1. 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.

2. 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

3. 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

4. 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 $
Negotiate
Repairs
Appraisal $
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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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

22. Please take a moment to complete. I will be collecting these
EVALUATION FORM
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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

23. Thank you for your time! Please complete your Program Evaluation.
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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