Here is another creative way to put you ahead of the competition. Let’s say you find a house that has a lot of liens and/or judgments on it. Everyone else turned his nose up at this. It looks like it has no equity. With some creative thinking, you can create your own equity. Let’s suppose the first is about 50% of the total value and the owner is behind in his payments.
The 2nd trust deed holder has probably been notified and he is probably not getting his payments also. I would assume he has called the 1st and found out that the owner is behind on those also. What to do!!!
He now has to make up the payments on the first (which he allowed to do to protect his interests).
At this point he can start his own foreclosure to protect himself. Suppose it’s a private individual who doesn’t have the cash to do this. How about you calling him and telling him that he stands to lose everything and you are willing to give him a pittance? After all, what are his choices? Now you have created equity.
This works even better when there are several mortgages on the property. You need to contact each one of them and work your magic. You need to be able to work with the owner also to get the deed from him. Since he has no equity, he will probably cooperate. Obviously, you get all the paperwork in place before you give anyone any money. This should be done through an escrow company. You have weasel clauses in all your agreements in case some piece falls apart.
Another way this can work is if you can talk the 2nd mortgage holder to discount when there is equity in the property and you know the owner can sell easily. Then you just wait for the owner to refinance or sell the property and you get paid off in full. This works in a strong market, not a weak one.
You can also discount liens and judgments in this way also. Judgments don’t even have to be paid off. You might talk the judgment holder into releasing the lien off the property and keeping it on the person. If they think the person is going to walk, they may be willing to cooperate. You offer a small amount to make them go away.
Another way to make money with notes is to buy a 2nd note from someone when the first is in foreclosure, buy it at a discount, and restructure the note with the owner’s cooperation. In this case, you are not looking to buy the property but looking for a good return on your investment. The owner of the house stays in the property. Perhaps down the road you might own the house. In the mean time you have helped the owner and yourself also. Needless to say, you should be convinced that they can make the payments. Sometimes people run into trouble and fall behind. Even if they manage to solve their financial problems, and may now be able to keep up, they still may not be able to make up the arrears. If you can work something out with the owner, you will both benefit. Make sure you are aware of the rules that California has for people in foreclosure and also the new nmls rules and don’t violate any of them.
Hope these ideas stir you.
