An Agent’s Guide to Short Sales, Foreclosures, and REOs

1. Breakthrough to Mastery An Agent’s Guide toShort Sales, Foreclosures, and REOs Master the Market of the Moment

2. Main Ideas • Perspective • The Foreclosure Process • Short Sales • Foreclosures • Real Estate Owned Properties (REOs) • The Bottom Line

3. 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

4. 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

5. Perspective (continued) Short Sales, Foreclosures, and REOsRequire • Leveraging systems, tools, and people • Time • Acceptance of risk Page 10

6. The Foreclosure Process Page 11

7. The Foreclosure Process(continued) 4. Notice of Intent to Foreclose publicized. 1. Homeowner misses loan payment. 2. Late charges begin accruing. 6. Redemption Period 0 390 days 30 60 90 120 150 180 210 240 270 300 330 360 3. Lender sends Notice of Default. 7. REO 5. Auction Phase 2: Public Auction Foreclosures Phase 1: PreforeclosureShort Sales Phase 3: PostforeclosureREOs Pages 12-13

8. The Foreclosure Process(continued) Defining the Three Areas • Short sale • Foreclosure • REO Page 14

9. The Foreclosure Process(continued) Why Do Properties Go into Foreclosure? • Subprime loan • Unable to refinance • Zero-down loan • Loss of income • Unexpected events • Market shifts Pages 15-16

10. 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

11. The Foreclosure Process(continued) Other Options • Forbearance • Mortgage modification • Refinance with an FHA-backed loan Advise the homeowner to contact their lender immediately. Page 17

12. 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

13. 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

14. Short Sales(continued) Six Key Sources • Your Solutions-Based Unique Selling Proposition (USP) • Notice of Default Lists • FSBOs • Listing Appointments • Lenders • Public Notices of Auction Pages 21-23

15. Short Sales(continued) Qualifying Short Sale Candidates • Market pricing must be less than the loan amount. • The homeowner must be financially insolvent. • The homeowner must demonstrate a hardship. • The homeowner must be cooperative. Pages 24-26

16. Short Sales(continued) Additional Considerations • Bankruptcy • Private Mortgage Insurance (PMI) • Imminent foreclosure date Page 27

17. Short Sales (continued) Page 28

18. 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

19. Short Sale Checklist– Information Gathering Short Sales (continued) Step 1: Gather Information • Proof of income and assets • Proof of hardship • Property information • Loan information Pages 29-31

20. Short Sale Contact Record Short Sales (continued) Step 2: Open Communication • Obtain and submit authorization • Initiate communication with lender • Short sale application packet • Name and direct number of decision maker in Loss Mitigation Department • Information about their policies • Systematize communication Pages 31-33

21. Short Sale Proposal Packet Checklist Short Sales (continued) Step 3: Develop the Proposal • Information from “Step 1: Gather Information” • Business case for accepting a reduced price Pages 33-34

22. 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

23. Short Sale Disclosure Example 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 Pages 36-38

24. 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

25. Short Sale Contact Record 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 Pages 39-40

26. 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

27. 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

28. Short Sales (continued) Are You Able, Ready, and Willing? What systems, tools, and people can you leverage to master short sales? Page 43

29. Foreclosures • Develop a Criteria Filter • Buying at Public Auction • Are You Able, Ready, and Willing? Page 44

30. Foreclosures (continued) Develop a Criteria Filter • Location • Type • Economic • Condition • Construction • Features • Amenities Pages 44-45

31. 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

32. 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

33. 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

34. REOs (continued) Breaking into the Business of REOs • Apply to a lender or asset management company • Leverage relationships Pages 49-51

35. REOs (continued) Services That Listing Agents Provide in Working REOs • Put a notice on the front door • Negotiate “cash for keys” or CFK • Accompany the sheriff on evictions • Secure and rekey the property • Clean the house • Repair the home • Pay utility bills • Manage the property Pages 52-53

36. REOs (continued) Services That Listing Agents Provide in Working REOs • Complete tasks quickly • Watch your accounts receivable Pages 53-54

37. 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 Larson Roseville, Minnesota Page 55

38. 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

39. 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

40. REOs (continued) Are You Able, Ready, and Willing? What systems, tools, and people can you leverage to master REOs? Page 57

41. 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

42. Productivity Boosters • Market With Your USP • Stay in Touch After the Short Sale Page 59

43. 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

44. 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

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