REVISED EDITION
Breakthrough to Mastery
An Agent’s Guide toShort Sales, Foreclosures, and REOsMaster the Market of the Moment
2An 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
3An 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
4An 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
5An Agent’s Guide to Short Sales, Foreclosures, and REOs
Perspective (continued)
Short Sales, Foreclosures, and REOsRequire» Leveraging systems, tools, and people» Time» Acceptance of risk
Page 10
6An Agent’s Guide to Short Sales, Foreclosures, and REOs
The Foreclosure Process
Three Phases of Foreclosure Process and Three Areas of Business Opportunity
Preforeclosure Short Sales
Public Auction Foreclosures
Postforeclosure REOs
Page 11
7An Agent’s Guide to Short Sales, Foreclosures, and REOs
The Foreclosure Process (continued)
Phase 1: PreforeclosureShort Sales
Phase 2: Public Auction Foreclosures
Phase 3: PostforeclosureREOs
1. Homeowner misses loan
payment.
30 60 90 120150
180210
240270
300330
360390 days
2. Late charges
begin accruing.
4. Notice of Intent to
Foreclose publicized.
5. Auction
6. Redemption Period
7. REO3. Lender sends
Notice of Default.
0
Pages 12-13
8An 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
9An 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
10An 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
11An 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
12An 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
13An 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
14An Agent’s Guide to Short Sales, Foreclosures, and REOs
Short Sales (continued)
Six Key Sources1. Your Solutions-Based Unique Selling
Proposition (USP)2. Notice of Default Lists3. FSBOs4. Listing Appointments 5. Lenders6. Public Notices of Auction
Pages 21-23
15An 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
16An 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
17An Agent’s Guide to Short Sales, Foreclosures, and REOs
Short Sales (continued)
The Eight Steps to a Short Sale
Step 1 Gather Information
Step 2 Open Communication
Step 3 Develop the Proposal
Step 4 List the Home
Step 5 Obtain an Offer
Step 6 Submit a Proposal
Step 7 Negotiate the Deal
Step 8 Close the Deal
Page 28
18An 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
19An 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
20An 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 lendera) 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
21An 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
22An 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
23An 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
24An 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
25An 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
26An 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
27An 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
28An 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
29An 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
30An Agent’s Guide to Short Sales, Foreclosures, and REOs
Foreclosures (continued)
Develop a Criteria Filter1. Location2. Type3. Economic4. Condition5. Construction6. Features7. Amenities
Pages 44-45
31An 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
32An 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
33An 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
34An 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
35An 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 door2. Negotiate “cash for keys” or CFK3. Accompany the sheriff on evictions4. Secure and rekey the property5. Clean the house6. Repair the home7. Pay utility bills8. Manage the property
Pages 52-53
36An 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
37An 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 LarsonRoseville, Minnesota
Page 55
38An 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
39An 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
40An 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
41An 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
42An Agent’s Guide to Short Sales, Foreclosures, and REOs
Productivity Boosters
Market With Your USP Stay in Touch After the Short Sale
Page 59
43An 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 60-63 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
44An 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
45An Agent’s Guide to Short Sales, Foreclosures, and REOs
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