Lease Option

I’ll never forget the first real estate seminar I ever went to. I left the building with so much hype that I was already mentally cashing my million dollar checks in my head. I was going to help my mom pay off her house. I was deciding whether I wanted a Dodge Viper or a Ferrari. I was also busy planning vacations to exotic places I had never been. A little FYI, I decided on the Ferrari and the Viper.

No money down investing. I mean, what could be easier than that, right? Does your story sound something like mine? Was the reality of making a fortune in real estate more challenging than you might have initially been led to believe?

What I Learned The Hard Way
It’s just an honest statement that there are more gurus who currently make money from selling the courses than there are who currently make money from actually using the techniques. With the time commitment required to promote their courses and seminars, they just don’t get to do much investing in there. That’s why one of the most important things you can possibly learn is the subtle changes in the real world that will drastically affect your results.

I’m almost embarrassed to admit that as a real estate “guru”, I couldn’t actually complete a sandwich lease-option my first bunch of attempts. I tried to sandwich this property and that property for 9 months and do you know how many deals I had to show for it? I had a pathetic big old zero. The owner would always inevitably change their mind or my tenant/buyers just didn’t have enough of a down payment to make the deal really worthwhile. I just couldn’t get it all together at the same time to get the big paycheck. That Ferrari sure looked further and further away.

I discovered something that would totally revolutionize my lease-option deals. It makes all real estate transactions happen faster and more efficiently. Artificially Created Competition.

Do you know what happens when you have 10 qualified tenant buyers to show your property to at the same time? You close that deal the same day, every time. Do you know what happens when you show one tenant buyer here and one tenant buyer there at their convenience? You don’t close a deal for 9 months.

Instead of showing the property to your tenant buyers when they can arrange it, show them all at the same time. Here are some magic words that will revolutionize your lease-option deals.

“Mr./Mrs. Tenant Buyer, I’m going to be at the property on Tuesday at 7pm, can you meet me there? Great I’ll be short on time so please be on time.”

You will place that same call with all of the different tenant buyers.

The Two Lessons I Learned The Hard Way
Lessson #1: Don’t show the property to your tenant buyers at their convenience.
You see, I was showing the tenant buyers whenever they were available to view the property. I figured that I wanted it sold sooner than later so I’d better rush down as soon as I can and let them think about it. Wrong! By giving them all kinds of time to think about it, they just found more and more wrong with the home and they just got overly picky. There was no reason for them to jump into a decision.

If you show your property to 10 or more people at the same time, it will create the psychological effect that the property is in demand. People act quickly when something is in demand. Do you know what people do to make sure they are your selection? They drive down and get the option consideration that day. You sign the deal and the seller you are completing the sandwich lease-option with ends up happy.

Do you know what happens with the remaining 9 tenant buyers who didn’t get the property? Well they eagerly await the next available rent to own and so your next deal runs more smoothly as well. You keep using your database of contacts until you get through them all.

Lesson #2: You need a database of a minimum of 25 quality tenant buyers to make this work consistently.

The real world taught me that most interested tenant buyers who respond to lease-option advertisements just don’t have any money. If they don’t have any money, how was I going to get paid? While it’s great that my “”rent-to-own low down” ad was getting response, I wasn’t properly filtering the people who responded. So many individuals assumed that “low down” meant “no down”. I just couldn’t get rich doing that.

Here’s what I did about it. If you don’t have a down payment, you don’t go on my list. In order to make this work, you need at least 25 quality tenant buyers. You need more than the 10 qualified tenant buyers who you will show the property to because some won’t be able to make it on the specified date or the details of the house like how many bedrooms or it’s location may not suit everyone.

I had an epiphany one day when dealing with another lease-option investor. We were discussing that we wanted to have better down payments, we wanted to know the tenant buyer’s credit situation, we also wanted to know a little bit about their employment and we wanted to have the required due diligence checks completed.

Do you know who had already completed most of this for us? Mortgage brokers already knew pretty much all of this information. You see a certain percentage of the clients that mortgage brokers see don’t qualify for a mortgage. I simply paid them a referral fee for their “turn downs.”

Before I spoke with my new tenant buyer, I knew their income, their credit rating, their employment history and most importantly, how much they could use as a down payment.

I then broke up my tenant buyers into two categories, a credit situation I could fix in 2 years or less and one that I could not. I simply kept the people with situations I could resolve. Knowing this will save you a lot of headaches and you’ll avoid law suits down the road by not dealing with tenants who could never obtain financing regardless of what you did.

What was the end result of all this?
I got more money up front. My tenant buyers closed on their lease-options more often than any other investor I’ve ever seen. I help my tenant buyers rapidly fix their credit. Sellers have their properties so well looked after that they actually refer me to more business. I avoid any lawsuits by dealing only with tenant buyers who can seriously purchase the property if they follow the credit repair program that I dictate. Best of all, I wasted a lot less time showing properties to unqualified people and I accomplished a lot more in a whole lot shorter time frame. Everybody ends up better off. It’s the ultimate win-win for everybody involved.

So if you’re trying to get that lease-option sold to a tenant buyer, trying to sell that wholesale deal to your end investor or trying to find a 3rd party investor to pay you for your short sale, build artificial competition. Show your properties to large groups of qualified leads and this business will be a whole lot easier for you.

May the force be with you.

Getting Your Lease-Options Sold The Same Day
was written by Matthew David

The median price for Massachusetts single-family homes sold in January rose 9.6 percent to $285,000 from $260,000 in January 2009, the second consecutive month that median prices for single-family homes increased by about 10 percent on a year-to-year comparison basis, the Warren Group reported today.

On a volume basis, the number of Massachusetts single-family homes rose 11.8 percent to 2,153 from 1,926 in January 2009; that was the fourth consecutive month of double-digit percentage increases, said the Warren Group, a Boston firm that tracks the local housing market and publishes Banker & Tradesman.

“The gains in both sales volume and median prices are a vast improvement to the housing market’s slow start last year,” Warren Group chief executive Timothy M. Warren Jr. said in a statement. “The improving economic picture and incentives like the home-buyer tax credit and low mortgage interest rates have aided the housing market. Still, it’s important to keep in mind that last month’s median selling price is 12 percent lower than it was in January 2008.”

Despite last month’s showing, there are some concerns. Recent momentum in the housing market has been propelled by a temporary tax credit for home buyers and mortgage rates near historic lows. That tax credit is scheduled to expire later this year, and mortgage rates are likely to rise, causing the loss of some momentum. Meanwhile, home owners who don’t need to move are reluctant to put their properties up for sale, thinking they may be able to get a better price if they wait. That reluctance has led to an inventory shortage, analysts said. 

In any event, the Warren Group’s January snapshot of the Massachusetts condo market showed that the median condo price increased 16.7 percent to $245,000 in January 2010 from $209,900 in January 2009. The number of condo sales was up 25.3 percent to 1,011 in January from 807 a year earlier.

The Massachusetts Association of Realtors also issued its monthly report on the local housing market. The association uses a different method to track activity than the Warren Group does. In January, the results of the two reports were similar.

In association’s report, the median selling price for single-family homes in January was $300,000, an increase of 14.1 percent compared to $263,000 in January 2009. On a month-to-month basis, the January median selling price in Massachusetts was down 1.6 percent from $305,000 in December 2009, the association said.

“Another month of positive sales is a nice way to start off the new year as buyers are continuing to take advantage of the favorable market conditions,” Massachusetts Association of Realtors president Kevin Sears said in a statement. “However, to get back to a more normal market we still need to see more homes for sale than we currently have. If not, prices will continue to go up to the point where it will impact sales and drive the market back down.”

A third housing report that includes data for the Boston area is scheduled to be released later this morning.

From Boston Globe 02/23/2010

This is a list of websites that list Bank Owned Homes. If you are interested in finding a home that has gone through the foreclosure process and is now an REO (bank owned) then this list is for you. You can find which home is owned by which bank and sometimes make an offer before the home reaches the market.

Government Auctions   This is a membership site with great information on Government Auction Deals

Bank of America

Bayview Financial

Compass Bank

Chase

Citi Bank

CountryWide

Fannie Mae

FDIC

Freddie Mac

HSBC

HUD

Hud Multi Family

Indymac

IRS

M&T Bank

PNC

Wells Fargo

VA

Bank Foreclosed Home Listings

Wilshire Financial

Advanced Collateral Solutions
Broker Price Opinions and AVM
acslinks.com

America’s info Mart
Broker Price Opinions, Appraisals, field services, inspections.
quickbpo.com

Asset Disposition Solutions
BPO and REO’s in California
assetdispo.com

AVM Asset Valuation & Marketing
brokerprice opinion services, AVM’s real estate,
assetval.com

BPO’s online
Broker price opinions for reo properties, distressed homes
bposonline.com

CBC Innovis
BPO’s and REO’s
denaliventures.com

Clear Capital
Nationwide BPO’s and REO’s
ClearCapital.com

Coldwell Banker
BPO’s and REO’s
reoexperts.net/vendor.aspx

Corporate Asset Management
BPO’s and other REO services
camreo.com

Corporate Realty Services

BPO’s and other REO services
stlreo.com

Countrywide
Broker price opinions, REO listings and various field services nationwide
www.cwfieldservices.com

e Mortgage logic
Property Valuations nationwide, Broker price opinions and appraisal services.
emortgagelogic.com

Evaluation Solution
BPO’s and other valuation services
Evalonline.com

Evaluate USA
BPO’s and Foreclosure REO’s
evaluateusa.com

Finiti
Bpos for major national companies and reo foreclosure companies
brokerweb.finiti.info

Fiserv Lending Solutions
Valuation Services
fiservlendingsolutions.com

First American
Residential Value View
farvv.com

Five Brothers
Nationwide Field Services
fivebrms.com

GO BPO
BPO for Real Estate agents company.
gobpo.com

Goodman Dean Corporate Real Estate Services
REO Foreclosure and BPO for mortgage and reo
goodmandean.com

Harbor Asset Management
Provider of outsource broker price opinions and valuation products.
harborams.com

HomEq Servicing
Homeq provides REO services and Mortgage Bpos.
homeq.com

Home Trust Nation
REO services and Mortgage Bpos.
hometrustnation.com

Integrated Asset Services
Reo’s and bpos
iasreo.com

Keystone Asset Management
BPO’s and Foreclosure REO
keystonebest.com

LAMCO
BPO’s and Foreclosure REO
lendersreo.com

Land America
BPO provider nationwide, appraisal services
ladsvalues.landam.com

LB Market Evaluations
BPO’s and asset management
lbmarketevaluations.com

Light House Real Estate Solutions
BPO’s and REO Foreclosure Real Estate
irescorp.com

MCB
Foreclosure Reo / Real Estate Broker Price Opinions.
mcbreo.com

M&M Mortgage Services
Real Estate Broker Price Opinions.
mmmortgage.com

Mortgage Contracting Services
Property preservation, Broker Price Opinions, REO’s.
mcsnow.com

National Asset Management Group
Asset Management, BPO’s
namg.com

Nationwide BPO’s
NationwideBPOs works with many banks, mortgage brokers, asset managers.
reonationwide.com

National Forclosure Services
Nationwide BPOs
nationalforeclosureservices.com

Network Mortgage Servicing
Nationwide BPOs
networkmortgageservicing.com

Olympus Asset Management
Broker Price Opinions and other valuation services nationwide
olympusasset.com

Ocwen Realty Advisors
Broker Price Opinions and other valuation services
ora-rmsi.com

Pro Teck
Broker Price Opinions and other valuation services nationwide
pro-teck.com

Real Trans
RealTrans / Ocwen valuation and appraisal services
http://www.ora-rmsi.com/

Remend
REO
www.remend.com

REO Corporation
Nationwide Appraisal and BPO Professionals
www.remusa.com

REO Illinois
REO’s and BPO’s
www.reoillionois.com

REO Nationwide
Reonationwide, broker price opinions and reo’s.
www.reonationwide.com

Residential Real Estate Review
Broker Price Opinions (BPO’s) & CMA’s
www.rrreview.com

Safeguard Properties
Broker Price Opinions Web site.
bpo.safeguardassetmanagement.com

Single source
Broker Price Opinions Web site.
singlesourceproperty.com

Trans Union Real Estate Services
Broker Price Opinions.
www.transunion.com

Trinity Valuation
Appraisals and BPO’s
www.trinityvaluation.com

Valuation Edge
valuatinedge.com

Valuation Support Services
valuationsupportservices.com

W-M Realty Services
National Valuations Services
w-mgroup.com

In wholesaling (short term flip without rehab), you want the type of house that your buyers will want, the ones that, for them, sell the fastest, and, of course, ones they can make a profit on. Following are some tips on what you should be looking for.

In general, especially if you are just starting out, avoid houses in the high end of the market. Yes, they can look beautiful,and clean up real nice, but most retail buyers will not be able to afford to live in them. And as rentals, they are murder when investors are trying to cover the mortgage payments.

You want to work mainly with houses in working class neighborhoods. Investors will be interested in these types of homes for rental purposes. And a majority of reliable renters will want to live in these neighborhoods.

Look for houses in need of repair. Look for peeling paint, broken windows, unmowed grass, general disrepair.

Especially in the beginning of your career, deal mainly with houses that do not need structural repairs, like foundation work. You will receive your fees quicker because any needed repair work can be done relatively quickly.

In the neighborhood you are working in, you want houses that are most affordable for first-time buyers. Those are the houses your buyer will want to rent out.

Put another way, you want houses in the median price range for your area.

The ideal house investor will want to buy will have 3 bedrooms and 2 baths, although you can get away with 1 baths. This is the bread and butter rental house for your buyers. If your area has only 2 bedrooms and 1 bath, you may have to go with that. Or, go farther afield to do your hunting.

What about war zone houses? Generally, you will do better in working class neighborhoods. However, if you have buyers on your buyer’s list who want war zone types of homes, go for it.

Avoid houses with weird floor plans. For example, houses where one is required to go through a bedroom to get to a kitchen, etc. They will be harder for your buyer to rent or retail.

Avoid houses that are too small. Medium size houses are what you are after. Medium for your area, that is.

The more equity a house has in it, the better your chances of making a deal with your buyer. More equity means there is plenty of room for your buyer’s profit, not to mention your fee.

You, of course, want to be dealing with motivated sellers who are willing (or forced) to take a discount from their asking price.

You are always looking for bargain properties where there is plenty of room for profit.

When you really get behind on your mortgage payments, you are faced with some tough choices. Should you opt for foreclosure or bankruptcy? Neither option is particularly attractive, but sometimes you have to choose the lesser of two evils. Each option has drawbacks of course, but depending on your situation, one might be better than the other. Here are a few things to consider when you must choose between foreclosure and bankruptcy.

Credit Report
Your credit report is one of the most important things you have when it comes to lending. Your credit report stays with you forever and lenders will be able to look at it whenever you need something. Borrowing money for a house, car, boat, student loan, or anything will involve a look at your report. Even applying for a job or an apartment can also be affected by your credit. Therefore, the cleaner you can keep your record, the better off you’ll be.

In regard to foreclosure vs. bankruptcy, both will affect your report negatively, but differently. A foreclosure will stay on your record for about seven years while a bankruptcy will stay there for ten. So the foreclosure will go away a little bit quicker. Either way, you’re not going to be buying anything big on credit for a while.

Severity of Foreclosure
Although the foreclosure will be stricken from the record sooner than a bankruptcy, that does not necessarily mean it’s the best choice. If you try to buy another house after a foreclosure, mortgage lenders that want to work with you will be few and far between. They take foreclosures very serious. If you could not handle a mortgage the first time, why would you be able to handle it the second time? Did you really change enough to gamble a few hundred thousand dollars on? 

When you file for bankruptcy and it does not involve a house, lenders will be more lenient with this than they would with a foreclosure. They will understand that you made some bad choices and probably racked up too much debt. However, when you get your house involved in the process, that is another story. You may never be able to get another mortgage after a foreclosure. Therefore, if owning a home is still in your future plans, you’ll want to do everything you can to avoid foreclosure.

Bankruptcy Consequences
If you decide to avoid foreclosure and opt for bankruptcy, there are a number of options that you can take. There are several different types of bankruptcy and choosing the best one for your situation could be tough. Some bankruptcies allow for you to keep your house and just lose everything else. This type of bankruptcy might be the best option for you, however, it will affect your ability to buy other things in the future. You might be able to keep the house, but if you want to buy a new car or get a new credit card, you might be out of luck.

Article written by Mortgage 101

Demand for fixed rate mortgages dropped to a record low in December, a survey reveals.

Just over one per cent of Mortgage Choice’s new home loan approvals were for fixed loans in December, a company survey released on Wednesday shows.

It is the lowest since the mortgage broker began recording such data in January 2003.

Mortgage Choice senior corporate affairs manager Kristy Sheppard said Australians taking out home loans were looking at the cost of fixing their interest rate and deciding that at the moment it’s not worth the extra expense.

“When you look at the comparative cost between fixed and floating rates, its not at all surprising that almost 99 per cent of our new residential borrowers are choosing variable home loans,” Ms Sheppard said.

“Our lender panels average basic variable interest rate is around one and a half percentage points lower than for the average three-year fixed rate loan, the most popular fixed loan.”

The current extra cost equated to $286 per month extra in repayments for a 25-year, $300,000 loan at 7.7 per cent versus a 6.2 per cent variable rate.

“It appears most new borrowers are looking at the difference between the two loan types and thinking they feel more comfortable paying less and riding the variable rate rollercoaster, despite the almost-certain rate rises coming up this year,” he said.

For those who think that the worst is over, the bad news is that it hasn’t started yet. In real life we get after shocks in the housing market we get before shocks. Everything that has happened up to this has been a mere warning.

Currently there are 7 million homes in default, if only half of those go into foreclosure that is 3.5 million homes in foreclosure in this once great country. Remember that our total population is 300 million. So if every house had only one occupant that is 1% of our population in foreclosure. But as most foreclosures affect families of 3 or 4 this means that 3 to 4 percent of our population will be foreclosed and evicted in 2010, if this is not an economic tsunami than I don’t know what is.

The economy regardless of what Wall Street cares to believe is the people, living, eating and buying. What effect will 4% of the population losing the roof over their head have on the economy not only in 2010 but in years to come? Also remember that the 4% have friends and relatives who will be affected bringing the total percentage affected by the 2010 Foreclosure Tsunami closer to 20% of the population of America.

Mr. Obama needs to do for the homeowner and tenant facing foreclosure what he did for the Banks. In the long run we might find out that the mantra of this economic crisis “Too Big To Fail” should have been reserved for the American people and not wasted as rhetoric on financial predators.

This is from an article that appeared on Article Rain. Does it remind you of any REO Realtors that you have dealt with lately.

The Banks with REO’s that they are trying to offload would in my humble opinion get far better prices for their foreclosed homes and or short sales if they moved out of their comfort zone and dealt with hungry realtor who have never even gotten a sniff of a bank owned listing.

Any here is the content of the article from Active Rain:

I tried to set up an appointment today to show a short sale in Maricopa, AZ. The Realtor Instructions on the listing went something like this:

“Listing agent office hours, Monday-Friday 8-4. Do not call me with any questions about the home unless you have seen it and are going to write an offer. Do not call me. Please email or text me. Do not call me on Sunday”

Are you kidding me? My Buyer and I both decided we didn’t want to deal with this agent now OR during escrow, so we didn’t bother to see it.

One question, Mr. “Don’t Bother Me”~ Does your Seller know the potential harm you are causing him, if no one wants to see his home due to your limitations?

What will you do when the time runs out on this short sale and the Seller is foreclosed on? Will you be available for the court date when the Seller wants to sue you for limiting the exposure on his home which may have contributed the ruin of his financial future?

Written by  Amy Jones

Yesterday, mortgage backed securities closed at their highest prices since early December which allowed lenders to offer the best mortgage rates seen in 2010. These improvements have extended over into today after some unexpected news from the Obama Administration.

But first a recap of morning economic data…

First to be released was weekly jobless claims.  This report gives us several readings on the number of Americans who filed for unemployment benefits in the previous week:

1. Initial claims totals the number of first time filers. 
2. Continued claims totals the number of Americans who continue to file for unemployment benefits due to an inability to find a new job.
3. Extended benefits totals the number of Americans who are receiving emergency benefits beyond the traditional time allowed to collect.  Under a recent government stimulus program, benefits can be extended up to 20 additional weeks and another 13 additional weeks in states with higher levels of unemployment.

To help you better understand the flow of claims.  When a American first files for benefits, they are counted in initial claims.  If that American files in the following week, they are now counted in continuing claims.  They will continue to be counted in this category until they find a job or they use up their traditional benefits.  If they continue to file after traditional benefits are used up, they leave that category and are now counted as an extended benefits recipient.  They will be counted in that category until they find a job or until those benefits run out and they are no longer counted.

The report indicated initial jobless claims rose 36,000 last week to 482,000, much worse than the 440,000 that was expected.  This was the third straight week of higher claims and the highest level in two months, which doesn’t point to an improving jobs sector.  Continuing claims fell 18,000 to 4.599 million.  Offsetting the positive continuing claims reading was the substantial increase in the extended benefits category which posted an increase of 613,000 to 5.92million!  What we see from this report is the improvement in continuing claims is simply people leaving that category and moving into extended benefits. There was an interesting debate this morning regarding seasonal adjustments.

The next report of the day came from the Conference Board: Leading Indicators.  This is a composite index of 10 economic indicators that are expected to provide a forward looking indication of economic activity.  If the month over month change is positive, it indicates the economy is improving.  Most of the components of this report have already been released so this doesn’t give us much new information.

The release indicated that Leading Indicators continue to indicate that our economy is stabilizing from record low levels of output. The index increased 1.1%, beating estimates for a 0.7% rise. 

The final economic release of the day and the week gives us a measure of the strength of manufacturing in the Philadelphia region.  Readings above 0 indicate improving conditions while readings below 0 indicate contraction.   Recent readings have shown manufacturing conditions improving with last month’s report jumping from 16.7 in November to 20.4 in December.   Economists surveyed expect a slight pull back with this month’s report to 18.4.

The release indicated manufacturing conditions took a step back coming in lower than expectations at 15.2.

The most important event of the day, besides the unexpected announcement from President Obama which I will explain in a moment,  was the U.S. Department of Treasury announcement on the size of next week’s debt offering.   When our government does not have the cash to pay for spending, they borrow  money by issuing Treasuries.  The added supply of debt on the market can pressure both treasury and mortgage yields higher.  Today the Treasury announced new supply totaling $118 billion. The breakdown is as follows: $44billion 2 year notes, $42billion 5 year notes, and $32billion 7 year notes.These amounts are unchanged from the previous auction cycle, the bond market did not react negatively to these terms. That is a function of President Obama’s press conference though…

This morning President Obama announced that he was planning on getting more involved in the financial markets, this time with a proposal to limit the size of banks and their risk taking/profit making strategies. While details have yet to be provided, the stock market did not react well to this news. Bank stocks sold off rapidly as market participants scrambled to make sense of the regulatory proposal. This event turned out to be very supportive of interest rates. We call this a “flight to safety” rally. This occurs when investors are nervous or in a panic and need to re-allocate their funds to safe assets. There are no safer assets than US Treasury debt, which are backed by the US government’s ability to raise money from taxpayers. This “flight to safety” rally was beneficial to the mortgage market. CAVEAT:THIS WAS FORCED BUYING AND IS NOT NECESSARILY A SIGN OF FURTHER IMPROVEMENTS TO COME

Reports from fellow mortgage professionals indicate lender rate sheets to be improved from yesterday. While the par 30 year conventional mortgage rate remains in the 4.75% to 5.00% range, it is less expensive to get those rates today. These rates are the most aggressive in the mortgage market, only very well qualified consumers will have access to these borrowing costs.  To secure a par rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less. These quotes also assume the borrower is willing to pay all closing costs including an estimated one point loan origination/discount/broker fee.  If you are seeking a 15 year term, you should expect a par rate in the 4.25% to 4.50% range with similar costs.

With lenders still offering the best rates we’ve seen in over a month and further progress unknown in the rates market, I think most should consider locking in their mortgage rate.   As I said yesterday, we have picked up significant gains this week, by locking you take advantage of those gains and remove risks.  At this point, without a fundamental shift in investor sentiment or the economy, it is going to be very difficult for mortgage rates to move much lower.   In my opinion you do not have much to gain by floating.  Also like yesterday, I am not totally against floating into tomorrow, but do feel the recent price gains warrant locking in loans. If you do decide to continue floating, you should be re-evaluating your stance on a daily basis. 

 Written by Victor Burek