The financing vehicles were in place for several years now for a borrower using some creativity with a seller to make 100% financing possible. However, the real estate market had been so bad in many areas in the U.S. With a softening market, creative financing is back as a helpful tool to allow sellers to unload their properties as long as an over supply of inventory exists.

Tom and Sandra had been renting a home in a suburban area for three years. They had been digging out from under a heavy debt load of medical collections. Sandra was leaving work one day and a truck had crossed the line and pinned her in her small car for a half an hour until the jaws-of-life was used to extract her out from her crushed vehicle. With a broken hip, ankle, eye socket and fibula a long recovery ensured and Sandra was not able to work for two years. The other driver was at fault, but any financial recovery was years down the road as the other insurance company was playing hardball.

In the meantime, with constant harassment for the out standing medical bills and the weight of credit card and installment debt that existed prior to the accident was just overwhelming. Harold had been working two jobs just to meet the basic family needs. Family help was limited and really wasn’t expected. Sandra’s therapy had been going on for a year now and real progress was being made. Her employer had kept her job open as a customer service representative ironically at a credit card service center. The benefits were limited and very little of the medical bills and rehab had been covered. Tom and Sandra had been seeking some financial advice from a local bankruptcy attorney. It was decided that with their level of income and huge medical bills that filing a Chapter 7 Bankruptcy action might be the best thing to do for mental sanity and cash flow. A Chapter 13-payback plan would be crippling for many years to come.

As the bankruptcy attorney explained to Tom and Sandra that in his practice example after example comes before him where just bad things happen to good people and that there was no shame in taking care of their financial affairs in this manner. The rationalization process followed.

Two months before filing the bankruptcy, the insurance company was offering a small settlement based on an allegation that Sandra may have temporarily been distracted by talking on her cell phone and thus reduced her reaction time. Rather than put up a long protracted fight Tom and Sandra, for better or worse settled for an amount that just covered her payoff on her totaled car. They were relieved of that installment. Their attorney for the accident urged them not to settle, but with Sandra’s eminent recovery and the stress of the whole ordeal, they grabbed what they could at the time.

Tom and Sandra received their notice of the Final Discharge of their Chapter 7 Bankruptcy. All the collections for medical bills, non-secured credit cards and one major medical bill that had resulted in a judgment being awarded for the first responding hospital had all been wiped out. They excluded their family car from the Bankruptcy matrix (which names all the debtors), which still had a $6,850 balance with a $295/month payment remaining.

They also excluded a credit card that they were authorized users and had a low balance and a low monthly payment. This allowed Tom and Sandra to maintain two trade lines and their on time rental payment of some $1,250/month outside the Bankruptcy action. Sandra had now been back to work at her old job for two weeks. She was fortunate to take advantage of a car pool with a fellow worker who lived a half mile away.

It was like the world had been lifted off their shoulders. Now Tom and Sandra had their rent, one car payment and a small credit card and their home utilities. The cell phone service had gone by the way side many months before.

Even through the most brutal times and the lowest of the low, Tom and Sandra, as their custom, visited Open Houses after church every Sunday. It was always in the neighborhood and never more than two home visitations. It was Tom and Sandra’s way to cope with the dark cloud that had beset them. During this process, they became familiar with a local Realtor who took a very personal interest in their situation. The Realtor, named Sherry, knew they were not ready to do anything until some things had been handled.

At the most recent Open House visit, Tom and Sandra shared that they had put their financial challenges behind them. Sandra was feeling great and off all her pain medication. Sherry raised the prospect and questioned them if she could figure out a way to get them into a home at a little more than they were paying in rent with little or no money out of pocket, would they have an interest at least in hearing more about it. Tom raised his hands with palms up and a shrug of the shoulders, and shared that it wouldn’t hurt to listen to some possibilities. The accident had caused a detour in the quest to own a home, but it had not killed their dream.

Sherry set up a meeting with the Realtor’s in-house mortgage broker to discuss their options. A joint credit report was pulled and as Tom at the time made the most money his middle score was utilized to qualify for a mortgage. His middle credit score was right at 500. The mortgage broker went on to explain that they would qualify for an 70% Loan To Value mortgage. Due to their lack of a cash down payment, it was added, that the only way that they could use this loan option would be with a seller held second of 30% loan to value with the seller also paying up to 6% of the contract selling price.

This would then give them a 100% Combined Loan To Value (CLTV). The loan would need to be a Fully Documented loan with verification for employment and income. The mortgage broker felt like he could present Sandra’s employment gap due to the accident and use her current income for qualifying purposes. Totaling up the income versus the debts, it was determined that Tom and Sandra could buy a home in the $175,000 range IF the seller would offer reasonable terms on the 2nd mortgage. Sherry piped in that she had been sitting on a listing for six months and the owner now may have an interest in holding some paper versus renting the property again and deal with the tenant challenges on repairs and upkeep. The home was close to their current residence.

Betty was able to work out the deal with reasonable terms on the second mortgage that would keep the overall monthly payment down at least for the first three years. As the mortgage broker explained, that should be plenty of time to establish a better credit history and qualify for a lower interest rate loan in two years. As an added bonus, the seller agreed to pay all the closing costs and prepaid expenses such as annual hazard insurance and tax escrows plus replacing a leaky roof. Tom and Sandra moved into their newly purchased home putting all the travails of the past in the rear view mirror.

Sometimes bad things happen to good people. In this current real estate market, there are creative possibilities. It won’t last forever; the time is at hand for seller help and creative financing.

Dale Rogers sellerhelpsbuyer brokencredit

Dale Rogers is a thirty-year mortgage veteran and frequent contributor to the Broken Credit Blog. The BCB is a free website created to assist the general public with information about credit repair and responsible mortgage lending.

The skills needed to be a successful Baltimore foreclosure investor are varied and need to be honed over time. The skills necessary depend on what level you want to be involved in the business. However, the more skills you are competent in, the more profitable your real estate business will be.

I have skills in many areas of the real estate business construction and destruction, evaluation and negotiation, sales and marketing, mortgage and title experience, and persistence and persuasion. It takes many deals but not many years to accumulate these skills and the best way to get started is to go do deals. You may have challenges with your deals but do not give up because the rewards are wonderful.

One of the areas you are going to need to be successful in the foreclosure business is evaluating deals looking at numbers, understanding numbers, crunching numbers and making sure a deal works out on paper. Now, is this important? Yes, it’s important. Do you have to be a mathematical wizard to understand this and be successful? No, there are definitely books and software on basic real estate finance that you can use.

Your experience will be your best teacher and evaluator of potential deals. You can also use a real estate calculator. There are many easy ones to use, and there are difficult ones. But real estate calculators are necessary to compute things such as amortization tables, loan to value and principal and interest payments. Get one and learn to use it. You will need to be able to estimate the costs of products, repairs, taxes, and insurance. But once again, experience is the great teacher.

One of the major skills you are going to need in the foreclosure business is persistence. You’ll need it in all aspects of the real estate business, but more so in the foreclosure business. There may be times you need to go back to a house you have targeted three to six times before you actually get to talk to the homeowner. Persistence is one of the major keys to success in this business.

Another skill that you need for successful foreclosure investing is the ability to read people, the ability to understand what they are going through, to have empathy and to understand their situation. I think one of the reasons my company is as successful as it is is because I can put myself in the place of the homeowner and have a tremendous amount of empathy. Homeowners feel and appreciate that because what they want is someone to have confidence in. If you can transfer that feeling of confidence and knowledge to the homeowner you will enjoy great success.

An additional skill you’ll need in the foreclosure business is to have skin thick as a rhino. You’ll have doors slammed in your face, you’ll have people yell at you, people may even throw things at you. Don’t take it personally. Turn around, walk away and move on to the next one. Don’t let it bother you. This business is a numbers game. These people you have approached will probably end up being tossed out of their houses, and you will continue in the business if you can adapt what I call the “rhino skin”.

The foreclosure business also requires understanding the legal process in regards to foreclosures at a basic level. Know the laws and procedures for the state in which the foreclosure takes place. You need to understand the particular laws and nuances of your state. It’s imperative that the real estate investor understands from start to finish the foreclosure process, the bankruptcy process, and the redemption process if the state has one. Bankruptcy can be a very daunting process if you don’t understand the differences between Chapter 7 and Chapter 13 bankruptcies.

It takes a practiced, hardened, persistent, creative, intuitive, persuasive investor to be successful in the foreclosure market. Many investors in the real estate market have some of these traits. Few have them all. The person who has all of these traits is the person who is ideal for the foreclosure market.

As you begin to buy real estate you will become exposed to evaluating property and to appraisals. A critical component to being successful in the business is understanding what you are doing in regards to putting it all together, getting ready to buy, making sure you are doing a deal that makes sense financially and making a profit. The buying and selling of distressed real estate basically, the business of foreclosures–is a tricky and risky business, especially if you are not prepared. The spoils go to the ones that are prepared.

Paul Wells has been investing in foreclosures full-time for more than 5 years. For more foreclosure investing secrets like the one in this article, subscribe to Paul’s Free Foreclosure Investing course here: http://www.FreeForeclosureInvesting.com

The notion of filing for Chapter 13 bankruptcy is a rough pill to swallow for a lot of homeowners. Countless attorneys fall short to tell their debtors that they have choices clear of filing a BK 13. For many, the Chapter 13 is the best option because it provides a fresh start and freezes interest and penalties. Debtors that have determined the Bankruptcy status is appropriate, can refinance their mortgage after 36 months and are not required to pay any unsecured debts. 95% of the time this is the best option for the debtor. Under BK law, the unsecured debt is washed on a BK 13 in the same way unsecured debt is washed under a BK 7. Debtors that can pass the means test can simply refi their mortgage under a foreclosure bailout program and file a Chapter 7 without ever needing to file a 13 and payback the unsecured portion. Many borrowers and attorney are simply unaware of the programs that exist.

Typically a foreclosure bailout will go to 65-70% LTV (loan to value). With the new laws enacted in October, many attorneys have been encouraging their clients buyout their debt. The way the process works under a tradition Chapter 13 Refinance would be as follows: My credit rehab programs is started with a 2/28 Arm that will pay off the existing mortgage and the items rolled into the bankruptcy. My program will lower the debts monthly payment and discharge their bankruptcy upon funding. Many times borrowers are able to take cash out of their home up to 90% LTV. The higher ltv will require a 0×30 rating on the trustees report (12 month history) and a 0×30 rating on their mortgage (12 month history). 80% LTV is allowed up to 2×60 on the mortgage/trustee payment history. There is no limitation on document types. Loans can be stated income stated asset or Fully documented. Obviously the interest rates will be more favorable by documenting income but is not required.

After 2 years of timely payments to your mortgage the 2/28 ARM can be refinanced to a lower 30 fixed if a fixed is desired. Being dismissed from a BK is precarious situation to be in. However, there are many banks that will allow a mortgage to be protected even if the debtor has been dismissed. As previously discussed, a dismissed BK debtor has the same options available as the debtor that never file a 13. The premise is to protect that mortgage and anything that would affect title to the property. Usually the open unsecured debts can be paid as well. It’s very important when refinancing your Chapter 13 that you use a chapter 13 specialist. Chapter 13 buyout is not like a traditional refinance. Many brokers are unfamiliar and inexperienced with Bankruptcy law and the process varies from state to state. i.e Pennsylvania does not require a motion to be filed with the court to get an approval to refinance a BK 13. Across the bridge its neighbor New Jersey does require a motion and the process takes much longer. Work with a mortgage professional who knows the attorneys and the trustees.

You may contact the author @

Shawn M Peck
Chapter 13/Foreclosure specialist
Brink Mortgage LLC
306 W Cuthbert Blvd
Westmont NJ 08108

856-858-1176 ext 108 PH
856-858-3077 fax
www.mybrink.com

Shawn M Peck has many years experience in the Foreclosure process and Chapter 13 bankruptcy.
Mr. Peck is a Rowan University Alumni and works exclusively in the Foreclosure and Bankruptcy field.
Mr. Peck has helped 1000’s of homeowners get back on their feet and holds lifelong relationships with area bankruptcy attorneys and their clients. Mr Peck is a member of The PAMB (Pennsylvania Association Of Mortgage Brokers) and is sworn to uphold their ethical code of conduct. Mr. Peck resides in Cherry Hill with his wife Elizabeth and his dog agustus.