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How To Make An Easy $100,000 In The Next Ten Months (Part 4)

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Article by Caryn McKinney and Mark Klee

This multi-part Report is your personal guide to an untapped goldmine of secret motivated sellers that 98% of investors don’t know about. And if they do, they’re scared to go after them … for no sane reason!

Part IV – SIX Bankruptcy Myths

At this point, you might be asking yourself… If this is such a great niche to go after, why isn’t everyone doing it? Well, that’s an entirely different topic and we certainly want to address it!

When most people hear the word "bankruptcy," their first reactions are intimidation and avoidance. The fact that it’s a legal process involving the Federal government pretty much explains both reactions.

From our informal surveys of many investors across the country, they react precisely the same way, largely due to a lack of knowledge and experience. It’s really very normal and reasonable… we are all intimidated by things we don’t understand. By the way, does your local REIA group offer an educational seminar or subgroup on bankruptcies? We’d be surprised if the answer is "yes"… unless it’s us! However, there are such incredible opportunities for real estate investors in the bankruptcy niche, that we’ve made it our personal mission to remove the fear commonly associated with bankruptcies and, at the same time, pass on the unique pool of knowledge that you need to make bank-accounting bursting profits!

Let’s start with the most common myths and misconceptions:

Myth #1: Bankruptcies are too legally complicated for the average real estate investor

Truth: That’s ridiculous. Do you need to be familiar with bankruptcy terminology and the general process of how a bankruptcy proceeds? Yes. Do you need to understand the basic differences between a Chapter 7 and a Chapter 13? Of course. Do you need to know the responsibilities of the Trustee? You bet. But you can easily learn all of these details and more by simply finding the right information and being open to grasping a unique, but small pool of information.

Myth #2: You can’t buy a house in a bankruptcy

Truth: Hogwash! Sure you can. It might (usually does NOT) require an extra step vs. a house you find through other resources, but it’s more than worth your effort. Indeed, it’s really a pretty simple process to get educated enough about the bankruptcy process so you can speak intelligently with sellers. And the paperwork required to purchase a home in a Chapter 7 or a Chapter 13 is also very basic. The magic piece of paper you need from the Trustee in a Chapter 7 is called a "Notice of Abandonment." If it’s a Chapter 13, you need to file a "Motion for the Sale of Real Estate."

Myth #3: Only attorneys can deal with the Bankruptcy Court or a Bankruptcy Trustee

Truth: No way! The Court system is designed for "the people"… it’s just where many attorneys earn their living. If you’re filing for bankruptcy, we certainly recommend that you do so through an attorney, but if you’re just trying to purchase a home involved in bankruptcy, you can do it on your own! Further, the Trustee is an officer of the court whose responsibility is to protect both creditors and debtors. As a potential purchaser of a property under the "control" of a Trustee, you can certainly contact that Trustee and walk through the process.

Myth #4: If there’s any equity in a house, the Court won’t allow me to buy it

Truth: Indeed, one of the Court’s responsibilities is to evaluate the debtor’s estate and see how as many creditors as possible can be paid. But there’s a big difference between a house having enough equity for the Court/Trustee to want to go to the trouble to sell it vs. a house having enough equity for a real estate investor to find a good deal. For example: (a) The Court must factor in a Homestead Exemption payment to the debtor (a real estate investor doesn’t have to do that). (b) The Court must factor in "yellow pages" prices for any necessary repairs (most investors have much less expensive resources). (c) The Court will sell the house through a full-service realtor, who will be charging a 6% or 7% commission, whereas an investor may sell to a buyer’s list, use a "flat-fee" listing service or want to keep the house as a rental. (d) The Court won’t negotiate a "short-sale" with the lender(s) and we all know that investors can make TONS of money in the "short-sale" market!

Myth #5: There are no pretty houses in bankruptcy

Truth: People with nice, expensive houses get in financial trouble just like folks with more modest or "ugly" houses. In fact, some of the most profitable deals we’ve done have been with VERY nice houses in VERY nice neighborhoods! In fact, we’ve each had the opportunity to do "short-sale" purchases on homes in the $300,000 – $400,000 range.

Myth #6: There are no investing opportunities for houses in bankruptcy… mortgage balances are too high

Truth: This issue was dealt with briefly in Myth #4, but there’s more to know. In fact, because of the circumstances leading most debtors to file bankruptcy, there are more opportunities in bankruptcies than elsewhere. Four reasons for the many opportunities are: (a) Most investors are afraid to deal with a bankruptcy… or don’t know how… there is less competition… where there’s less competition, there’s more opportunity! (b) We’ve heard all sorts of figures, but most recently have been quoted that 86% of all Chapter 13 bankruptcies fail… which leads to extremely motivated sellers! (c) Many debtors were facing foreclosure when they filed bankruptcy so when they realize they are getting "kicked out" of their bankruptcy, they often realize they have run out of options and they MUST sell their house to avoid foreclosure. (d) Mortgage companies that loaned money to these debtors have really been drug through the legal system… foreclosure, bankruptcy, back to foreclosure… so the mortgage companies are also extremely motivated to negotiate a "short-sale" so they don’t end up owning another house via foreclosure. Yet another opportunity for the real estate investor!

These are just some of the many myths surrounding bankruptcies and the many hidden opportunities for real estate investors. A little knowledge can go a long way when you see the amazing real-life, spendable cash that you can make via this niche market!

Caryn McKinney and Mark Klee originally partnered in 2002. Now they are a national voice on investing in bankruptcies. At the request of their subscribers and students, they have developed quality training materials and seminars to educate investors about this incredible investment opportunity. Their simplified and detailed information includes everything you need to know as a real estate investor wanting to purchase homes in the bankruptcy niche market, including training you how to access and prescreen the hottest leads coming out of bankruptcy. Now you can enjoy the same amazing profits as Mark and Caryn reveal their secrets. Mark Klee is a regular guest speaker at CT REIA. Go here for the current list of upcoming real estate investing seminars in Connecticut.

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