Leverage Orlando Loan Modifications to Get Homes For Pennies on the Dollar By Mike T Warren At Isnare.com Ezine Articles

As some of you know I like to buy defaulted mortgages when affiliates find deals they don’t know what to do with. Well I just had a fax come across my desk from an affiliate who participates in our Mastermind Coaching program. As part of this program we talk about all different ways of making money from bad debts. A defaulted mortgage is a bad debt. Most people think of a defaulted mortgage as a foreclosure. It all means essentially the same thing.

In this case we have a seller carry back mortgage on a 2 bedroom 2 bath house in San Antonio, Texas. The sale price of the property was $78,000 with $2,000 down by the buyer when they purchased the property. The seller of the house decided to act like the bank and take back a mortgage so that they could get monthly payments. What often happens in cases like these is that the seller of the house sooner or later needs a lump some of cash instead of monthly payments. They may need the money to pay bills, buy a car, travel or even for the purchase of a new property. Either way the seller of the property (note owner) needs cash and is often willing to sell their note at a discount. We are in the negotiating phase with the note owner to buy their note for $18,000.

Wait a minute you might say! Why would someone sell their $76,000 note for just $18,000? The answer is pretty simple. This note is in default. In other words the current owner of the house (person making the payments) is behind in their mortgage by 8 months. Their monthly payment is $647.47. Multiplied times 8 months and they owe a minimum of $5,179.76 in back payments not included late fees.

The note owner does not know how to foreclose or have the money to pay an attorney to handle the foreclosure. They have been living off the monthly payments, but now they have had no income for the past 8 months. The note owner is now late on their bills because they do not have the income they were promised when they sold their property.

So let me jump to the end and tell you the plan.

When I (or you) buy the paper (mortgage) on a property I do not need to do a short sale, yet I can make as much money or more as someone who does a short sale. (I will cover this topic at my live 3-Day Foreclosure and Bad Debt Academy.)

Here is what happens. We will complete the purchase of the note for $18,000. We will then contact the homeowner (actually we will get this part done even before we complete the purchase) and offer our own forbearance agreement. Meaning we will not foreclose on the property. As part of the forbearance agreement we will get a Deed in Lieu of Foreclosure placed in escrow. It must go in escrow because we do not own the mortgage yet. We will agree with the homeowner that if they sign the Deed in Lieu of foreclosure to the house we will not foreclose (remember we are buying the note and we will end up being the bank). The homeowner agrees to move from the property and we agree to keep the foreclosure from appearing on their credit report. We can even give them cash to help them move if they need it (again we are the bank; we are not doing a short sale).

When we complete the purchase for the $18,000 we transfer the Deed that was held in escrow and now we own a $78,000 house (value in 2004) for just $18,000. We can turn around and rent the property out, flip to an investor, or sell it a full value to an end buyer. We have a $60,000 profit from knowing how to shuffle paper.

In this deal we combined two techniques. We used our own forbearance agreement with buying a note from the bank (note owner).

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