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Trading Appreciation Potential For Foreclosure Relief
| | Tuesday, October 19, 2004 @ 11:25 AM EDT
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Contributed by: Bill Gatten
Bill Gatten Properties
Read more archived articles about Foreclosures
So much has been written about how to capitalize on the misfortunes of those in foreclosure, that the subject is--all too often--associated with greed, or with taking 'unconscionable advantage' of good people in distress.
And...why do you suppose that is?
Well...not to offend anyone, but...it’s because all too often those who work foreclosures are in-fact greedy and in the habit of taking advantage of people in duress...when they really don't have to.
Q: So what's the solution to working foreclosures, staying fair and never hurting anyone or taking advantage of their misfortune?
A: Well...how about truly 'helping' the guy in foreclosure (i.e., you catch more flies with honey…and all that). Why not honestly offer to save his home; to preserve his equity; to reduce his
payments; to restore his mortgage credit…and do all of this while dealing only at the full value of the property?
The fact is that one needn't take a bunch to get a bunch...there's always a better way than that. OK...then...put another way: "All of a thing is seldom more valuable than several parts of a lot of things."
So, how about a flyer (or letter or??) that says something like the following? Would it go over?
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SAVE YOU HOME BY SELLING SOMETHING YOU DON’T EVEN OWN (YET)
Dear Mr. and Mrs. Smith,
Regarding your property, which the public record shows to be in arrears, may I offer to SAVE YOUR HOME FOR YOU while leaving you and your family in the property; stopping your foreclosure; bringing your mortgage payments current; and even reducing your payments for at least the first year of our agreement.
However, should you prefer instead to vacate the property and make no further payments, I will then...fully at your discretion...be happy to simply purchase the property from you at its full value and still preserve as much of your equity for you as possible.
Our program requires only the following:
• That the existing mortgage financing remain in place for the term of our agreement (note that our program does not violate a lender’s ‘due-on-sale’ clause)
• That the property’s title be held in a third-party, co-beneficiary land trust for the term of our agreement (for the personal and legal protection of all parties)
• That the two of us share together in future appreciation potential (usually by 50%) should such appreciation have occurred by the time the property is sold or refinanced by you at termination
• That my initial investment be eventually returned to me (without interest) from proceeds received upon the disposition of the property (sale or refinance) at termination
• That you will have thoroughly reviewed and become wholly comfortable with our program
• That you agree (should you opt to remain in the property) that in the event of a future uncured default, you will sell me your equity in the property at its then full fair market value.
Respectfully,
Bill Gatten
Please call me at my private line at 800 207 xxxx
503 228 xxxx
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Q: Now, you say: Ok, which walnut is the pea under? How do you do all that and still make a profit?
First--'full value' means the value that we mutually determine to be fair when my expenses, anticipated costs, and reasonable margin of profit are subtracted from the FMV.
Second--placing a property into a land trust does not violate the due-on-sale clause within itself, and does indeed shield the property from myriad legal and personal problems that could otherwise arise and attached to the property.
Third--in sharing future profits with the borrower-of-record, I am getting half of the appreciation, as well as half of the loan's principal reduction and a full refund of my initial investment…and my ‘reasonable margin of profit’ at termination.
Fourth--I add $1,200 to my initial investment so as to reduce the homeowner's payment by $100 for the first year. After that, we agree that his payment will increase to $200+ for the 2nd year; $300 plus for the third year; and so on.
Fifth - Regarding the buy-out provision re. default, my offer of FMV will be: the loan amount, plus missed payments, late fees and a $2,000 default fee (as per our agreement). Then...if my offer is challenged, the contract provides that any deficiency must be proven--at the defaulting party's expense. If it can be proven that he is owed more than my offer, the amount owed will be paid in full…in the form of an ‘unsecured promissory note’ to be retired only when the property is finally disposed of (should there be sufficient fund to do so)
FOR THE READER: My motto has always been that “Thinking BIG is great: but thinking small a whole bunch of times can yield the same result a lot more safely.”
Bill Gatten
Note: Bill Gatten is Creator of the Equity Holding Trust(tm) Transfer Systems: PACTrust(tm) & NEHTrust(tm). You can contact him here
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