07 Jan 2014
10 Steps to Zombie Mortgage success, Part 2
In part 1, I explained what a zombie mortgage is and how it unknowingly affects millions of people every year. Luckily, there is a solution for this growing epidemic; however it is virtually impossible for the homeowner to get over this hurdle without a knowledgeable real estate investor. Lawyers can do their part, realtors can participate and contractors are usually involved, but the key is the educated risk taking real estate investor.
These methods set the stage for you to become the owner of the property. They will also inspire you to replicate the entire process, increasing your real estate portfolio quickly and at a low cost. Once you internalize the system, you will be a sought out expert in the field of zombie mortgages.
These are the 10 steps to zombie mortgage success:
1. Help people first
Many investors fail in their endeavors because they don’t understand that the fundamental basis of success is to help others first. They put the cart before the horse and wonder why they can’t seem to enjoy consistent cash flow. Begin by seeking out and helping those who need your services and the money will eventually come.
2. Set your goals
Your goals must be specific, measurable, attainable, realistic, time-bound and written to guarantee accomplishment. A goal isn’t a whimsical thing.
An attitude of “maybe I’ll get it maybe, I won’t” will bring failure.
You must set goals that will become the driving force of your life, involving your attention at almost every waking moment.
3. Plan your business strategies
Having set your goals, the next step is to set your plan for achieving those particular goals. Any successful long term business follows a structured plan. The more details that are included in your plans and the more finite and organized your written plans are, the more success is guaranteed. How many zombie property owners will you need to help in order to attain your financial goals?
4. Spread the word
The more people who become aware of zombie mortgages and know you have the solutions, the quicker your goals will be achieved. There are many ways that you can attract the zombie mortgage homeowner which will bring more attention to this national epidemic and allow you to control, manage and cash flow these properties.
5. Meet the homeowners and tour the property
I’ve seen absentee buyers acquire properties sight unseen, but you definitely do not want to deal with zombie properties in this manner.
There are so many things that can go wrong both with the physical property and with the mental stability of the owner – this is a people business.
You have to remember Step 1: Help people first. However, in some cases the owner is troubled psychologically or the property is troubled physically. In either case it is just not worth bothering with. You won’t know until you meet both.
6. Investigate the property and due diligence
One of the most important stages of the process is the proper and detailed investigation of everything to do with the property. This includes the physical condition of the property by professionals, the background on the seller to assess their story, the neighborhood conditions (physical and financial), value determinations, marketability and the legal title.
7. Complete legal documentation
A package containing a plethora of documents must be prepared, checked and signed by the seller and you – the buyer. This package is very different from the traditional closing documents, mainly because although you are receiving most of the so called ‘bundle of rights’ concerning the property, you are not receiving ‘legal title’ to the property, or at least not yet.
8. Rent the property out
Once you have the legal documentation completed, you have the right to operate and manage the property as though you were the owner. You can collect rents, pay property taxes, insurance, water and sewer bills. However, in most cases, you won’t have to pay the seller’s mortgage payments until the conclusion of resolution with the lender (you either become the property owner with a clear title or the bank forecloses).
9. Begin attempts to ‘clear the title’
Now that you are in the driver’s seat and properly managing the property bringing in cash flow each month, it’s time to start clearing the title. This means to remove the mortgage liens.
The short sale is one way which will leave you with clear and marketable title. Another way is for the lender to complete a proper and legal foreclosure process. However, you should be aware the second option may not be available to the lender if there was lender fraud involved anywhere along the mortgage or previous foreclosure process.
10. Decide whether or not to close escrow
The result of this entire process is to clear the current owner’s name (seller) off the title.
In most cases, you will become the legal title holder with all the rights of ownership. Other cases, such as the foreclosure, will also clear the seller’s name but unless you are the successful bidder at the foreclosure auction, you will not end up with the property. There is also the very real possibility that the lender will do nothing – no short sale and no foreclosure.
Meanwhile, you can run the property and collect the rents until the bank finally works with you on one of these outcomes, or until you finally find a way to clear the title by other means.
This simple list may appear to be an easy undertaking, but there is so much more that must be accomplished between the lines. The solution to the problem is absolutely useless unless a real estate investor learns the details about the solution and places those methods and procedures into action.
Alan Kosinski is the co-founder of ZombieMortgage.com where homeowners can learn & find help, and ZombieInvestors.com where investors can see how it’s done. This is the second article of a 3 part series. In part 3, we’ll look at a real life example which will enable you to see these steps practiced in real life and how you can do it.
Photo by: WeirdSid.