Preforeclosures and Auction Deals- Without Ever Dealing With the Seller
From the Desk of Jason Loucks
There are entire categories of Preforeclosure deals where you can make a fortune on these deals without ever dealing with the seller.
One of the ways we do that is to go after the liens and buy those liens at a discount (if it’s a Preforeclosure), or Buy the lien and get ownership of the property (if it’s an Auction deal).
Here’s how it works:
Whenever you are looking at a local bank that made a first or second mortgage or even a third or fourth or fifth mortgage, or if you are looking at a foreclose-able Judgment against a property, or in a lot of cases a seller held mortgage, usually a second, that the Seller allowed to get the deal done in the first place.
Any of those prospects that come up through the Foreclosure Liens are ripe for you to step in, buy the lien at a discount and “back in” to ownership of the house.
And you don’t have to deal with the seller. You actually become the one doing the foreclosing, if it’s necessary.
So, for instance, let’s say we had our $250,000 house with a $200,000 first and a $50,000 second. Now let’s say you step in on that property and you buy that second mortgage for $5000.
If you remember when we talked about Short Sales, we got him to discount the $5000 and paid it off.
Well, if we haven’t worked with the Seller and we don’t have control of the house, we don’t want to pay it off, otherwise there would be no mortgage and we would have no claim.
Instead we buy that $50,000 lien for $5000 and now the seller owes us the $50,000 instead.
It’s a great position to be in. We have every avenue available to make money.
If the seller refinances, we get paid $50,000 for a $5000 investment.
If the seller turns around and sells the house we get $50,000 for our $5000 investment.
And if you are an ethical investor like I urge you to be, I will go to the seller and say,
“Listen. I have good news. I bought the second mortgage on your house, so you don’t owe them the money any more. Now you owe it to me. And I don’t want your house. So I am going to do everything I can to either get you refinanced or help you sell the house. How does that sound?”
I have even done these deals where I restructure the loan so they pay me back on a regular payment plan.
So in a case like this, I will make a $5000 investment and I will collect up to $50,000 when the house is refinanced, sold or otherwise taken care of, and monthly payments in the meantime.
So it is a great way for you to back into these deals. You don’t ever have to deal with the seller if you don’t want to. You can just let the chips fall where they may.
And if you really do want to you can foreclose on that house from a second position.
Why would I do that? In many cases we will end up doing that when the house is vacant and we can’t find the seller to work with them.
We will buy a junior lien at a discount and we will end up owning the house “Subject-to” the first mortgage.
And we can do that on houses where other investors can’t even find the seller to make a deal!
That will massively expand the number of deals you can do. And sometimes you will make more money staying out of it, and letting the seller refinance or sell it however they want and just cashing in when the note gets paid off rather than even bothering with the house.
One of my favorite strategies for these delinquent 2nd, 3rd, 4th liens, is to just work with the Owner to figure out a repayment plan.
I had one of these deals one time where I had bought a second mortgage at a discount and said, “Hey, I have got good news. I bought the mortgage on your house and I don’t want your house so I am going to bend over backwards to help you refinance or sell.”
And she said, “Well, I made up the payments on the first mortgage. Can I make up the payments to you?”
And I said, “Sure!”
Because I am not in the business of putting people out of their house.
I don’t want to turn people out of their houses. I don’t like doing it. It is not what I am in business for.
I am here to help people. To help those who want to be helped. Those who are good people to whom something bad happened? I love helping them.
That is why I am in this business instead of another.
So I actually allowed her to just make up the back payments to me.
She went on and made payments to me for almost two years before she finally sold he house and I got paid in full.
So it was probably five times my investment that I got paid back and I am more than happy to do that for her if she is willing to make the effort to bring everything current and make it work.
I am more than happy to be the bank for a while.
But I am in that position because I know how to do it, because I am smart enough to make it work. The Bank would have just foreclosed on her!
So it is good for her that I came into her life. And it is good for me, too, because I made a quite a bit of money.
So you can help them refinance and if they can’t pay you off in full maybe they can pay you off in half and you get the other half later.
When you’re the bank, it’s wide open.
There is another level of this strategy, this “Buying Liens at a Discount” strategy.
Almost no one knows this, so let’s keep this hush, hush between you and me. Most people don’t know that you can buy junior liens at the Foreclosure auction and back in to controlling the house.
So let me be really clear about how this works.
We were working on a property one time, a property where there was a $6000 homeowners’ association lien.
Now that homeowners’ association lien was in second position. There was a first mortgage on the property and the first mortgage was for $112,000. The property was worth around $160,000.
At auction that Lien, that Home Owners Association Judgment, the $6000 lien sold for $12,000.
Now most people say, “So what? What the heck does that mean?”
Well, the good news for the owner is that since the lien was $6000, and it sold for $12,000 he got $6000 overpaid for that lien. That’s a profit to him if he knows to go and get it.
Here is the bad news for the seller. At the auction the winner of that mortgageended up being the owner of that property “Subject-to” the first mortgage of $112,000 for $12,000 down.
Meaning when they won the bid on that homeowners’ association lien, they became the owner of the house “Subject-to” the seller’s mortgage, the unwilling seller’s mortgage in this case.
The 2nd lien Forecosued, and the winner of the bid, for $12,000, now owns the house complete with a $112,000 mortgage on it.
So what that means is this person bought $160,000 property subject to $112,000 first mortgage, which was current, for $12,000 down.
Imagine you put $12,000 down and you bought $50,000 in equity in a beautiful house in a nice area.
That is the kind of investments that I am talking about.
The $12,000 went $6,000 to the HOA, $6,000 overage to the Seller, and the seller lost ownership of his house.
Now that is the bad news. The good news is if it was you, you could help them retain ownership of the house by refinancing or selling.
But more important is that you can buy these Foreclosure deals when the seller is gone and no one on earth can find them!
And every other Investor in town would LOVE to “have a crack” at talking to the Seller, but you don’t care because you don’t have to find the seller to buy the house.
Everyone else on earth, who doesn’t know this, has to find the Seller to buy the house… but not you.
So this will allow you to do is sit in your office, or by the pool like me, and cherry pick only the best deals, and leave your so-called competition scratching their heads, wondering how you keep doing it!
And when you combine this with “OPM” – Other Peoples’ Money – you can get other people to lend you those small amounts of money, $6000, $12,000, $20,000…
…but the whole point of it is you can control those properties that other investors don’t even know how to deal with.
Heck, 99.9% of people don’t even know these kinds of deals exist!
But you can buy them. You can get $50,000 equity or more in these properties and no one else knows how to do it but you. And that is the real power of this strategy.
Everyone else gives up way before the Preforeclosure stage is even over.
Almost no one understands how to buy properties at auction. Most just show up and pay too much and all cash for houses they’ve never even seen the inside of!
And of the few, the tiny, tiny handful of people who do understand it, almost no one is leveraging their efforts by buying small liens.
I personally prefer to work these kinds of deals on vacant houses. And I’ve created a system for finding vacant houses where the tiny Foreclosing lien is the senior Lien.
That means, when you win the bid on that Lien at the auction, all the Junior Liens- 2nd mortgages, 3rds, Judgments, whatever they may be, are wiped out.
In fact, I had a student who came to the Foreclosure Event that I recorded for the Ultimate Foreclosure Course, and she had just bought a $175,000 condo in Boca Raton Florida…
… for $3,300 Free and Clear!
I want to make a point here.
You can go to your Foreclosure listings, however you are getting your leads, the three free ways we talked about or maybe you are paying for them. I don’t really care.
Just look at how many of those liens are small homeowner’s association liens. And when you send out your “sneak up” marketing letters, look how many come back stamped vacant.
All of those of those are almost completely cut off to other investors and are ripe for the picking if you are using my system.
You can buy low cost liens at auction and back into ownership of the properties. That is a hugely powerful technique not 1 in 1,000 of your so-called competition understands.
And to tell you the truth, in 99% of the Foreclosure auctions I have been to, no one will even bid on those because they don’t know what we know!
So now you know how to buy houses at auction dirt cheap.
You can also buy liens at auction and control the property buying small liens and taking over the existing financing with the full knowledge and the full consent of the local Foreclosure sheriff’s office or County Court.
You can turn around and sell the properties for a big profit and do it all without ever dealing with a Seller, or needing a bank loan or anything.
If you’re someone who wants to change your life for the better while helping other people keep their homes, and protecting neighborhoods from the blight of vacant houses, then you might be wondering how you can implement all the tactics and strategies I just showed you quickly and easily.
The way to do that is a brand new Course I’ve just created called, “The Ultimate Foreclosure System”.
It will show you how to find, control, and profit from these deals, including how to tap into “OPM”- Other people’s Money- to fund these and all of your property purchases.
Copyright 2019, Jason Loucks and Home Financing Options, All Rights Reserved. Home Financing Options, Inc. 1732 S Congress Ave. Suite 285. Palm Springs, FL 33461 Phone: (561) 623-8930 | Email: Service@HomeFinancingOptions.Com