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!
Let’s take a very specific look at the opportunities created by the system with regard to a Chapter 13 bankruptcy, which is what most homeowners have to file.
A Chapter 13 bankruptcy is commonly referred to as a "reorganization." This is simply because the purpose of the bankruptcy is to "reorganize" an individual’s debt into an installment payment plan that can fully (or partially) repay the money they owe over a period of time. During this time, which can be extended up to five years, creditors are not allowed to start or continue collection activities against the debtor. This "payment plan" is instituted by the Trustee of the court and generally implemented through a wage garnishment against the debtor’s income. Payments collected by the court are then distributed to the creditors according to the plan approved by the court.
A little known and very important fact that most people don’t realize is that the debtor is required to make their bankruptcy payments to the court in addition to all their normal monthly payments (i.e, mortgage companies, car loans) as well as their current monthly living expenses (utilities, food, day-care, gas, phone, etc). If at any point after the bankruptcy has been filed, the debtor fails to make a mortgage payment on time, the mortgage company can file a special motion ("motion for relief from stay") with the court asking to be removed from the bankruptcy. When the motion is granted, the mortgage company can then proceed with the foreclosure process.
This process provides many opportunities for us as investors. But first, let’s make something perfectly clear: just because there are profitable opportunities when investing in bankruptcies, these opportunities do not have to be at the expense of the person involved in the bankruptcy – or at ANYONE’S expense, for that matter. Every property we have ever purchased that was involved in a bankruptcy ended with all three parties (the lender, the homeowner, and us) coming away from the closing table pleased with the transaction. Without exception, the homeowner was quite relieved and excited to be out from under the circumstances surrounding their home … and the lender was thrilled to have a non-performing loan off their books!
Let’s go over the specific opportunities in Chapter 13 bankruptcies:
1) We don’t have exact figures on the number of Chapter 13 payment plans that fail but we’ve heard experts in the field say that 80 – 90% of the plans don’t make it to completion. And this makes sense doesn’t it? If a homeowner hasn’t been able to keep up with their payments to-date … and they have a mortgage plus a car payment, credit card debt, medical bills, etc., do you really expect that the court can garnish their wages and they still be able to meet their normal monthly expenses? Not surprisingly, the mortgage is usually the biggest bill, so this is where most homeowners first stumble. Of course, this is also where we as investors have the opportunity to step in and "save the day" (so to speak) with regard to their home.
2) By the time most homeowners have reached the point of getting "kicked out" of their bankruptcy, they fully understand that they have pretty much exhausted all options for saving their home. Many times homeowners have "played the game" of foreclosure, bankruptcy, legal actions, etc. for many, many months … even years! By the time they finally lose the protection of the bankruptcy court, they realize they’ve run out of options and are going to lose their house. This is often very different from people who are in foreclosure, where many people understand that they still have several options and possibly can go several more months of living in their homes without making mortgage payments. By the time the courts have removed the bankruptcy protection, investors are possibly the only option left that can stop the impending foreclosure. And if you are the only investor who knows the owner has lost their bankruptcy protection, you are in a very powerful position to purchase that house!
3) Lastly, we’ve found that most mortgage companies are extremely motivated to get these "non-performing" loans off of their books. Because of this, most seem much more willing to discuss short sales. This fact makes more sense when you understand that federal regulations require lenders to protect all outstanding debt with a certain percentage of cash held in reserves. In the case of "non-performing" loans, the reserve cash required is eight or nine times the amount for a typical "performing" loan. This fact, coupled with the fact that a bank’s investors consistently judge how successful the bank is at loaning money, gives lenders a strong incentive to unload as much "non-performing" debt as quickly as they can. In the case of bankruptcy, lenders understand they may have a non-performing loan on their books for as long as five years! With this knowledge, it’s easy to understand why banks are more willing to negotiate on a property tied up in bankruptcy.
All of these details – a failed bankruptcy, an extremely motivated seller, and an extremely motivated mortgage company clearly lead to incredible opportunities for us as investors!
If you are willing to:
YOU will be one of the ‘exceptional investors!’ As a result, the ‘sky’s the limit’ for you and your investing business. And the best part is – virtually nobody else knows about these homeowners or how to find them, which literally translates into NO COMPETITION!
To wrap up, there are clearly more reasons than you could have ever imagined to be marketing to the "troubled bankruptcy" market. These homeowners need your help!
Are you wondering about the future of bankruptcies? Well, bankruptcy filings (which later lead to our targeted "troubled bankruptcies") are UP over 70% in 2008 over 2006. We’re hitting records numbers every month. Further, our current economic climate is only getting worse. Clearly, the "troubled bankruptcy" niche is just starting to heat up … NOW is the time to catch this tidal wave of opportunity, help these homeowners and grow your business at the same time!
We would like to help you be even more successful than we’ve been in this bankruptcy niche. We will be speaking in Connecticut at the CT REIA Monthly Meeting on August 16, 2010. You’ll be amazed at the doors a little knowledge can open for you!
So when you’re really ready to out-maneuver the other investors in your area, (before they out-maneuver you), then take action NOW. Remember:
LIFE Rewards ACTION and EDUCATION without IMPLEMENTATION is just ENTERTAINMENT!
We look forward to working with you!
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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