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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