Transcription
All right. Welcome everybody to the weekly probate mastery group coaching call. Balcom was one of our punctual first here, and he got a few questions, so let's jump right in. How can we help you?
Awesome. Awesome. It's completely unrelated to probate, and if need be, we can tailor it towards the end of the call, but I was hoping you could re-canvas your foreclosure conversation framework. You touched on it last week, and I wrote as much of it as I could; sometimes, you drop those gems, man. So I gotta keep asking.
Yeah. So for me, and we can pull that mind map up here. I'll find it, but the methodology developed out of my own self-criticism; like I would approach people with kind of a selfish approach of "I'm going to get that house." And what I realized is almost everyone in foreclosure thinks that they're not going to get foreclosed on. There's a lot of psychology at play. In my experience, 99% of them want to stay in the home and want to continue living there. And that's what we want for them too. We don't want to kick people out of their houses, but the reality is at some point the sheriff is going to intervene, and they're going to have a rude awakening on that day. And I've seen that happen. People literally just completely lost, moving into these crappy little weekly stay hotels because they just put their head in the sand and refuse to admit what was happening.
All that said, I found that approaching them and understanding that they have to come to their own realization—in their mind, "Oh, this is real. And it's going to happen"—The question of, I listened, I noticed that you're probably getting a lot of phone calls. This one's going to be a lot different, and I just have one question for you: "Would you like to keep the home, would you like to stay home and keep it, or would you like to sell it and get a fresh start?" And then just be absolutely quiet. Do not say a word and like what they say next; you can immediately start to gather what their emotional state is, what their financial situation is, how far behind, or how deep their head is in the sand. And then you start to navigate the conversation—an emotional conversation with a logical track.
And let me jump over and grab that mind map so we can take a look at it. And I think this with almost every lead type, but foreclosure is where I learned it. And then later applied it to the probate zoom.
All right. You guys have my screen now?
Yes.
All right. So this is a work in progress. This is just a rough outline, but, and in my head, and so this is any and every conversation. So we know there's real estate. Yes. We know there's debt. Yes. So from this branch out is where, so you have your real estate, you have debt, and our payments current? No. So basically this branch represents the foreclosure situation. So the first thing we're trying to find out is, is there equity, but we don't just want to come out and ask this of these people, right? We need to find a balance between appealing to their sensitive, emotional state and getting the logical information we need. That's one of the reasons I hate scripts so much is because people go out and they fire too early. It's about reading the conversation. Okay. We know you're behind on payments. We saw that in the notice of default; we don't really need to have that conversation, which is an embarrassing conversation and can drive them inward where you're not getting the engagement. So there's some things we know through deduction, like the way that we got the list. So letting them know that that's nothing to be embarrassed about—"9 million other people are in that situation," whatever that might be. And the fact that, like, when I say "you," I'm sure you've gotten, you've had conversations, and I just want to let you know this one's going to be a lot different. So I'm trying to get away from that preconceived reputation they've given me because of everyone else has muddied the water and tried. I want to let them know this is more of a consultation.
So the first thing you're trying to figure out: is there equity? Yes or no. If they're behind on payments and there is equity, then we just need to figure out how can we get them out before the foreclosure date, right? Like how far behind are they? What's their target date? How quickly can they find another suitable living situation? If it's less than 30 days, we got to bring cash in and close this thing fast, if we have a short fuse deal. 60 to 90 days, we can probably get them out as a broker. If it's long-term, like if they're willing to wait a long time for the solution, but we need to get it in place quickly, this is a great place for creative financing. So we can put a second, like a wrap, we can sub-to, or we can do a lease option; there's a lot more of the scenarios right now than there was in 2008 through 2012. Because of the massive amounts of money printing that the fed has done, a lot of folks do have equity this time. And even before the COVID lockdown, we had higher equity levels than almost any other period, because we had the de-leveraging in 2008 through 12, and we tightened lending guidelines. So you're going to have this conversation a lot more now than you did in the 2008 to 12 period. But the ones who really are stuck are, they aren't current on payments. There is no equity. And from here, if you have less than 30 days, like this is a short fuse, an absolute real hurry, can we transition it to a rental property and somehow bring the thing current so they could. One to six months, we're going to do a short sale in that scenario. Um, The other, the outcome here too, is if you can't do this, it's going to the courthouse usually, and then longer term the creative financing. So we can do a second, a wrap, lease option, or a sub2.
If you have a more specific question or if you were just looking to get back to this, So the question was like, okay, so the first part, you nailed that, but I guess I just kinda wanted to hear the Chad way of "here's a Chad approach to how you would ask, what you would literally be saying to lead them down these questions and decision paths," because I've had wildly varying experiences when speaking with homeowners that have been going through foreclosure, and rightfully so...
You have one fresh in your head?
So the last one, I tried it—a remix of something I'd heard you say—you know, "I know that this could be a touchy conversation. I didn't want to rehash something that they'd already heard a lot." And I was looking at the mind map and just trying to work my way through it. But when I got to the part when I was asking if there was equity, she kinda clammed up on me. She didn't really want to share.
You willing to role-play?
All right, let's go. Your scenario, I know nothing about it other than you're in default; let's just, let's set some assumptions to set the stage. I don't know if you have equity in your home. I haven't done the research on the asset, but I do know that you have an N.O.D. So you're at least three months behind on payments because that's the list I found you from that fits the scenario that you're talking about.
Okay. Ring. Hello.
Hi, I'm trying to reach Malcolm.
Speaking.
My name's Chad Corvette. We don't know each other yet, but I did get your name from—I'm sure you can guess where—because I'm sure you've had this conversation, a similar conversation. I noticed that you do have a notice of default on public record. We were down at the courthouse pulling some data, and I just want to preface this with this: This is a different type of conversation than you've probably had. We are a social enterprise here in the Roanoke valley, and we try to reach out to families that are in tough situations, because we have a lot of resources and teams of people, a team of people that was built specifically to help people save their homes and sometimes move on to the next chapter of life. So have you got just a few minutes to chat?
Yeah, I've got a few minutes.
Okay. I'm guessing you've heard from some other people that were trying to get to find out how they could get the house and this and that, then probably didn't ask you a lot of questions about yourself. If I have your permission—if you can trust me that I am here trying to help you—and if I can get your permission, I'm going to ask progressively more personal questions, because I don't know how to help you until I can really understand your situation. So are you okay trusting me enough that I can ask some kind of sensitive personal questions?
Yeah. For now.
Yeah. Okay. And if we get to a point where you say, where you feel like, "Hey, this is none of his damn business," all I ask for is the transparency. Just tell me that.
Okay. The first things that, that we try to determine, as we'll may ask you that, "What is your goal—to stay in your home, or would you rather move on to another chapter of life?"
I want to stay here; it's difficult for me to afford the place now, obviously. I lost my job due to COVID, so I have bills and...
And you're facing unemployment. Your unemployment overlay goes away in less than a month, right?
Yep.
Yep. So the first thing we try to look for in this situation, if you want to stay there and you don't have an income right now, is there somebody in your family or your spirit, your group of friends that, that first of all, would you believe be willing to ask for financial help from a friend or family? And second, do you, as that person, is there a person like that in your life right now?
At the moment? No.
Okay. When do you think you'll be back to work? Do you have work lined up? What line of work are you in? Is it something you expect this to be short-term or long-term?
I expect to be out of work; it could be some time. I'm a commercial glazier.
No, have a blast. I've been putting applications out everywhere; it's pretty tight, due to all these shutdowns and lockdowns; nobody's been able to really get any glass in. Everybody's pretty much hurting, so no one will put an application—I just, I'm not getting any callbacks. They're all saying the same thing.
Sure. Let me ask you this, do you in the next, and let's just look out the next six months to start. Are there any other big purchases you need to make? Do you need to replace a family vehicle, or do you need to use your credit for anything in the near future?
Sure. No, the car is fine for now. They haven't repossessed that.
Okay. And are you making the payments on your vehicles, and that's okay?
I'm about a month behind on my car payment.
Okay. And do you do you have a way to keep those?
Yeah, I'm keeping my car payment current.
Okay. As you can see, we're really worried about your overall situation, but that will bring us back to what is the best thing to do about your living situation. So I'll check in with you from time to time based on the kind of questions I've asked so far.
Yeah.
Okay. So where we are, we try to look at options. So for you to stay in the home, we've got to find a way to bring the payments current, because at this point in the next 30 to 45 days, the sheriff could be knocking on your door. Have you talked about that with your family? Have you really felt that and thought about what the logistically what happens when that happens?
Honestly, it's been just so stressful; now I've just hid under, hidden under the cover, hoping it would go away.
So the reason I ask this is unfortunately, we—I guess fortunately, because we have an opportunity to have this conversation—we've talked a lot. We talked to a lot of folks. We try to talk to everybody who's on your situation because we know there's almost always a solution that we can find through years of experience and tons of great relationships with other professionals here. We can find a way to help you, and we can navigate this with you. But a lot of the most common thing I see is people just don't do anything. And that inaction usually results in a much more painful end result. And that's the sheriff knocking on the door with a piece of paper in his hand and family members crying and a panic to figure out where the hell are we sleeping tonight. And that comes with embarrassment. And I try to, I see my role in, in large part of how can I help prevent that because I sure as hell wouldn't want to be in that position. So do you have family members, do you have suitable housing and other than this, if you had to move tonight, what would you do?
You do either go to a hotel or sleep in my car.
Okay. So neither of those are a good outcome. So I like what I'm seeing is we need to find a way for you to stay in the home as long as possible until we can get some income, and then we can get you back on your feet and get you into a rental property. Are you willing to live in a rental for a while?
Yeah.
Okay. So there's a few options here. Are you familiar with, do you know if I say "short sale," do you know what that means?
No, I don't.
So a short sale is simply the bank agreeing to take a, an amount short of what you owe on their home. So how much is your, what's your balance? The remaining balance on your mortgage. And if they've sent you a statement with penalties and the actual payoff amount, do you know what that number is roughly right now?
Nah, I still owe about 80 on the house.
Okay. And have you spoken to any other real estate professionals that have given you an indication of what the home was worth? Have you had an appraisal or a BPO or a realtor tell you what it's worth?
No. I just had a bunch of people calling me and texting me telling me they want the house.
Do you think it's worth, if you said, "All right, I'm okay selling the house," what do you think it's worth today?
I honestly hadn't really thought about it, but I've seen houses nearby from neighbors, no, fixing up their houses and moving; last one I seen went for about 150, 160.
Okay. So there's a good chance that you have equity. We could be talking about $80,000 in cash to better your situation; that would be helpful.
All right. Tell me about the condition of the property.
As I said, I'm a glazier; when I first got here, the place, it had nothing; they had nothing at all. I completely redid the patio; had some contractor buddies of mine and another buddy of mine that that I worked with as a civil engineer. So we completely redid the back patio. It was all dirt back there before I got here, but now it's a nice finished patio. I've got swinging patio glass doors for the back. There's two bathrooms; I installed last year frameless glass showers—Neo-angle glass showers. And both of, both of the bathrooms, the roof's okay. I know that doesn't need to get redone. The shingles are fine. The electric is, the electric is good. It's not knob and tube or anything crazy. I would say that, by most standards, the house was in pretty good condition.
Okay. It sounds like it'll qualify for FHA VA. Like we won't have problems getting financing on the home. It's not in terrible condition.
Sounds like it's in great condition, and you've done the right things to actually build equity into it. So this is an easier conversation than if you said, "Chad, I owe 150 and I think we could sell it for 130."
So when was the last contact you had with the lender? The last letter you got or the last phone conversation?
Yeah. About four months ago.
Okay. Do you know if they have scheduled an auction date for you?
Okay. So that's the first thing we need to look at. We need to look at the notice of default and actually see, is there an auction scheduled? If there is, that's going to tell us what, how short our fuse is. You're beyond the 90-day mark. So in the state of Virginia, they could be, you could be less than 30 days from the sheriff, from the courthouse steps and the sheriff knocking on your door. Now I have a bit of a—I have an emergency button. If we need to, I can, I need if that starts to happen, if we run out of time, I might need you to file bankruptcy. That doesn't mean you have to take it all the way through to a discharge, but it will absolutely put the brakes on this. So if I call you and say, "You need to file bankruptcy today," I need you to be mentally prepared, emotionally prepared for that. Because that's the only way that with absolute certainty, we can stop a sale on its tracks. So if you were in that situation and it's going to spill over into your, your home loan, your car loans, your other things—oh, you don't have to finish it. And our bankruptcy attorney can have that conversation with you about what that means. But if we've got days, that sometimes the tactic we have to use, it's unlikely. It's—I like to have a good strategy in place, so we know, I don't call you and just hit you out of the blue and blindside you or something like that. The other option is we can transition it like you typically, if there's not equity, we'll try to do a short sale, and we can get it. We can get that contract; we can get the short sale paperwork into a division of the bank that moves it out of their special assets division and over to a distressed assets division. And it stops the clock on all that stuff. So there's ways that we can intervene in that process; ideally in this market condition with your home in great condition and such low inventory levels, I don't think we're going to have to use those kinds of contingency plans. I think our primary strategy is beautiful photography, really good marketing, a conventional listing; we'll price aggressively low to really get attention, and we'll call for offers and sit for seven days and wait and let them sweat and continue to build themselves up. So we'll maximize what equity, every bit of equity we can get out of it. We'll pick the best one. And then we'll know we've got about $80,000 to find you a more suitable alternative living situation. We've got to verify all this and make sure that's right, but just based on what I know about your situation right now, I think that I think you're going to be okay, man. Like I think in the next 30 days, we can get you a closing. I know that it's not the outcome you really want; it's not keeping you in your home. Now, if you had a way to, if you had a way to say, "Chad, listen, I've got this lump sum of money coming," or, "No, that I'm going to get this contract at work," there, there is one more alternative, like either me or some of the investors I work with, we can actually extend a bridge loan to you, like mezzanine financing to help you get across this. So it will be a short-term loan, and it's a higher interest rate because it's very risky, cause we would be taking a second position on the deed. But I have done that before, too, where I've actually had to, I've had myself or other investors step in and create a bridge. For example, if you had a life insurance plan with a cash value that you could cash in, then I would basically be comfortable using that as collateral. If you made me, you made me the beneficiary of that on the promissory note, and then we would go 12 months, and then you would pay me back whatever that was. So just like hypothetically, if you were $10,000 in payments, all the missed payments, then I would advance you $10,000 on a promissory note. That promissory note would—you would, your obligation would be to make me the beneficiary on that life insurance policy. So there's creative things like that that we can do to create bridge loans. But it requires you to have to have a solution for that income problem. So is there anything like that that we haven't talked about that where we might be able to just bridge you and leave you in the home, but you've got, I've got to have certainty that you have the ability to repay. Is there anything you can think of, and it helped, or any ways you could make money, any assets you can still...
Life insurance policies, anything like that. So we could have a solution for you to stay where you are.
No, I don't really have any assets or anything like that. Unfortunately.
Okay, that's okay. As I said, there is a strategy that will work. The good news is you're in a far better position than most. I know it really sucks to move, especially after you've done all that work to the home, but without having you lose, you're losing equity by the day as the penalties rack up, we owe the bank more and more, so the faster we can do this, the better off your family will be and finding your next living situation.
So what I would like to do is it's only, it's early today. I'm willing to be over there this afternoon, this evening, if you would like to meet, but what I do want to make sure that everyone who's affected by this decision can be present for the conversation. So a lot of times we'll sit down with the entire family, even young children, because I like for them to be able to ask me as a new, as a kind of a third party, sometimes it's helpful for the parents. If the real estate professional answers to hard questions and we may have to play a little bit of good cop bad cop, right? So this is less stressful on your family. When you can say, "It just, that's what Chad said we have to do." So then in the child's eyes, you're not taking away their bedroom. You're not taking them out of the school system. So if it's okay with you, I would like for your whole family to be present when we meet and have the conversation, because everyone will be affected. And I don't mind absorbing that. If they want to blame me, that's always another way for me to help you.
So when can we have everybody together in one room for that conversation? We can do it.
Okay. How about seven o'clock?
Seven o'clock is perfect. That's dinner time.
Okay. In the meantime, what I'm going to do is dig in and do some research on the notice of default that you've received, if there is a sale date. And also if you could help me by I, you've gave me a good overview of what the home, the condition of the home. But if I could ask you a few more questions and then get a little more specific about it, then I'll be able to do better homework. So when I get there, I'll be able to tell you, "Here's where I'll place you in the marketplace. And, to sell this in a week, we should be around this price." So then we'll dig in a little closer. So what I'm going to do, quite frankly, a bit of a deeper dive than even an appraiser would go. And I'll have a market absorption analysis showing you what you could expect, how quickly you could expect to sell and each of the price ranges.
So have you got just another 15 minutes to ask, just to talk about the house? I know this has been mainly a people conversation. I told you it was going to be different, but now it needs to be a house conversation. Cause I think I see the way we're going to get you out.
Yeah, we've got 15 minutes and we'll break there. You guys don't need me to hear it, to hear me interview him about a house.
So what I did there, I was trying to make you comfortable and let you know that you weren't the only one. I was trying to let you come to your own conclusion. We found out you had equity and then that determined the strategy, you're just a conventional sale. And we've got to have some contingency plans in there in case the bank pulls a fast one, and that goes to the courthouse steps. We gotta be able to stop that. All of that stuff is stuff that I've done in real life; you can do bridge loans. You can file bankruptcies and just not take them all the way through. You can initiate short sales with an investor offer. You can start foreclosure in its tracks in a matter of hours. But you'll notice in that conversation, I, where I was emotionally preparing them for those things: "You willing to share personal information with me? When the questions get too sensitive, will you be honest and transparent with me?" And those things all build trust. And they're just little things that I learned, picked up over time, but using this approach, I got every single notice of default that would engage with me, turned into a deal. Like it's, you didn't hit me with any objections, but they typically don't either.
I couldn't, I wanted to. Yeah. So it's and if you guys, it may be painful for everyone listening, that's damn, when he just get to the damn point, but that is the point, slow down. This is a people conversation.
Yeah. You get paid to sell houses or buy houses, but when you realize this is a people conversation, the house is the tail end. Like I, I talk about houses after I've gotten trust and act like that the person has taken action and said, "Yes, please come to my home and sit in front of my kids and say this, okay. Now let's talk about the house," because before then the house doesn't freaking matter. It's the people that matter. So that's how I've always approached it. I use this in basically every list, like, you guys probably see a lot of similarities in how I approach probate. But that's how I handle all of the distressed real estate situations.
That was easily hands down the best. I just can't believe I'm spacing this well. I'm glad you got value from it, man.
Thanks as always, man. Okay. I'll get off the mic.
All right, well guys, listen, I'm going to jump. This was always fun conversations. Hope you guys got a ton from it. I see a lot of new names here. We didn't get, didn't hear from, so you guys hopefully you got value from this. If it was your first call, work up the courage to introduce yourself and join us next week. But as always guys, thanks for being part of the community and being an engaging fun crowd. We'll talk to you soon. Have a great day.