Many of you are probably thinking you could never do a free “How to Avoid a Foreclosure” consultation. But, it’s really quite easy to do. As an agent, you likely have already worked with buyers. Giving advice is what you do.
Here’s what will make it easy for you. Just reference this document while you are talking to them.
More often than not, these homeowners are not thinking about selling. They want to save their house. You go in, meet with them and do a free consultation. Take the time to help them and give them their options. The best option for most of them will be the one that gets them cash. Since you took the time to show them their options, including getting cash, you become their go to.
Give them the information and leave them with it in their minds. In a month or two, they will be calling you to sell their house.
A good point Chris brought out is developing a relationship with an investor. You can help out the homeowner’s with selling their house, and then help them with their rental.
Let’s get into the options you will be giving in the consultation. There are 7 options.
- Do nothing and be foreclosed on.
- Deed-In-Lieu of Foreclosure, where you surrender your home to the lender.
- Reinstatement which requires you to come up with all back payments, late fees and other costs.
- Loan modification to reduce your mortgage payment.
- Obtain a new loan and pay off the existing loan.
- Get cash by selling.
Get Into the Options
When you do nothing, you will end up with almost nothing. Let’s say you have a home worth $300,000, with $100,000 equity. The bank is going to sell it for maybe $250,000. Now your equity is $50,000 but the bank is going to charge you all sorts of fees. Attorney’s fees, insane interest, lender processing fees, etc. Now you get $10,000- $20,000, if anything at all.
A Deed-In-Lieu will end with you in about the same position. You surrender your home and the lender sells your home for less than it is worth. You get nothing in return.
Reinstatement is a great option, if you are able to come up with thousands of dollars. Let’s say you are six months behind, and your mortgage is $1,500 a month. That’s $9,000. Plus, you need to pay attorney’s fees, which are easily a couple thousand, plus other miscellaneous fees and the cost of their insurance. All in all you are looking at probably around $15,000 and then you get to keep your home. However, they are in this position for a reason and most probably don’t have $15,000. So not a very viable option.
Next, you talk about loan modification. Maybe they can’t afford $1,500 mortgage payments, but they can afford $1,200. Lenders can reduce your interest rate or extend the term of the loan. Getting a loan modification approved is difficult though. It will require calling 50 times, constantly following up, chasing them down. Even if the homeowners reach them, and send all the documentation, it can still be denied.
Another option is to get a new loan and pay off your existing loan. With this, you probably won’t get the same interest rate you had before. Maybe you had a 5% interest rate, but with the foreclosure on your record, you now qualify for 9%.
Getting cash for your home. Sell your home, get some cash in your pocket. Help relieve some of the financial stress going on. Then, help them move into a rental.
The final option is bankruptcy. There is Chapter 7 and Chapter 13. The law on bankruptcy has tightened up. Instead of getting a fresh start, you usually end up with a Chapter 13. Unlike a Chapter 7, which gets rid of all your debts, Chapter 13 sets you up on a monitored repayment plan. You end up under the same burden of debt, except you have to pay the costs associated with the bankruptcy. You have someone managing your money, deciding for you where your money will go. Your finances are completely in someone else’s hands.
When you go for your appointment, do not show up in a flashy car or flashy clothes. Still look professional, but tone it down so you are more conservative.
Take notes during the appointment, allow them to talk. Have empathy, feel their pain. The idea is for them to see you as a good person, someone there to help. Not someone just after their home like the banks.
After all that listening you are going to show them how you can help. You give them their options. Then, since you did your research before the appointment, you tell them what you can get them. Check on Zillow for an idea of the home’s value and find out what they owe through the county website.
Then you can tell them honestly what you can get them for their home. You can list their home, get it under contract, delay the foreclosure and get them cash back in their pocket.
How do you delay the foreclosure? Once the house is under contract, you talk to the lender, send in the letter of authorization, contract, let them know you are closing in 60 days and that you need the foreclosure postponed. The bank will usually work with you and postpone the auction if you can show them it is ready to sell.
Remember, not everyone you meet with is going to list their home. Some may think another route is a better option, and for some it may be. Your job is to simply give them their options. Educate them on the good and bad of each option.