How to Buy Foreclosures & Short Sales Hello, my name is _______. I’m a _______ , as well as a Member of The Society for Financial Awareness, commonly referred to as SOFA. We’re here as a 501(c)(3), with a Mission of ending Financial Illiteracy across America, one community at a time! Today we will be talking about How to Buy Foreclosures & Short Sales.

WE WOULD LIKE TO WELCOME YOU TO TODAY’S WORKSHOP Thank You for joining us! Our hope today is to provide you with some valuable information, have some fun, and enjoy this next hour. Most importantly, I’d like to welcome you to today’s workshop. In this next hour, it is our sincere desire to provide you with some really interesting and informative information that should provide you with a lot of answers in your journey of your Financial Plan. Feel free to use the back of your Program Evaluation for notes. As to any questions that might pop up, please feel free to ask at any time during the presentation, so you don’t forget. 2016 | The Society for Financial Awareness

EVALUATION FORM Please review this form. I will be picking these up at the end of the workshop. Do note – the backside is to be used for your specific questions and issues. Pass out the Evaluation Form now and explain the Complimentary Consultation. * Do note – this slide follows the welcome slide. 2016 | The Society for Financial Awareness

Home Buying Flow Chart Offer Gets Accepted The Deal is Done Initial Meeting Meet with Lender Loan Pre-Approval Show Property Negotiate The Offer Deposit 1% of sales price Make Offer Offer Gets Accepted Open Escrow Home Inspection $300-500 Negotiate Repairs Appraisal $350-600 Title Search Bring in Closing Funds Sign Loan Documents Final Walk Through Full Loan Approval The Deal is Done It’s Time to Move Loan Funds Deed Records 2016 | The Society for Financial Awareness

Should You Buy an REO? Factors to Consider An REO is “Real Estate Owned” by a lender or bank, taken back in a foreclosure There seems to be a growing number of homes that are lender owned Lenders may aggressively price their listings Buying an REO, however, is not for everyone Buyers should be aware of the unique challenges presented by REO properties 2016 | The Society for Financial Awareness

Should You Buy a Short Sale? Factors to Consider A short sale listing is one where the property owner owes more than the home is worth and the lender is asked to discount the debt to approve the sale There are many short sale listings in the United States; most are priced aggressively Offers are sent to the lender(s); there is no guarantee the lender(s) will approve the short sale Short sales are not for everyone; it can take many months to close on a short sale; buyers have to be patient but may score a good deal 2016 | The Society for Financial Awareness

If you decide to buy an REO or a Short Sale What do you need to know? What do you need to do? 2016 | The Society for Financial Awareness

Consider Hiring a Buyer’s Broker There are many parts in any normal real estate transaction: title, escrow, lenders, loans, repairs, CPAs, finding properties, inspectors, appraisals, insurance, contracts, offers, negotiating, disclosures, evaluating reports, dispute resolution Foreclosed properties have unique challenges; buying a foreclosure is different from buying a short sale or regular listing Some realtors specialize in representing buyers; a buyer’s broker can protect your interests and guide you through the maze of opportunity in the market 2016 | The Society for Financial Awareness

Get Preapproved for a Loan No seller will take you seriously if you do not have a pre-approval letter from a lender Underwriting requirements are now more stringent It may take longer to get a loan REO properties often require you to use their lender to get pre-approved Consult with several mortgage brokers; talk to large institutional lenders; talk to your local credit union 2016 | The Society for Financial Awareness

Credit is King Get your financial house in order! Your FICO credit score will determine the interest rate a lender will charge you on your loan FICO scores also determine the interest rates on car loans or the financing of other big ticket items Establish credit and use credit wisely Pay off debts and improve your rating Three companies - each measure a little differently Equifax, Experian, Trans Union 2016 | The Society for Financial Awareness

Tips to Improve Credit Scores Pay bills on time Payment history accounts for 35% of your credit score Do not max out on your available credit The amounts you owe account for 30% of your credit score Other factors include length of credit history and type of credit used Get a copy of your credit report at least once a year Dispute errors Note whether credit card issuers are reporting a credit limit Do not reopen an old collection account by paying on it right before getting a loan Best tip - reduce or eliminate your debt Having unused/available credit will enhance your FICO scores 2016 | The Society for Financial Awareness

Shop for a Loan Shop and compare; do not take the first loan offered Understand all loan terms and documents, e.g., note, trust deed, fixed and adjustable interest rates, pre- payment penalties, points, foreclosure, etc. Read the loan documents; ask questions Get educated; consult an expert A 30 year fixed rate amortized mortgage is good A 15 year fixed is better - if you can afford it Make sure you compare APRs (annual percentage rate) not just interest rates; the APR includes fees and the cost of credit 2016 | The Society for Financial Awareness

Understand the Costs of Ownership - Buy What You Can Afford For a primary residence purchase - spend no more than one third of your total pre-tax income on housing costs – mortgage, insurance, maintenance and property taxes Investors – ensure that the rents cover the costs of ownership, understand tax benefits Make a down payment - if possible 20% - this will help avoid mortgage insurance Cost vs. value 2016 | The Society for Financial Awareness

Where to Look for Houses Many buyers start on the internet; check out Realtor.com; Trulia.com and Zillow.com Realtor web sites often give free access to the Multiple Listing Service (MLS) and a list of foreclosures in your area Other places to look – neighbors, family members, friends, auctions, newspapers, trustee sales at court house steps 2016 | The Society for Financial Awareness

Tips on Shopping for a Home Buy a home in the nicest neighborhood you can afford It is OK to fall in love with the first house you see… but, continue to shop and compare Have vision when looking at homes; do not be turned off by the need for cosmetic fixes – paint, carpet, yard or clutter You may be able to get a discount because many buyers will be turned away; your fixes can add value to the home Avoid buying a total fixer unless you are a contractor Buy the least expensive home in the neighborhood / avoid buying the most expensive house on the block Do not tell the seller’s agent that you love the house or show too much emotion - you may pay more than necessary 2016 | The Society for Financial Awareness

Before Making Offers Learn the Seller’s Motivation In both short sales and REO listings, lenders are the decision makers Before making an offer, attempt to learn the lender’s unique situation and motivation Ask questions or have your Realtor ask: How motivated is the lender? Is the asking price the best they can do? Is an offer pending? Are there multiple offers? How long has the house been on the market? Has it fallen out of escrow in the recent past? 2016 | The Society for Financial Awareness

How to Make Offers Do not proceed simply based on the asking price First, analyze both recent comparable sales and active listings in the neighborhood to learn the home’s market value; use this information as a basis for making an offer & if needed, to justify your offer Do not be afraid to make offers You will never get a home unless you make an offer It may take many offers to finally secure the home you want The strongest offers in REO’s and short sales are: - All cash (or a large down payment), “as is”, close in 30 days or less 2016 | The Society for Financial Awareness

The REO Addendum is “Lender Friendly” Lender contracts are more stringent; lenders need to move their inventory; they want serious buyers A buyer, however, has the right to inspect the home and cancel within a relatively short time after opening escrow… 10 days, for example A buyer’s failure to cancel within the time allowed or a buyer’s failing to close could mean the buyer will lose their earnest money deposit Your earnest money deposit will be returned if Seller cannot deliver marketable title Seller cannot close for any reason 2016 | The Society for Financial Awareness

Buyer Protections in REO Sales Lender owned homes are sold In “as-is, where is ” condition with no warrantees Sellers typically make no repairs unless there is a health or safety issue Buyer releases seller from all claims or liability Ask for a home warranty in the purchase contract Will cover repairs of major systems for one year If bank won’t pay, pay for it yourself or negotiate with your Realtor to pay for it - $300- $500 2016 | The Society for Financial Awareness

Buyer Protections (continued) Do Your Due Diligence Investigate both the house and the neighborhood Hire a professional home inspector – understand what you are buying You may decide to conduct additional inspections based on the initial home inspection report You may want to ask the seller to make repairs or give you a credit; you may decide you do not want the house You are in a powerful position relative the seller; you are in a position to re-negotiate the purchase price and make other requests Read and understand all disclosures and title reports Condo buyers - read and understand the Home Owner’s Association documents – CC&Rs 2016 | The Society for Financial Awareness

Best Advice for the Future Homeownership offers many advantages Financial, wealth building, tax and personal benefits If you already own a home, think beyond your primary residence; houses, as a part of a diversified portfolio, can be an excellent way to build wealth Learn to invest wisely Think of real estate as a long term investment Flipping is risky – a business for pros Get educated; consult with experienced, successful investors before you invest 2016 | The Society for Financial Awareness

Please take a moment to complete. I will be collecting these EVALUATION FORM Please take a moment to complete. I will be collecting these in a moment. If you need a pen, please let me know. Now is the time to promote the Evaluation Form and Complimentary Consultation. * Do note – this page is the 2nd to the last slide of your presentation. 2016 | The Society for Financial Awareness

Thank you for your time! Please complete your Program Evaluation. We will be picking them up shortly. Now would be a good time for me to answer any particular questions you may have. IMPORTANT: This is where you move from the front of the room, to the back by the door. This strategic location is where you will be picking up your Program Evaluations from your Attendees, who will be met by you at the door they’re leaving from. 23