Interested in learning how you can quadruple the conversion rate of your foreclosure deals?
I thought so…
Hey Moguls, it’s David Corbaley coming to you with Part 3 of my three-part lesson about this very topic. I’ve already shared loads of great info in my previous lessons, so make sure you check them out.
In Part 1, we covered how to handle your incoming calls and how to stay in control of the conversation. In Part 2, we explored the responses available to you as the seller reveals his/her intentions. As was covered in Part 1, your seller has only two options: to keep the house or sell it. Either way, you’ll need to know exactly how to handle their response in order to increase your conversion rate.
Now in Part 3, I’m answering the question of what’s next… once you’ve converted the seller, how do you work with them?
The answers are here – about which documents and disclosures are needed, solid tips when talking with them on the phone and more. Get to it.
Documents Required
Once the seller is ready to do business, I tell them:
“In order for us to make this happen, your lender is going
to require specific documents. You’ll need to write these down.”
Then I give them this list:
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Pay stubs from past two months
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Bank statement (two months)
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Tax returns (past two years filed)
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Hardship letter
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Financial form
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Recent mortgage statement
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Letter from attorney
There’s also a possibility for discussing either an address disclosure or an address deficiency. Let’s look at both…
Disclosure
This is how I explain the disclosure to the seller:
This document goes over a few things so you know exactly what will happen and what is not going to happen. For example, it states we are not going to put any money toward your mortgage. We may hire a cleaning crew or fix a few things in the house, but ultimately, we will not put any money into the house.
It also states that the loan will stay in your name until the lender decides what they are going to do with the property. And that you will not hold us liable if this does not work.
You need to realize that we are going to do our best to help you, but the lender is the one who will make the final decision as to what happens with the property. Not us. All we can promise you is that we are going to do our best to help you out.
Deficiency
I then ask them if their lender mentioned anything to them about the deficiency. They nearly always say no. So, I give them an example to clue them in...
If you owned a house worth $100k, and it was foreclosed on, the lender is going to auction it off to the highest bidder at the courthouse. If the highest bidder pays $70k, the difference between what is owed and what it sells for, in this case, is $30k. The lender now has a right to sue you for that difference.
This is called the deficiency judgment.
If this happens, not only will you have a foreclosure on your credit, but you will also be slapped with a $30k deficiency judgment. Ouch.
If the lender sells your house with a deficiency prior to the foreclosure (a short sale), they still have the right to sue you for the deficiency. However, what lenders are doing about 90% of the time is sending out a 1099 and asking the homeowner to pay the taxes on the difference.
The options are (i) to pay the deficiency or (ii) to pay taxes on the deficiency. Either way the deficiency is going to exist. The difference is how the lender handles it.
Once we explain the disclosure, we ask them to sign, indicating they are aware of these measures.
1099 Debt Forgiveness
We also explain to the homeowner what 1099 debt forgiveness is…
There is a law stating that if the lender gives the homeowner a 1099 from a short sale, they are not responsible for paying it. They will receive a Form 1099-C, "Cancellation of Debt," from the lender that forgave the debt.
Common examples of when a Form 1099-C is used includes repossession, foreclosure, return of property to a lender, abandonment of property or the modification of a loan on your principal residence.
You would do well to research this on your own to fully understand it.
On the Phone
A crucial moment in this process is when you’re talking to that seller on the phone.
Here are a few tips:
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Don’t say too much or you’ll scare them off
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Just tell them the required documents and tell the rest of the information in person
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Answer the phone—from experience we know that the seller will go with the first one who gives them a solution
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Do the right thing, always
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Treat them with respect (they are going through a difficult time)
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If a deal is not panning out, don’t be afraid to let go and move on
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Don’t hide anything—disclose everything
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Don’t ‘hard sell’
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Don’t worry about:
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Being nervous
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Making mistakes
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Answering their questions
What to Do Next
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Memorize scripts word for word when talking with sellers
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Consistently practice until you have it down pat
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Answer the phone
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If you absolutely do not want to work the phones, use an answering service such as:
Summing Up
Well, there you have it folks.
By following my advice – gleaned from years and years of foreclosure experience – you too can increase your conversion rate on these deals.
Again, if you haven’t done so – start with Part 1. You don’t want to miss any of the info I provided.
I’m Listening…
I’m sure I’ve given you lots to think about. Please leave your thoughts, ideas and questions in the comment box below.
David Corbaley
joined the military right out of high school and became a special forces green beret. After 10 years he exited and joined the Seattle fire department. He started his real estate investing career in 2002 and bought his very first property on a lease option. After learning multiple ways to do a deal, like most investors do, he found a serious issue: He kept going broke. He was doing everything the courses said, direct mail, signs, ads and everything else. Same results: Do a deal, get paid, then find himself with little money all over again. Do another deal, get paid, etc. Over and over. The problem was not having leads to fuel his business. No leads or sporadic leads = no/sporadic business.
Finally, he went back to his Commando roots, and approached it from an unconventional standpoint. Then it happened. After 2 years of R&D and testing, he relaunched in 2006 and ended up doing 7 figures that year. It’s cool to have become a sought after marketing master. Companies now seek him out to consult for their business and marketing strategies. He’s known as “The Marketing Commando”, and for good reason: He’s trained thousands of real estate investors and business owners how to turn on the REAL power of marketing in their business.