TFT 2008

Top
Foreclosure Training
Short Sales 101

By Marty Schulting
Top Foreclosure Training co-founder and coach

www.TopForeclosureTraining.com

1
 TFT 2008

Table of Contents
Welcome Page 3

Military Aircraft and Short Sales Page 4

Real Estate and Short Sales Page 5

Short Sales 101 Page 6

What is a Short Sale Page 7

Where You Fit In Page 8

The Foreclosure Process Page 9

Homeowner’s Options Page 11

The Process, Simplified Page 13

Find a Seller Page 14

Contact the Lender / Negotiate Page 15

The Short Sale Package Page 16

Loss Mitigation / Loss Mitigator Page 18

The BPO Page 20

Selling the Property Page 22

Closing the Deal Page 24

Conclusion Page 25

2
 TFT 2008

Welcome to Short Sales 101, the first of a three part series that will change your

financial life forever. My name is Marty Schulting, and on behalf of my business

partner David Corbaley, we would like to welcome you to the beginning of a

whole new life; one filled with endless time, energy, potential, and money!

What you are about to read has the ability to change your life; should you so

choose it. It is the core of what Top Foreclosure Training has spent years learning,

designing, and doing.

David and I both started in real estate long ago, and we saw many investors

succeed, but even more fail. As we progressed in our own businesses, we often

wondered what a successful investor was made

Daavviidd aanndd II hhaavvee
D
ffoouunndd tthhee aannssw weerr,, aanndd of. Was it talent? Was it luck? Was it money?
wwee’’llll sshhaarree tthhaatt w
wiitthh David and I have found the answer, and we will
yyoouu iinn tthhiiss 33 ppaarrtt
sseerriieess share that with you in this three part series. What

is unfortunate about the investors who failed, is that they had no idea how close

they were to making it big in this business. For some, all that was needed was a

little tweaking to make the business run smoothly. For some, a complete overhaul

was required. For both, the financial rewards would have been well worth the

effort!

3
 TFT 2008

This is Not a Sales Pitch

First off, you can relax; we are not selling anything in this or either of the two e-

books that follow. We do mention resources for more information, but there is

nothing here to buy, so don’t stop reading until you have gone through all three e-

books. If you do, it will be a huge mistake. If at the end of these e-books, you

decide on a future relationship with us, then so be it. Either way, get ready for your

financial future to change dramatically! RReellaaxx!! W Wee’’rree nnoott sseelllliinngg aannyytthhiinngg

hheerree.. JJuusstt sshhaarriinngg ggoooodd,, uusseeffuull
iinnffoorrm
maattiioonn..

What is in this E-book

What you will find in “Short Sales 101” is the foundation of the short sale. With a

solid foundation, you will be able to work your way through the two follow on e-

books titled “Short Sales 401” and “Short Sales 801”. You should start with this e-

book and read your way through the three e-books one at a time. When finished,

you will have the complete knowledge required to do your own short sales, from

beginning to end. If you are already a novice or expert in this business, you will

have the knowledge required to take your business to the next level.

What Military Aircraft Can Teach You About Short Sales

I spent 11 years in the military flying the F-15C Eagle fighter followed by the B-2

Stealth bomber. When I flew the F-15, the squadron would occasionally stop the

“day to day grind” of flying and go “back to basics”. What this consisted of was

4
 TFT 2008

“starting all over” from square one with the very basics of flight and working our

way through, step by step, how to fly and fight.

This training culminated with simulated wars in

the deserts north of Las Vegas (called Red Flag)

where hundreds of military assets participated.

If the military finds it beneficial to do this, then so should even the best of the short

sale experts. This three part series was designed to do just that.

Real Estate and Short Sales

It is no secret that real estate has been (and continues to be) the sure fire way

toward long term wealth. Most every guru out there will tell you that it’s easy, that

anybody can do it, and that you’ll be rich in 90 days or less. What’s crazy is that

they’re right… sort of.

- It IS easy, but only after spending the time and energy required to learn how

to do it.

- Anybody CAN do it, so long as they’re willing to put the time and energy

into learning how to do it.

- You CAN be rich in 90 days or less, but we’ve found that the more realistic

amount of time required is quite a bit longer.

5
 TFT 2008

We’re not here to blow smoke. We’re here to give you the truth about short

sales and the truth about real estate investing.

The truth is this. If you want to make money in real estate, short sales are the best

way to do it in today’s market. Eventually this will change, but not for the

foreseeable future. Did you ever wonder how the rich make money in a down

market? Keep reading, because we’re going to show you how they are doing it in

today’s plummeting real estate market. When you finish these e-books, your eyes

will be open to so many possibilities, that you will never again see declining

markets in the same light.

If you are brand new to real estate and brand new to short sales, prepare to be

blown away.

Short Sales 101

This document is meant for three types of investors. It is meant for:

1. The brand new investor who is looking for the basic information needed to

get started in real estate investing and short sales.

6
 TFT 2008

2. It is meant for the novice investor who has done a few deals and is

struggling with some of the finer points of the transaction and just needs a

little guidance to help them break through.

3. It is meant for the expert investor who has the system nailed and wants to

make sure they’re truly maximizing their deal potential, business efficiency,

purpose, and profit!

This book is the first of the three part series that will help all three types of

investors. Congratulations on finding the right place!

What is a Short Sale?

To get started, let’s define exactly what a short sale is. A short sale is a transaction

where the lender accepts less than full payoff on a loan. For example, if a

homeowner owes $100,000 on their house, and they sell it to somebody for

$60,000 (assuming the lender agrees to do it), then the homeowners sold their

home via a short sale. Simple enough, isn’t it. Typically, short sales are done on

properties facing foreclosure, however they can be done on homes that are current

on their mortgage. Obviously, short sales are critical to success in today’s market.

Why You Care About Short Sales

7
 TFT 2008

Here’s why you care about short sales. If you are an investor, realtor, homeowner,

or home buyer, then you really need to understand the significance of the short

sale, especially in today’s market. As of the date of this e-book (September, 2008),

we are at a time in history that we will never see again. Real estate prices are

plummeting in many markets. Housing markets are flooded with homes for sale,

homes in foreclosure, REOs (homes that already foreclosed, but nobody bought

them, so the bank owns it (Real Estate Owned by the bank)), vacant homes, homes

tied up in bankruptcy, foreclosures and more. People are just throwing their hands

up and leaving their properties; they are simply giving up. What lead up to this

mess is beyond the scope of this e-book, and what you really need to know is that

the train wreck has just begun. There are millions of homeowners out there right

now sitting on time bombs. Who is going to clean up this mess?

Let’s Talk About Where You Fit In

And all of this leads to you, the real estate investor. This is where you can get paid

a whole lot of money for a very specialized knowledge. You are in the absolute

right place at the absolute right time to learn a business that

will change your financial life forever. Not only will you

change your own financial life forever, but you will also help

a tremendous number of people in the process. By doing short sales for

homeowners, you will:

8
 TFT 2008

- Help the homeowner avoid a foreclosure

- Help the homeowner avoid a deficiency judgment

- Help the homeowner “save face” with friends, family, and themselves

- Help the bank dispose of an unwanted property

- Help the neighbors keep up their property values

- Remove an “eye sore” property from the neighborhood

- Make a very large paycheck for your specialized knowledge!

And with NO MONEY and NO CREDIT!!!

Seriously, I’m not kidding. I used to think that the entire “I made a million dollars

with no money and no credit” late night infomercials were all full of it. And

what’s crazy is that I STILL didn’t believe it even after actually DOING it the first

few times! It wasn’t until I started closing deal after deal after deal that I truly

believed that it could be done! Even today I’m floored when I get a large

paycheck. Every time I close a deal, I have a hard time believing how easily it

worked! It’s the best system out there because it literally puts you at no risk…

NONE!!!! If the deal works, you get a paycheck, if the deal does not work, you are

not liable for anything and you lost nothing except your time. So here’s what I

propose to everybody new to this business. Every other day, exchange just 1 hour

of television watching and put that time, instead, into this business. Just give it a

9
 TFT 2008

few months, and soon you’ll be amazed at what you’ve learned, what you have

accomplished, and how much money you have made!

The Foreclosure Process

In 101, we’re just going to briefly cover the foreclosure process. You just need to

have a very basic understanding of the process to be able to grasp the big picture of

short sales and foreclosures.

In a nutshell, here is how the foreclosure process works. When a homeowner starts

falling behind on their mortgage payments, the lender first sends a letter notifying

the homeowner of their missed payment, and directing the homeowner to make up

that payment they can be current again on their mortgage. If the homeowner does

not get current on their mortgage, then the loan gets handed off to the collections

department, and the lender will then start

incessantly calling the homeowner

demanding payment. After missing the

third payment, the homeowner is officially

in default. Only when the homeowner is in

default, does the bank have the right to begin the foreclosure process. Each state is

a little different in how it handles foreclosures, and this affects the timeline

required to complete the foreclosure process. In some states, the foreclosure

10
 TFT 2008

timeline is just 21 days. In other states, the foreclosure timeline is 2 months. In

some states, the foreclosure process can take up to a year to complete. For now,

just understand that when a homeowner misses their third payment, the lender has

the right to start the foreclosure process, which can take anywhere from 21 days all

the way up to a year or more.

One more thing to understand about this process is that when the lender starts the

foreclosure process, they will usually hand off that responsibility to a Trustee.

That Trustee is usually associated with a foreclosing attorney, and this foreclosing

attorney is the one that will complete the foreclosure process for the foreclosing

lender. Again, states do it differently, but what I just explained gives you a basic

knowledge base for your short sale foundation.

One final note. The notice of foreclosure can be called a few different things. It can

be called:

- The Notice of Trustee’s Sale

- The Notice of Sheriff’s Sale

- The Notice of Foreclosure Sale

- Lis Pendens (Latin for Lawsuit Pending)

11
 TFT 2008

They are all used interchangeably, so don’t get confused when people interchange

these words, as far as you’re concerned, it’s all the same thing.

What are a Homeowner’s Options?

So what are the homeowner’s options when their lender starts the foreclosure

process on them? Let’s be very clear about something because sometimes people

mix things up a bit when we talk about homeowners facing foreclosure. We are

talking about homeowners that are in foreclosure, but that have not yet been

foreclosed on. We are talking about homes that are in default and the lender has

started the foreclosure process, but it has not yet been completed, meaning the

home has not actually foreclosed yet.

Reinstate/Forbearance/Modification/Deed in Lieu/Short Sale

When a homeowner is in foreclosure, they have limited options. We will discuss

these option in more detail in “Short Sales 401,” but for now just know that the

different options exist, and they are:

- Reinstate the mortgage

- Forbearance agreement

- Loan modification

- Deed in lieu of foreclosure

12
 TFT 2008

- Short sale

- Foreclosure

For now just realize that 99% of the people in foreclosure do not have the ability to

reinstate their mortgage. 80-90% of the people cannot afford a forbearance

agreement. And about 80% of the people will not get approved for the loan

modification. A deed in lieu of foreclosure is not much better than a foreclosure,

and of course most homeowners do not want the foreclosure on their credit or the

ensuing Deficiency Judgment (we discuss the Deficiency Judgment more in

“401”). This then leaves the homeowner with just one option, and that is the short

sale.

How you present these options to the homeowner will make or break your success

in this business. You must present them in a way that helps them understands what

their options are, because it can (and will) get confusing for them. We will show

you how to present these options to the homeowner for maximum conversion in

“Short Sales 801”. When you present these options correctly, the homeowner not

only will do whatever you need of them to get the deal done, but they will do it

with complete trust in you.

So Here’s How the Process Works (in 4 Simple Steps)

13
 TFT 2008

Let’s simplify the process down to the very basics. Here is how you make money

by buying and selling homes that are facing foreclosure.

1. Find a Seller (Homeowner in Foreclosure)

2. Contact the Lender and Negotiate the Short Sale

3. Find Your End Buyer (Sell the Property)

4. Buy and Sell the Property for a Profit (Close the Deal)

Yes, it really is that simple. Realize that there are more “detailed steps” involved in

the process, but when you break it down to the very basics of the transaction; it

really and truly is just those four simple steps.

I know that many of you right now are thinking to yourself, “but I don’t have

money/credit/the guts to buy a house!” or “what if I can’t sell the house” or “my

market is declining, I’m not dumb enough to buy a house in a declining market!”

Good thinking! Keep reading, because we have a solution for all of those

problems! And you’re going to be floored when you see how easy it is to get

around those problems.

First, however, let’s take a closer look at each step in the process.

14
 TFT 2008

1. Find a Seller (Homeowner in Foreclosure)

We will discuss in 401 and 801 how to find the sellers. Let’s assume you have

found one. Now what happens when the homeowner decides that they will work

with you? The first thing you will need to do is go over paperwork with them to get

started.

That paperwork includes:

- Authorization to Release Information

- Purchase and Sales agreement

- Disclosure (explaining to the homeowner what you will do and what you

will not do).

- Financial Form

- Land Trust Docs, Option agreement, or Revocable Living Trust Docs (we

discuss all three of these in “801”)

Other docs you will need from the homeowner include:

- Hardship letter

- Last two months bank statements

15
 TFT 2008

- Last two months pay stubs

- Last two years tax returns

2. Contact the Lender and Negotiate the Short Sale

The next step is to negotiate the short sale. To do this, you will need to work

through the following steps:

- Assemble and submit the short sale package

- Follow up with the foreclosing lender

- Work with the loss mitigator

- Negotiate the BPO

- Agree on a price for the property

Let’s go over each of these individually to get a better understanding.

The Short Sale Package

In order to negotiate a short sale with the homeowner’s lender, you will need to

submit what is called a short sale package. Different lenders require different

things for their short sale package, but for the most part it usually includes all or

some of the following:

16
 TFT 2008

- Authorization to Release Information

- Purchase and Sales Agreement or Option Agreement

- Estimated HUD-1

- Hardship letter

- Financial Form

- Last two months bank statements

- Last two months pay stubs

- Last two years tax returns

You simply put all that paperwork together and fax it to the lender to start the short

sale process. The above documents are (for the most part) all you need for a

complete short sale package. Some lenders might require more or less documents,

but in my office we submit the exact same thing every single time. We’ll discuss

how to automate and simplify your business in later e-books. For now, just

understand that you should be putting together the short sale packages the way we

outlined it above.

Following Up With the Foreclosing Lender

After you fax your package to the foreclosing lender, you will need to follow up

with them. ALWAYS follow up with the lender, do not wait for them to call you.

There are times when you will need to wait for them to call you, and we’ll talk

17
 TFT 2008

about that in later e-books. For now, however, just understand that you need to be

in charge of pushing your file. When you follow up with the lender, you need to

find out a few things from them. You need to know:

- Did they receive the short sale package?

- Are they showing the package as complete?

- If not, what are they showing that is missing?

- If it is complete, has it been assigned to a loss mitigator yet?

This brings up our next topic, that of the “loss mitigator.”

Loss Mitigation and the Loss Mitigator

Realize that banks have many departments, including Customer Service,

Collections, and Loss Mitigation to name just three. For now, we are only

concerned about these three departments. Let’s go over each of them briefly and

discuss what they are used for.

Customer Service – This is the department that is very kind, gentle, soft spoken,

and nice. This is who the homeowner gets to talk with when they are current on

their mortgage.

18
 TFT 2008

Collections – This is the department that is not so kind, gentle, soft spoken or nice.

In fact they are the exact opposite of that. They are usually nasty, mean, and

abrupt. Their job is to collect money, and they will call a homeowner incessantly

and demand payment. Their job is to hound the homeowner until the homeowner

pays, or until the property enters the loss mitigation department or until the

property forecloses. (What I just told you will help you to empathize with the

homeowner. Many times a homeowner will tell you how nasty the bank is being to

them. Now you know why that is. It is usually collections that is creating the anger

and frustration.

Loss Mitigation – This is the department that handles all the workouts for the bank.

This is very important, so if you missed that last sentence, go back and read it

again. Loss mitigation will do forbearance agreements, loan

modifications, and yes, short sales! Customer service and

collections will not do short sales**. This is important

because if you keep speaking with the wrong departments at

the bank, you will get nowhere. You must make sure that

you are speaking with the right department when you are doing this business.

** There are rare exceptions to this rule. The only bank that ever allowed another

department to do a short sale was Chevy Chase bank, and their collections

19
 TFT 2008

department did that short sale. This is the only exception I have ever heard to this

rule.

Loss Mitigator – The loss mitigator is the person you will work directly with when

you are negotiating a short sale. He or she is the person who is specially trained to

negotiate short sales. Their ultimate goal is one thing, and one thing only, to recoup

as much debt as possible from a property that has gone into default. And yes, they

will do almost anything to recoup that debt, including using tactics and strategies

to persuade you into paying more for the property than you should be paying.

Many people feel as though loss mitigation uses unfair tactics. Many loss

mitigators will stretch the truth about information regarding the property (including

BPO values) in an attempt to recoup more money for the bank. For example, a

BPO agent might tell you that she submitted the BPO at $100,000, and the loss

mitigator might tell you the BPO came in at $120,000 in an attempt to get you to

pay more for the property. Does this sound fair? We don’t think so either. In “Short

Sales 801,” we discuss ways to counter these unfair practices that the banks use.

Gate Keepers – Gate Keepers are the people who screen calls for the loss

mitigators. They will verify the account information, feed you information, and

basically take the “heat” off the loss mitigators who are working the files.

20
 TFT 2008

The BPO / How the Bank Determines the Sales Price

The bank is going to determine what they will sell the house for, not you. That

being said, you still have an opportunity to influence what the bank will sell it for.

So how, then, does the bank know what price is a fair price for each house, and

more importantly, how do you influence what the bank will take for the house?

To determine the value of a house, the bank will sub contract a company to do an

evaluation. That company hires a real estate agent to go out to the property to do

what is called a Brokers Price Opinion (BPO) on the

property. Here’s the key. You want that number to

come in as low as possible. Yes, as LOW as possible.

The lender will drive the property’s sales price off of

that number. The banks will usually take a discount off of what the BPO agent says

the house is worth. So if the BPO agent says a house is worth $100,000, then the

lender might take somewhere between $80,000 and $100,000 for that house. So

you can see why it makes sense that the lower you can get the BPO agent to submit

this number at, the better price you are going to get for the house, and thus the

larger your paycheck will be.

21
 TFT 2008

NOTE:

Sometimes the lender will hire an actual appraiser to evaluate the property. You

should treat the appraiser the same way you treat the BPO agent, so for the

purposes of this e-book, we’re just going to call them all BPO agents. Also realize

that when you are speaking to the lenders, they will sometimes interchange the two

terms (BPO and appraisal), so don’t get confused by the two. The bottom line is

that the lender is going to send somebody out to assess and evaluate the value of

that property.

Do it With Integrity

There are many techniques for influencing the BPO, and whatever technique you

decide to use should be done with integrity. This business is very easy to make

money in; there is no need to do it unethically. So how, then can you influence the

BPO? We will discuss this in 401 and 801, for now; just understand that every

property has a range of numbers that it can come in at. Your job is to show the

BPO agent the true value of the property and have them submit the value in the

low end of that range.

Agreeing on a Price (Counter Offers)

After the BPO is done, the lender will probably counter your initial offer. You and

the lender will probably go through a series of counter offers until you agree upon

22
 TFT 2008

a price for the property. For now, just know that it’s going to happen. We will

discuss in later e-books different strategies for this that will maximize your profit

from these deals.

3. Sell the Property

At some point in this process you will need to start selling the property. There are

many strategies for selling these properties, and for now we want you to

understand the basics of the process. Your ideal situation is to have the buyer lined

up and ready to close the transaction on THE

SAME DAY that you buy the property. This

type of closing is called a “simultaneous

closing” or a “double closing” and is a great

strategy for buying and selling houses.

Simultaneous closings are how you are able to buy and sell a house with zero

money and zero credit! Yes, it can be done, and it IS done every single day all over

this nation. This strategy should absolutely be used every chance you get,

especially in the rapidly declining markets throughout the nation today. We

currently have students using this strategy in California and Florida where home

prices are dropping $20,000 and $30,000 every couple months. Declining markets

are NOT the place to be buying and selling houses by funding the transaction

yourself and holding the property for a few months. In markets like that, you can

23
 TFT 2008

very quickly have a profitable deal turn ugly and you end up needing to pull money

out of your pocket to get it closed to the end buyer. The only way to safely flip

houses in today’s market is to do it with a simultaneous closing. We will talk more

about this later.

So let’s talk a little bit more about selling the property. What you need to do is use

every technique possible (we will discuss them later) to market your property to

the end buyer. When you find the buyer, you simply put the property under

contract with him or her and have that person get their financing in order to close

by a certain date. You then work to get your approval letter from the foreclosing

lender so you can close (if you don’t already have it). When you get the approval

letter (also known as the payoff letter), then you close the transaction on the same

day, meaning you buy it and sell it on the same day. The closing agency (Title

company, Escrow Company, or Attorney, each state can be different) will then

close the transaction for you, which we’ll talk about next.

4. Close the Deal

Ok, so now you have negotiated your short sale with the lender and you have your

payoff letter from them. You have also found your end buyer and they are ready to

close. So now it’s time for your closing agency to get the deal closed and for you

to collect a very large paycheck!

24
 TFT 2008

So how does this transaction close? Let’s look at it on a basic level to make it

clear. Assuming that you will be buying and selling the property on the same day

(doing a simultaneous closing), then there will need 2 purchase and sales

agreements. There will be:

1. One purchase and sales agreement between the person in foreclosure and

you, the investor.

2. One purchase and sales agreement between you and your end buyer.

*** There are ways to make this transaction easier by utilizing Land Trusts,

Revocable Living Trusts, or Options. These will be

discussed in “Short Sales 801.”

So what happens is the end buyer will fund the entire

transaction and whatever money is left over is yours to keep. Let’s go over an

example to make this more clear.

You negotiate a short sale on a property and have a payoff letter for $100,000. You

find an end buyer that is willing to pay $130,000 for this same property. You buy

the property from the bank for $100,000 (and because you are using a

25
 TFT 2008

simultaneous closing, you do not have to bring money to the table), and your end

buyer brings $130,000 to the table to close. After taking out all the closing costs,

agent commissions (if applicable) etc, you would have a $20,000 - $25,000 profit

from the deal! Not a bad day’s work. That’s basically how the closings will take

place, and again it is all done without you needing to bring any money to the table,

without you needing to get a loan, and without you putting anything (except your

time) at risk.

Conclusion

We really hope this has shed some valuable light on the short sales process and

what it takes to accomplish a short sale from beginning to end. By using this and

our follow on e-books, you can make this time in American history one that will

change the financial life for you and your family forever! Don’t let rising fuel

prices and falling home prices get you down. Do what so many other people have

done and continue to do, profit by learning

how to fix this problem that the banks

have made for us! You will be so happy

that you did!

To your HUGE success!!!

Marty Schulting along with David Corbaley (TFT founding members and coaches)

26
 TFT 2008

If there is anything our office can do you help you, please contact us at

Support@TopForeclosureTraining.com

You can also visit us on our website at: www.TopForeclosureTraining.com.

27