they are trapped in distressed houses. It’s times like these that require true professionals to perform with the utmost ethics and honesty. While it’s impossible for you to give legal or financial advice to these people (unless you are an attorney), you do have a responsibility to make sure distressed homeowners are aware of all their options before going forward with a short sale. The listing broker on your team has a fiduciary responsibility to the seller. In a short sale, this responsibility includes protecting the client’s credit rating. That means being sure the client has all the information needed to understand that avoiding foreclosure or bankruptcy is almost universally better no matter how it’s accomplished. The short sale is often the last choice before foreclosure or bankruptcy. Once the short sale decision is made, the broker has a responsibility to make every effort to close the sale. The Seven Streams Flipping Short Sales MethodTM earnestly encourages brokers to be sure all sellers are fully aware of their options. A separate file briefly describing the most common © 2009 SevenStreamsFlipping.org. All rights reserved.
3
www.sevenstreamsflipping.org
Seven Streams Flipping Short Sales MethodTM Lesson #12: The 7 Income Streams For Your Highly Profitable Business options is included with this lesson. It can be handed out to prospective clients to encourage them to study what else might be done before resorting to a short sale. Options Brokers Should Present Sell the property to repay the loan in full if possible Refinance into a new affordable loan Consult with a mortgage broker Reinstate the current loan Forbearance agreement – repay arrears with installments Loan modification Short sale Deed in lieu of foreclosure Foreclosure Bankruptcy
Legal Options They can have a forensic audit conducted on their mortgage These options paperwork by an accountant and/or attorney. A substantial cost amount of predatory lending occurred. The borrower may have money in been taken advantage of. The audit will examine the paperwork the form in regard to local, state, and federal laws. of attorney fees
Produce the note is another legal option. Many mortgages have been packaged and repackaged so many times that the paper trail has been lost. The lender may not be able to prove they own the loan or that the borrower owes money. There are attorneys specializing in this technique they can consult with. Getting Credible With the Client At the initial meeting with a distressed homeowner, discuss all of their options but don’t assume responsibility for providing professional advice or suggesting what decision they should make.
© 2009 SevenStreamsFlipping.org. All rights reserved.
4
www.sevenstreamsflipping.org
Seven Streams Flipping Short Sales MethodTM Lesson #12: The 7 Income Streams For Your Highly Profitable Business If they ask what you think they should do, remind them that you can’t provide legal or financial advice. You are only making them aware of their options. You can add both another layer of protection and assure them that you are not trying to scam them by offering to sit down with their attorney to discuss the best solution. It tells the homeowners that you are comfortable enough with your process to openly discuss it with their attorney. Leave them some thing to refer back to
Create a Handout Use this information to create a handout that can be left with the homeowner. Have the handout reviewed by your attorney. If you are an attorney, have it reviewed by another unbiased attorney. Decide what role you want to in the process and consult with an attorney. Also consult with your local bar association. Your “Assignment” for Stage #1 Start working on your own handout for homeowners based on the sample provided. Have it reviewed by your attorney before giving it to any homeowners. Send any questions or comments about the material to me by logging into the Lesson page at: www.sevenstreamsflipping.org/e-classes2
The Seven Income Streams The seven income streams are: Mix and 1. Loan Modification fees or to make referrals to loan mod match to specialists maximize 2. Capital gain flipping the property your profits 3. Real estate commissions
4. Short sale negotiation fee 5. Loan / mortgage broker commissions 6. Document preparation fees © 2009 SevenStreamsFlipping.org. All rights reserved.
5
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Seven Streams Flipping Short Sales MethodTM Lesson #12: The 7 Income Streams For Your Highly Profitable Business 7. Garbage fees (processing, document preparation, administration, and other fees) Loan Modifications Some There are many scenarios of how your services can be used in states different combinations. One might be consulting for a loan have very modification for a client. They are pleased with your services and strong think of you several months later when they find they are still laws on having trouble making the mortgage payment and the house has this subject - lost another 12% of its value. The house is now underwater and know they want to do a short sale instead of struggling to pay a loan for yours more the house is worth. If you don’t want to do loan modifications, you can work out a referral relationship with someone that does. You refer loan modification clients to an attorney in exchange for the attorney referring short sales to you. It’s not directly income but referrals certainly do lead to income. (If your state allows it you can refer clients to loan modification specialists for a fee.) You can then market for loan modifications to create deal flow for short sales. People want to try saving their house before deciding to short sale. Almost everywhere in the US you can legally do loan modifications if you follow the laws closely. And the laws do vary from state to state significantly. So be sure you do fully understand the laws. Check out If you want to get into the business of consulting for loan my loan modifications you can get in touch with me and I’ll help you with mod the training you need. course
Capital Gains Capital gains are the net difference between what you paid for the property and what you sell it for. The bottom line on the HUD-1 form at closing. It reads “Cash to Seller”. You are the seller on the B to C transaction of short sale. © 2009 SevenStreamsFlipping.org. All rights reserved.
6
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Seven Streams Flipping Short Sales MethodTM Lesson #12: The 7 Income Streams For Your Highly Profitable Business This is the big one
The capital gain should always be your biggest paycheck from flipping short sales. How big depends on how good your team is. The team needs to put the right package together and market the property to sell it quickly. You want a team member that is a high volume listing agent. Someone that knows the market. Someone that can price the property correctly. Ideally between 85% and 90% of market value or less if the spread from the purchase price is big enough. Have the short sale agreement in place and sell it fast. A good broker should bring in multiple offers.
Sell it fast for maximum profit
In an industry with falling prices, you don’t want to get caught chasing those falling prices. Get rid of the property for the asking price in 35 days or expect to be lowering the price in a couple of months. The strategy is to buy for 60% or 65% of market value. The bank approves because it costs a lot less than foreclosure. Sell for 85% and make 10% after all costs and commissions are paid. Repeat this 4 or 5 times each month and you’ll have a very good income stream. Commissions Anyone involved with real estate investing should have an agent’s or preferably a broker’s license. Here are the advantages:
These provide many ways to make an income, some times for very little work
It enables you to receive a commission on anything you
buy anywhere in the USA. Your buyer’s commission can be used as a down payment
when making a purchase. The 3% buyer’s commission on a $200,000 purchase
comes to $6,000. A significant stream of income. Closing 5 deals each month comes to a gross income of $30,000. Take a short sale listing. In the event you come across a
short sale that just is not worth flipping because the profit margin is too small, you can still take it as a listing to earn the commission. Lenders are willing to pay a © 2009 SevenStreamsFlipping.org. All rights reserved.
7
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Seven Streams Flipping Short Sales MethodTM Lesson #12: The 7 Income Streams For Your Highly Profitable Business commission in short sales because they know a MLS listed house sells for about 15% more than a sale by owner. Another alternative for a short sale with no profit margin
for flipping is to refer it to another agent to list. Typically, you can expect a referral fee equal to 25% of the commission the other agent will earn. Stay in the role of real estate investor, refer the broker
role in a short sale to a broker you want to work with. Collect the 25% referral fee and then come into the deal as the investor. Collect the 3% buyer’s commission and flip the property to collect the capital gains. This one applies to deals with adequate profit margin. Another combination is to refer both the listing agent
and buyer agent in a deal with little profit margin. Your source for buyers is the same as for flips. Just no capital gains. But you collect the 25% referral fee on the entire 6% commission paid to the listing and buyer agents. This is an incredible method for finding interested buyers
The 9-day sale method is a tremendous way to generate a huge number of buyers interested in buying short sales or other discounted properties. If you want to learn more about the 9-day sale method, get a hold of me and I’ll show you how to learn all about it. Negotiation Fees On page one of the HUD-1 there is a section titled “Items to be deducted from the seller’s net amount”. To collect your short sale negotiation fee, you submit a “net” sheet to the closing agent or attorney that completes the HUD-1 form. List it as a business entity separate from your land trust. Probably an LLC. It can be either a set fee or it can be a percentage of the gross sale. Do this when you have a seller and a buyer but don’t want to be a principle in a flip. Something about the deal is too difficult. Or you are not comfortable with the deal. Negotiate the short sale between seller, buyer, and lender.
© 2009 SevenStreamsFlipping.org. All rights reserved.
8
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Seven Streams Flipping Short Sales MethodTM Lesson #12: The 7 Income Streams For Your Highly Profitable Business Depending on what you are doing, you should still be getting paid for: Loan modification fee Commission for representing the buyer or referral fee Short sale negotiation fee
You can still earn $10,000 to $20,000 without the capital gain. Loan / Mortgage Brokering Commissions Another These can be used as cost offsets. In some states, it’s illegal for very the mortgage broker to pay a referral commission. In others it’s innovative acceptable. way to earn an income
Where it’s unacceptable, a good arrangement is for the broker to apply a portion of their commission towards marketing your short sales business – a form of cost offset. Also on joint marketing for your real estate broker to bring in more deal flow. He places the ads, websites, and other marketing. The expenses are covered by the mortgage broker. You can run ads that say you buy houses without equity. The broker can place a small ad inside seeking refinancing business and ethically pay for the ad. Ask that 25% of their personal commission be applied towards running your business so that you can bring in more money for them. How to Build your Business Once you have a solid foundation and a quality team in place, you can consider running seminars to generate large volumes of very targeted potential clients and deals. Run a Seminar Titled: “Are You Tired of Paying a Predatory Loan and Need to Get Out?” -Or-
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Seven Streams Flipping Short Sales MethodTM Lesson #12: The 7 Income Streams For Your Highly Profitable Business “Do You Have Zero Equity But Need to Sell Your Home” Be sure to read the main text for many other ways to grow your business
Have your mortgage broker pay the cost of the seminar and offer it free to potential clients. These all market directly to homeowners. You want to have a few deals under your belt before doing this. You need to have your process down flat and be prepared to ramp up your business in a hurry when you begin targeted direct marketing. Laminate a pile of (200) of your flyers. Have someone take your region’s foreclosure list and tape the quality flyer to every house that doesn’t have a reality sign posted. Stay away from those already listed with realities. Don’t interfere with the business of others. The Title at the top can read: “Short Sale Specialist” Open with several questions like: Do you owe too much on your mortgage? Are you struggling to make your mortgage payments? Are you facing foreclosure? Thinking of bankruptcy? Want a fresh start? Need to get out from under?
At the bottom, only include a telephone number and an email address.
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Seven Streams Flipping Short Sales MethodTM Lesson #12: The 7 Income Streams For Your Highly Profitable Business Income Stream 6 – Documentation Preparation Fees Talk to your attorney about this. You can charge $500 for preparing your short sale document. Have the fee paid to a separate entity from the principle in the deal. It should be a LLC, not a land trust. Five transactions a month is $2,500 per month or another $30,000 for the year. Even one per month will pay many of your expenses like heat, electricity, and office supplies. What’s in it for $500? Grant deeds warrantee deeds Everything in the A – B transaction except the standard
real estate forms that the broker handles Short sale disclosures Information release authorization Financial statement review Hardship letter review All documents from the short sale package Packaging and transfer to the lender
An independent closing entity handles the B – C transaction. Six separate entities are involved. Nowhere else will you find these kinds of secrets to short sales
1. Land trust buys and sells property using a different one on every deal 2. LLC #1 is used for documentation preparation 3. LLC #2 is for negotiating the short sale – you can use this one over and over again 4. LLC #3 is a separate entity if you will be conducting loan modifications 5. LLC #4 could be a handyman service 6. LLC# 5 is your broker license
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Seven Streams Flipping Short Sales MethodTM Lesson #12: The 7 Income Streams For Your Highly Profitable Business This creates the potential for you to receive up to six checks from the closing table. Income Steam 7 – Garbage fees. That’s the industry term for a lot of loose ends. There is a municipal lien certificate, various other local certificates and documents. Someone has to gather these requirements and deserves to be paid for it. Another $500 check at closing. A Break Down of The 7 Income Streams Here is how a typical deal might come together. Here’s the bottom line for a typical seven streams short sale flip
1. Loan modification fee
$ 2,000
2. Capital gain
$28,000 (average)
3. Buyer’s agent commission (on a $200,000 house)
$ 6,000
4. Short sale negotiation fee
$ 2,500 to $3,500
5. Mortgage broker earns $2,000 spends on your marketing
$
500
6. Documentation preparation fee
$
500
7. Garbage fees
$
500
Total at Closing
$39,500
The way another person does the flip the gross profit would have been limited to the $28,000 capital gain. Using the Seven Streams of Flipping Short Sales MethodTM adds another $11,500 of profit to the average flip. The $39,500 is what you get paid. Others are getting paid also. Like your listing broker that can earn up to a 9% commission. The mortgage broker that netted $1,500 and the contractors that you hired. Four or five other people are really happy also. © 2009 SevenStreamsFlipping.org. All rights reserved.
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Seven Streams Flipping Short Sales MethodTM Lesson #12: The 7 Income Streams For Your Highly Profitable Business As you might expect, now that you’ve reached the end of the eCourse, there is substantial homework to complete. Time to get started on the best business decision you will ever make….
Your “Assignment” for Stage #2 Decide on your loan modification strategy. Find a loan mod team member if needed. Investigate referral commissions in your local area. Contact an attorney about setting up the business entities that you will need going forward. Find a mortgage broker for your team. Create your direct marketing flyer based on the sample provided. Begin the implementation checklist provided. Send any questions or comments about the material to me by logging into the Lesson page at: www.sevenstreamsflipping.org/e-classes2
Congratulations on reaching the end of the eCourse - Seven Streams Flipping Short Sales MethodTM. You now have all the knowledge and tools need to begin your own short sale flipping business. As you go forward, always remember not only will you be making immense profits from short sales but you will be relieving many homeowners of a great burden they cannot accomplish without you. Keep your eye on your inbox because I’ll continue keeping you informed of developments in the always changing real estate and short sale business. Best wishes
Richard Geller Publisher, Seven Streams Flipping Short Sales MethodTM
P.S. Be sure to review all of the materials that are included with this week’s curriculum package. You should have received four other files: © 2009 SevenStreamsFlipping.org. All rights reserved.
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Seven Streams Flipping Short Sales MethodTM Lesson #12: The 7 Income Streams For Your Highly Profitable Business 1. eCourse for Flipping Short Sales Module 12 – 7 Income Streams Explained 2. eCourse for Flipping Short Sales Module 12 – Information for Homeowners 3. eCourse for Flipping Short Sales Module 12 – Direct Marketing Flyer 4. eCourse for Flipping Short Sales Module 12 – Implementation Checklist
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