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GRAND-MA

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  1. GRAND-MA By Dennis Henson

  2. GRAND-MASelling Upside Down Homesto Buyers who Can't get a Loan By Dennis Henson

  3. Seven Secrets of Successin Real Estate Investing • Get your mind right • Seek Wisdom • Develop Skills • Make detailed plans • Take massive action • Form great alliances • Be persistent

  4. 5 M’s of Real Estate Investing 1. Mining 2. Money 3. Maintenance 4. Marketing 5. Management

  5. Seven Secrets of Successin Real Estate Investing • Get your mind right • Seek Wisdom • Develop Skills • Make detailed plans • Take massive action • Form great alliances • Be persistent

  6. New--MAPS/IMAP/AMPS • Mortgage Assignment Program • IMAP Scott Horn • AMPS Phill Grove • Assignment of Mortgage Program • “Sell An Un-sellable House To An Un-loanable Buyer” Phill Grove • I decided to call it…

  7. GRAMPS Because it is NOT a new technique

  8. GRAND-MA is now… GRAND-MA

  9. What is GRAND-MA • “GRAND Mortgage Assignment” • GRAND-MA • The sale of a property where the Seller’s liens are accepted by a buyer in exchange for a deed of that property • Better known as “Subject To” (Sub2)

  10. GRAND-MA • Combines • An Option • Subject to • A Note • and a Wrap

  11. Is GRAND-MA Legal? • First rule of GRAND-MA • Always follow the law! • Ask your Real Estate Attorney • Work with an RMLO • But Thousand of Sub2s are done each year

  12. Why GRAND-MA Worksfor Sellers • Seller’s Problems • Behind on mortgage payments • Homes are upside down • Cannot afford the cost of selling • Undesirable choices • Need Cash to sell • Short Sale takes time & hurts credit • Can’t afford to pay a realtor to sell • Foreclosure • Sellers’s Solution = GRAND-MA

  13. Why GRAND-MA Worksfor Buyers • Buyer’s Problem • Anxious to own • Banks are not lending • Loans have been rejected • Buyer’s Solution=GRAND-MA

  14. Benefits to Seller • Solves their problems • Stops nightmare • Saves credit • Easy • You handle everything • $1,000 CASH

  15. Benefits to Buyer • Own their Own Home • No Credit Check • No Long forms to fill out • Very little paperwork • Quick Closing—Usually within weeks • Low if any closing cost • vs. thousands in a conventional purchase • No Points or Realtors Commissions to be paid • Monthly Payments are Fixed and Affordable • One Low Monthly Payment includes Taxes & Insurance • Probably No Pre-payment Penalty • Buying a home will help build credit • Help with refinancing is available

  16. Benefits to Investor • Takes little or no Money • Lots of Buyers and Sellers • Does not take much time • Is very rewarding • Can get started TODAY

  17. GRAND-MA Easy as 1 2 3 • Market to find deals • Get deal under Option • Marketing to buyers & close

  18. Finding GRAND-MA Deals • Use my “66 Ways to Find Deals” • Contact leads • Calling ads • Calling signs • Answering ads • Asking W-H-A-T Questions • See next slide

  19. Ask W-H-A-T Questions • What is it worth? • How much do you owe? • Uncovers GRAND-MA Prospects • Asking price? • Tell me why you are selling • Equity GO!!!

  20. Deal Analysis • Research • MLS or Fact Sheet • Tax Sheet • Comps • Repairs • TurboBidder2 Summary • Map • Killers • Bankruptcy • Too far behind

  21. Negotiating GRAND-MA • Are there other liens on the property • Are you willing to walk away • Have you considered a short sale • What if I could • Solve your problems • Save your credit • And pay you $1,000

  22. How to Make $ Using GRAND-MA Deals • Tie up property using little or no Money • Make changes to the liens • List and Market • Collect a check at closing • Possibly collect monthly payments

  23. Real GRAND-MA Deal 609 Nightshade Dr.

  24. 609 Nightshade Dr. • ARV 117-125 • Repairs 6K • 1ST 96K • 2ND 8K • 3RD 6K • 4TH 10K Total 126K

  25. 609 Nightshade Dr. • Sold 131,500 • Repairs 1K • 1ST 96K • 2ND Reduced to 1.7K • 3RD Reduced to 0K • 4TH Reduced to .7K • Selling Costs 4.5K • Profit $27,600

  26. Get Help • Real Estate Attorney • Title Company • RMLO • Realtor?

  27. Do I Need a Realtor • Realtors are not required but • But Realtors can be useful • Finding Deals • Researching Deals • Marketing Deals

  28. Forms Needed • Option • Note • Sales Contract/Subject to • Disclosures

  29. GRAND-MA Components • An Option • Subject to • A Note • a Wrap

  30. Option GRAND-MA uses an Option to tie up property

  31. Options may be Used to Control Property Options allow control of a property for a time • An investor may sell for a higher price • Sale price – Option price = Profit

  32. What is an Option A unilateral agreement: • Between an Optionor & an Optionee • Or Buyer and Seller • Binding only on the Seller • The Buyer has no obligation to purchase • But the Seller is required to sell • at the strike price • if the Buyer chooses to purchase • before the expiration date

  33. Elements of an Option • Price--to be paid for option • Time—when option starts & expires • Strike Price—purchase price of property • during the option period • Other terms and conditions

  34. Is this the same as a Lease Option? • Yes and No! • The Option is the same • But the Lease Option includes a Lease • The Option and the Lease are together

  35. Are Options Legal in TX? • Yes Options are legal in Texas • But when attached to a Lease=Problems • To avoid problems consult an attorney

  36. What are the Steps an Option Transaction 1. A Buyer and Seller enter into an agreement • The Buyer pays a consideration to the Seller • The Seller grants the Buyer • The exclusive, unrestricted, irrevocable purchase option • At a fixed purchase price • For a specified period of time

  37. What are the Steps an Option Transaction 2. The Buyer either • Sets up a closing • And buys property before the expiration date • Sells the option to another investor • Lets the option expire • by not purchasing the property in time

  38. Option Benefits • Saves on closing costs of buying & selling • Saves holding costs • Maintenance • Taxes • Insurance • Other costs • Saving time • Applying for Loans • Setting up closings • Going to closings • Put time to better use • Finding more deals and money

  39. One More Thing • An Option expires on the expiration date • Unless renewed or exercised • At expiration • Buyer loses control of the property • And their original option payment

  40. Subject To • No Credit Check • No Loan Apps • No Waiting • No Closing Costs • None of Your Own Money • BUT • A Bank is involved • There can be stress • Proceed carefully

  41. “Subject To” Means • Subject to the existing mortgage “To purchase property subject to a mortgage on the property. The purchaser assumes no liability for repayment of the mortgage debt. The only money at risk is your equity.” Carleton Sheets

  42. Overview • Old Lender note remains in place • No liability for the underlying loan • Foreclosure will not effect buyer’s credit • Buyer is not obligated to pay bank loan • There is only a moral obligation to pay

  43. Why Sellers Agree • Foreclosure • Sickness • Death • Divorce • Job change • Behind on payments • Old age • Inheritance • Had to move • Immediate need for cash • Don’t want any hassle • Live in another part of the country • Tired of dealing with renters • Lots of other reasons

  44. Concerns • Is This Legal? • The “Due On Sale Clause”? -> • What if I fail to make the payments? • Bank Communications • How to be sure payments are credited? • How do I get Pay Off information? • Escrow Concerns • Insurance • Taxes

  45. The “Due on Sale” Clause • The most common question— • "What about the Due on Sale Clause?" • Scares both buyers and sellers • Can and does kill deals • The lender • can declare the note due • has the right to foreclose • But--the Federal Government will punish the lender for having a "bad debt“

  46. Bankruptcy • Stop • Don’t do Subject to • if seller is filing for bankruptcy

  47. Monthly Payments • You have a choice • pay the mortgage or • lose the property by foreclosure • But where do you get the money? • Lease Option • Rent to Own • Rent

  48. One More Thing • On an FHA insured loans— lenders are required to receive HUD for permission to foreclose a mortgage on a property transferred without paying off the loan (or “Subject To”) • As of this research--there have been no reported cases where HUD actually gave that permission

  49. How to Setup • Add • Subject to Current Mortgage • To the sales contract • Have an Attorney or Title Co. • Prepare A Special Warranty Deed • Have seller sign • The contract • The special warranty deed • Listed additional insured on Policy • Insurance policy changed to landlord policy • Change address of seller to yours at bank

  50. Notes