Hey Moguls, it’s David Corbaley back with you again for Part 2 of a 3-part lesson about how you can actually quadruple the conversion rate on all your foreclosure deals.
In Part 1, we covered how to handle your incoming calls and how to stay in control of the conversation. I described the different types of callers that you may come in contact with. And I closed by explaining the importance of a script and how to navigate that script.
In Part 2, we’ll move forward on this same subject by digging into the responses available to you as the seller reveals his intentions. As we talked about in Part 1, your seller has only 2 options:
Either way, you’ll need to know exactly how to handle their response in order to increase your conversion rate.
Homeowner Wants to Keep the House
In the prior part of the script (discussed in Part 1), you’ve already learned all the mortgage information, as well as the amount of arears. You also know the reinstatement figure. Armed with this helpful information, you now walk them through the 3 options for being able to keep the property. (I’ll explain why you should do this in a minute.)
Those options are:
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Reinstatement
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Forbearance agreement
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Loan modification
Take the time to walk the homeowner through these 3 options and clarify each one to them. Let’s take a closer look at them...
Reinstatement: This simply refers to the homeowner paying the mortgage company the total amount that is in arears by a specific date.
Forbearance: When the lender agrees to allow the homeowner to pay a smaller mortgage payment for a period of time. In some cases, the lender will agree to no mortgage payment during a set period. This allows the borrower to get back on their feet financially.
Loan Modification: For homeowners who can’t afford repayment plans, the lender may be willing to negotiate for a permanent change to the loan terms so the payments are affordable. This may include such measures as extending the life of the loan or adding missed payments to the existing loan balance.
Why do this?
I mean, after all, you want them to sell their property to you not keep it.
Well, by taking the time to explain these options, you will set yourself apart from other investors. Most are not willing to take this extra step. You’re showing that you actually care about them and their situation. This builds trust and rapport – should they decide to end up selling – they’ll reach out to you.
Once they attempt either the forbearance step or the loan modification, and they’re turned down, now you have a homeowner who’s ready to sell.
And you have yourself a deal.
Plus, you know you did the right thing because you helped them walk through all their options. They’re willing to trust you and they’ll want to work with you.
If you show the homeowner these options of how they could keep the house, you must follow up. This is crucial. Whether it’s a few days later or a couple weeks later, let them know that you’ll be calling them to see how they’re doing, and that you’ll be available to answer any questions at that time.
Homeowner Is Ready to Sell
At this point, let’s say they’ve converted themselves over into the sell arena. You didn’t have to manipulate or coerce at all. Because they appreciate your honesty, you’ll be the person who gets to buy the house.
This technique of helping them with their options will absolutely quadruple your conversion rate.
Now you ask the homeowner:
“Would you be willing to sell the house for what you owe?”
No matter how they answer this, you continue to move forward. Next you ask:
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“What will the property appraise for?” (You need to know how long ago that appraisal occurred.)
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“What type of appraisal was it?”
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“What repairs are needed?”
From here, you move to the general questions about the property.
If they answered ‘no’ to the first question, now you ask, “How much above what you owe are you willing to accept?”
Why wait to ask this?
Because while asking all these other questions, you’re showing them that the appraisal, and need for repairs, will play a big part in the sell price. This gives them a more realistic mindset.
Once they give you the price they’re willing to accept, now you move to a different line of questions. You ask them about the hearing date and/or the sale date. This is in order to bring them back into reality… that this foreclosure is actually going to happen.
Now it’s time to set the appointment to meet with them in person.
At the Appointment
If they’re asking for a large amount of money, I just say, “I can do that only if there’s a large amount of equity in the house.”
Then I tell them that we’ll have their lender go through a process to determine what they will sell the property for, which will be somewhat less than what the homeowner owes.
The problem here is—and I explain this to the homeowner—if the lender agrees to sell the property for less than what is owed, they dictate that the owner cannot receive any of the proceeds.
Once you point this out, be quiet for a moment and let the homeowner speak next. If they still insist on being paid in this sale, go with this:
“I’ve worked a way around this with my attorney. My attorney will
only allow $500 back to the homeowner. That’s the best I can do.
And I can only pay you after we close.”
Sometimes I increase this amount to $1k, but never more than that. The only time I’ve ever done that was on a home worth $1.7 million. But if I do that, I always put something in writing stipulating that I don’t pay them out of my pocket.
For most deals, my advice is not to give the homeowner any more than about $500. And you’ve got to make sure you do it legally.
Refinance
The subject of refinancing usually doesn’t come up, but if it does, here’s how to handle it...
You ask if they have attempted to refinance. If the say ‘yes,’ you know they’re going to get shot down because they’re going to have late payments all over their credit report. Their credit score is going to be low, which means no lender is going to refinance that loan.
But the only way they can know for sure is to talk to a mortgage broker. So, you be the one to send them to someone.
If they have a lot of equity, you might give them the option of turning to a hard money lender who will basically buy their house from them for the deed to the house. That can give them 6 months to a year to get their credit cleaned up.
At that point, they can buy their house back. This is very rare. I’ve offered the option to a few people, but no one takes it because they don’t want to give up the deed to their house.
Really, there is no re-fi option for them, unless a friend or family member wants to buy the house and lease it back to them. Personally, I will never do this. There are too many legal issues involved with that, and ethically, I don’t like it. So, I simply don’t do it.
Looking Ahead
Now you have the full picture of the steps needed to move the homeowner from being a reluctant seller over to being a willing seller. You know what to say and how to handle their objections or concerns.
In Part 3, we’ll look at what happens after that homeowner is converted into a seller. You’ll want to treat each person with respect and never be afraid to walk away from a deal that’s not going as it should. These and many other tips will be waiting for you in Part 3. See you there.
Your Thoughts?
Leave your thoughts, ideas and experiences in working with foreclosures. What you have to say is important. Please leave your comments below.
Follow a script while on the phone with sellers to ensure you remain in control of the conversation and get the needed information.
Present and explain to the seller their other options available instead of selling: reinstatement, forbearance agreement, loan modification.
Ask what the property appraises for and how the seller reached that number while you’re negotiating price.