Converting “Short Sale Sellers” to Move up Buyers

If you market this program properly you will collect two commissions (AND a host of subsequent referrals).

American Commerce Mortgage is funding loans to buyers who wish to purchase  their next home… using rental income from their current residence… despite the fact they have zero/negative equity (“underwater”) in their current residence.

The criterion are:  

680+ Fico 

20% down 

Loan amounts up to $625,000

But bear with me just briefly …..while I show you how to find, market to, and convert the homeowners who want are  in need of this loan option.

The wave of strategic defaults is about to crest. Despite media hype…how many homeowners do you know personally who simply walked away from their PRIMARY RESIDENCE in the last 3 years?

Now more than ever homeowners are angry!!!!!!!!!!! 

They are feeling trapped and getting increasingly motivated to find a solution.

They are trapped in their current residence that no longer is suitable.

In the past homeowners simply converted their current home to a rental …purchased another home …waited for the market to recover… and often sold the rental at a later date when the market recovered. The agents sold the home and became a property manager for the incoming renter.  One move up buyer..two commissions.

That was a great business model for over a half of century.

Now the “banksters “ (you know to whom I’m referring to)  have  different guidelines. By employing the so called “Buy and Bail Restrictions”* (see below for specifics) they are actually trapping homeowners and fueling the phenomenon of “Strategic Defaults”..the exact opposite of the intended result.

Homeowner anger is further being fueled by:

4)   Many condo associations (up to 40% in So Cal) simply cannot meet the new more stringent certification standards  being imposed by HUD (effective for ALL projects Sept 30, 2011) making their condo ineligible for FHA/ FANNIE/FREDDIE/VA financing. In other words…the only way to sell a condo in these projects is to have a CASH BUYER.

And although there are a number of cash buyers in the market place….few if any will pay full market price when they can just as easily buy another unit at an auction…at a steep discount. 

5)   The homeowner who has an addition to the family (elderly parent, newborn infant or a child that returns to the nest) and the home is just simply too SMALL.

6)   Borrowers who have adjustable loans (30% + of all OC homeowners have adjustable and/or interest only) are poised to adjust .

Typically a $300k loan …”interest only” (5% rate)….fixed for 5 years…has a current payment of $1230 but will adjust to $1750.

Given the state of the economy how many homeowners can (or will) handle a 25%  increase in their monthly mortgage.

7)   Last but not least ; the Mortgage Tax relief Act passed in 2007 is expiring at the end of 2012. Homeowners will begin listing and dumping properties in early 2012 in order beat the deadline and avoid IRS taxes and penalties.

All of these factors are leaving homeowners with few options other than “fire selling” their home (if they have equity) “short selling” their home (if they don’t)  or continuing to watch values and the neighborhood deteriorate further.

But you can provide them a solution. With 20% down the borrower can get their next home while you earn at least two commissions.

“Marketing to Homeowners”

1)   Begin a marketing campaign by first using “farm reports” to target market homes that are underwater. The goal here is to “rifle in” vs. a “shotgun” campaign to the entire tract.

A) Owner occupied

B) Homeowner loan(s) (refi/ purchase /home equity between (approx.) between 2005 and 2009.

Homes with second trust deeds will be even farther underwater and owners more motivated to move up.

c) The more affluent tracts will have borrowers with more disposable income that can more readily afford the 20% down need to repurchase.

D) Housing tracts with a high number of vacant/foreclosed homes. A simple “drive by” (MLS records will identify REOs from the vacant rentals).

Focus on the homes in the “line of sight” of the REO. The residents of these tracts are already suffering from the above (#3) phenomenon and reminded daily the situation.

e)    Condo associations….simply log on to HUD.gov for a list of complexes that ARE APPROVED…then market to the ones that aren’t. Condos are ripe for the plucking as growing families have two incomes and not enough space.

As an agent I’m sure you’ll have other marketing insights.

“Buy and Bail Restrictions”

Even if the homeowner has equity…. the guidelines are so difficult to comply with that they are fueling the situation they’ve been designed to avoid.

1)   “Move Up” Homeowners with LESS than 30% (conventional )/ 25%  (FHA) equity …wishing to purchase another home, are required to qualify for the NEW MORTGAGE….with BOTH house payments …but NO OFFSETTING  MONIES for the (future) rental income of their current residence.

 Obviously this drastically reduces or outright quashes their ability to qualify for that next home.

2)   “Move  Up” Homeowners (with more than 30% or 25% equity) who wish to purchase another home, while planning rent out their current residence may use that future rental income to qualify:

IF AND ONLY IF

3)   The homeowner possesses a signed rental agreement AND is “in “possession of funds” (from the future renter) at loan approval thru the close of escrow..

In other words…..the homeowner must have a renter who is willing:

1)   To tie up their rental money (usually “first and last” months)

2)   For (approx.) 60 days.

3)   While waiting for the seller close escrow, move out and complete any repairs or upgrades BEFORE THE RENTER WILL BE ABLE TO TAKE POSSESSION OF THE PROPERTY.

Daniel Dobbs
Sr. Mortgage Loan Officer
American Commerce Mortgage
4676 Lakeview Ave #212
Yorba Linda, Ca 92886
(just 1 block from the Nixon Library)
Cell: 949 250-3981 Fax (714) 970-9777
Dandobbs6@gmail.com
DRE # 00986886 …..NMLS# 307631

I’ll provide you & the borrower with:

1 )"DU" loan approval  Just have your borrower fill out my convenient 5 minute “prequal application” and I can give you an answer in with a maximum  purchase price in just a few hours.