GRAND-MA

By Dennis Henson

GRAND-MASelling Upside Down Homes

to Buyers who Can't get a LoanBy Dennis Henson

Seven Secrets of Successin Real Estate Investing

1. Get your mind right2. Seek Wisdom

3. Develop Skills4. Make detailed plans5. Take massive action6. Form great alliances7. Be persistent

5 M’s of Real Estate Investing

1. Mining

2. Money3. Maintenance

4. Marketing5. Management

Seven Secrets of Successin Real Estate Investing

1. Get your mind right2. Seek Wisdom

3. Develop Skills4. Make detailed plans5. Take massive action6. Form great alliances7. Be persistent

New--MAPS/IMAP/AMPS

• Mortgage Assignment Program– IMAP Scott Horn– AMPS Phill Grove

• Assignment of Mortgage Program• “Sell An Un-sellable House To An Un-loanable

Buyer” Phill Grove

• I decided to call it…

GRAMPS

Because it is NOT a new technique

GRAND-MA is now…

GRAND-MA

What is GRAND-MA

• “GRAND Mortgage Assignment” – GRAND-MA

• The sale of a property where the Seller’s liens are accepted by a buyer in exchange for a deed of that property

– Better known as “Subject To” (Sub2)

GRAND-MA

• Combines–An Option

–Subject to–A Note

–and a Wrap

Is GRAND-MA Legal?

• First rule of GRAND-MA – Always follow the law!

• Ask your Real Estate Attorney

• Work with an RMLO

• But Thousand of Sub2s are done each year

Why GRAND-MA Worksfor Sellers

• Seller’s Problems– Behind on mortgage payments– Homes are upside down– Cannot afford the cost of selling– Undesirable choices

• Need Cash to sell• Short Sale takes time & hurts credit• Can’t afford to pay a realtor to sell• Foreclosure

• Sellers’s Solution = GRAND-MA

Why GRAND-MA Worksfor Buyers

• Buyer’s Problem– Anxious to own– Banks are not lending– Loans have been rejected

• Buyer’s Solution=GRAND-MA

Benefits to Seller

• Solves their problems

• Stops nightmare

• Saves credit

• Easy– You handle everything

• $1,000 CASH

Benefits to Buyer– Own their Own Home– No Credit Check– No Long forms to fill out

• Very little paperwork

– Quick Closing—Usually within weeks– Low if any closing cost

• vs. thousands in a conventional purchase

– No Points or Realtors Commissions to be paid– Monthly Payments are Fixed and Affordable– One Low Monthly Payment includes Taxes & Insurance– Probably No Pre-payment Penalty– Buying a home will help build credit– Help with refinancing is available

Benefits to Investor

• Takes little or no Money

• Lots of Buyers and Sellers

• Does not take much time

• Is very rewarding

• Can get started TODAY

GRAND-MA Easy as 1 2 3

1. Market to find deals

2. Get deal under Option

3. Marketing to buyers & close

Finding GRAND-MA Deals

• Use my “66 Ways to Find Deals”

• Contact leads– Calling ads– Calling signs– Answering ads

• Asking W-H-A-T Questions– See next slide

Ask W-H-A-T Questions

• What is it worth?

• How much do you owe?• Uncovers GRAND-MA Prospects

• Asking price?

• Tell me why you are selling• Equity GO!!!

Deal Analysis

• Research1. MLS or Fact Sheet2. Tax Sheet3. Comps4. Repairs5. TurboBidder2 Summary6. Map

• Killers– Bankruptcy– Too far behind

Negotiating GRAND-MA

• Are there other liens on the property

• Are you willing to walk away

• Have you considered a short sale

• What if I could – Solve your problems– Save your credit– And pay you $1,000

How to Make $ Using GRAND-MA Deals

• Tie up property using little or no Money

• Make changes to the liens

• List and Market

• Collect a check at closing

• Possibly collect monthly payments

Real GRAND-MA Deal

609 Nightshade Dr.

609 Nightshade Dr.• ARV 117-125

• Repairs 6K

• 1ST 96K

• 2ND 8K

• 3RD 6K

• 4TH 10K

Total 126K

609 Nightshade Dr.• Sold 131,500• Repairs 1K• 1ST 96K• 2ND Reduced to 1.7K• 3RD Reduced to 0K• 4TH Reduced to .7K• Selling Costs 4.5K

• Profit $27,600

Get Help

• Real Estate Attorney

• Title Company

• RMLO

• Realtor?

Do I Need a Realtor

• Realtors are not required but

• But Realtors can be useful– Finding Deals– Researching Deals– Marketing Deals

Forms Needed• Option

• Note

• Sales Contract/Subject to

• Disclosures

GRAND-MA Components

• An Option

• Subject to• A Note

• a Wrap

Option

GRAND-MA uses an Option

to tie up property

Options may be Used to Control Property

Options allow control of a property for a time

• An investor may sell for a higher price

• Sale price – Option price = Profit

What is an Option

A unilateral agreement:• Between an Optionor & an Optionee

– Or Buyer and Seller

• Binding only on the Seller• The Buyer has no obligation to purchase• But the Seller is required to sell

– at the strike price – if the Buyer chooses to purchase – before the expiration date

Elements of an Option

• Price--to be paid for option

• Time—when option starts & expires

• Strike Price—purchase price of property– during the option period

• Other terms and conditions

Is this the same as a Lease Option?

• Yes and No!

• The Option is the same

• But the Lease Option includes a Lease

• The Option and the Lease are together

Are Options Legal in TX?

• Yes Options are legal in Texas

• But when attached to a Lease=Problems

• To avoid problems consult an attorney

What are the Steps an Option Transaction

1. A Buyer and Seller enter into an agreement– The Buyer pays a consideration to the Seller– The Seller grants the Buyer

• The exclusive, unrestricted, irrevocable purchase option• At a fixed purchase price• For a specified period of time

2. The Buyer either – Sets up a closing

• And buys property before the expiration date

– Sells the option to another investor – Lets the option expire

• by not purchasing the property in time

What are the Steps an Option Transaction

Option Benefits

• Saves on closing costs of buying & selling• Saves holding costs

– Maintenance– Taxes– Insurance– Other costs

• Saving time – Applying for Loans– Setting up closings– Going to closings

• Put time to better use – Finding more deals and money

One More Thing

• An Option expires on the expiration date– Unless renewed or exercised

• At expiration– Buyer loses control of the property – And their original option payment

Subject To• No Credit Check• No Loan Apps• No Waiting• No Closing Costs• None of Your Own Money• BUT

– A Bank is involved – There can be stress– Proceed carefully

“Subject To” Means

• Subject to the existing mortgage

“To purchase property subject to a mortgage on the property. The purchaser assumes no liability for repayment of the mortgage debt. The only money at risk is your equity.”

Carleton Sheets

Overview

– Old Lender note remains in place– No liability for the underlying loan – Foreclosure will not effect buyer’s credit– Buyer is not obligated to pay bank loan – There is only a moral obligation to pay

Why Sellers Agree• Foreclosure• Sickness• Death• Divorce• Job change• Behind on payments• Old age• Inheritance• Had to move• Immediate need for cash• Don’t want any hassle• Live in another part of the country• Tired of dealing with renters• Lots of other reasons

Concerns

• Is This Legal?• The “Due On Sale Clause”? ->• What if I fail to make the payments?• Bank Communications

– How to be sure payments are credited?– How do I get Pay Off information?

• Escrow Concerns– Insurance– Taxes

The “Due on Sale” Clause• The most common question—

– "What about the Due on Sale Clause?"– Scares both buyers and sellers– Can and does kill deals

• The lender– can declare the note due– has the right to foreclose– But--the Federal Government will punish the

lender for having a "bad debt“

Bankruptcy

• Stop • Don’t do Subject to

– if seller is filing for bankruptcy

Monthly Payments

• You have a choice– pay the mortgage or – lose the property by foreclosure

• But where do you get the money?– Lease Option– Rent to Own– Rent

One More Thing

• On an FHA insured loans— lenders are required to receive

HUD for permission to foreclose a mortgage on a property transferred

without paying off the loan (or “Subject To”)

• As of this research--there have been no reported cases where HUD actually gave that permission

How to Setup

• Add – Subject to Current Mortgage

• To the sales contract• Have an Attorney or Title Co.

• Prepare A Special Warranty Deed

• Have seller sign– The contract– The special warranty deed– Listed additional insured on Policy– Insurance policy changed to landlord policy– Change address of seller to yours at bank

Notes

GRAND-MA Uses Notesas a Substitute for CASH

Creating Notes

• By creating notes you may– Purchase fantastic deals—

• without using any of your own money!• And you could even get cash back at closing

• Writing notes is like creating money• Out of thin air

What is a Note?

Note

• An agreement to pay money:

– a signed agreement promising payment

• of a sum of money on demand

• at a specific time

• or in payments

Is Creating a Note Legal?

• Yes

• A note is just an IOU

– A promise to pay an amount of money

– Anyone can write an IOU

• Anytime

• for anything

How do You Create a Note?

• The easiest way is by having– your title company– or real estate attorney do it for you

• (the title company is usually less expensive)• You will need some basic information

Use an RMLO

• Residential Mortgage Loan Originator

• SAFE Act – http://www.dre.ca.gov/lic_safe.html

Information Needed to Create a Note (Pg 1)

• Parties and their contact information• Amount if any being paid as consideration

– the cash being paid to the seller • Collateral pledged as security

– address & legal description of the property

Information Needed to Create a Note (Pg 2)

• Amount of the note• Terms and when the total payoff is due• Percent of and type of interest (simple or compound)• Payment and when payments are due (any amount)• Where the payments are to be paid and to whom• Balloon payment If any

Recording

• To assure the Seller the note will be paid• Seller will have two documents recorded

• The title company will do this at closing– A promissory note

• The written obligation to pay– And a security instrument pledging collateral

• Either a Deed of Trust• Or a Mortgage

Using Notes

• Motivated sellers want their problems solved – Take over their property “Subject to”– Give them a note for the balance– Or give a note for entire amount

• If no mortgage

Selling with Notes

• Advantages to Seller– Faster Sale– Tax advantages

• Advantages to the Buyer – Less money to come up with

Financial Calculators

• For Calculating Notes

• Have 5 unique keys– (N) Number of equal payments in a loan– (%I) Interest Rate per payment– (Pmt) Payment for each period– (PV) Present Value (amount borrowed)– (FV) Future Value after the payment period

• Get “Calculator Power” – By Jon Richards

To Maintain Control

• “Buy Subject to then… sell with a Wrap!”

Wraps

What is a WRAP

• A Wrap-Around Mortgage (WRAP)

• A form of secondary financing – for SELLING real estate

“The seller gives a junior mortgage which wraps around a superior mortgage that is secured by property.”

How Do Wraps Work

The new loan envelopes the old loan

With a WRAP

• A seller accepts a secured note– for the amount of the underlying mortgage – plus an amount for the remainder of the price

• The buyer will make monthly payments• The seller is responsible paying the first lien • If buyer defaults--seller has right to foreclose

– and recapture the property

Also with WRAPs

• The title transfers to buyer

• Which may trigger due-on-sale clause– If such a clause is present

RMLO

• Again you are going to need an RMLO

• Residential Mortgage Loan Originator

• SAFE Act – http://www.dre.ca.gov/lic_safe.html

SAFE/Senate Bill 36

• Secure & Fair Enforcement • Mortgage Licensing Act of 2008• SAFE was signed into law in June 2008• Federal mandate for states to license &

regulate mortgage loan originators (RMLOs)

• http://www.fdic.gov/regulations/laws/safe/index.html

The RMLO

• Residential Mortgage Loan Originator– Takes Residential Mortgage Loan Applications – Negotiates terms of a residential loan– Will be compensated for arranging the loan

• Residential Loan– Secured by real property with a dwelling– Dwelling is a residential structure (1-4 units)

• Independent loan processors/underwriters– Must comply with SAFE Act licensing requirements

Seconds

• The owner financed note may be a “2nd”

• Second means filed after the “First Lien”

• Other liens take the next position

Nothing Down• Nothing down means:

– Buying property using none of your own money

• These can be profitable because of "leverage." • Leverage means

– Investing a small amount to get big return

Marketing

• Use the 47 Great Ways to Market Property

• Run “Owner Financed” ads– In Newspapers– In Tabloids– On Internet Sites

• List with “Owner Financed” websites

Paperwork

• Letter to Mortgage Company• Blank Letter to Mortgage Company• Change of Address to Mortgage Company• Limited Power of Attorney• Notice of Lien not Being Paid Off• Title Transfer• Assignment of Agreement• Or just ask your RMLO

Steps to a GRAND-MA Deal

• Get a Notarized Option from the Owner• Record the Option• Market, Market, Market• Buyer Pays Down Payment• Buyer Signs Purchase Agreement• RMLO Prepares WRAP• Title Company Prepares Closing Docs• Seller and Buyer Attend Closing• Collect Check as Title Flaw

What if They Do Not Pay?

Say in control of WRAP

If Buyer does not pay

•Foreclose

•Repeat the process

GRAND-MA Summary

• Takes little or no Money

• Lots of Buyers and Sellers

• Does not take much time

• Is very rewarding

• Can get started TODAY

Easy as 1 2 3

Seeking Wisdom is a

Secret to Success!!!

To learn more about GRAND MA

www.grandma123.com

“Ask and ye shall…”

• What did I just do?

Final Thought

• If you only take one thing from the

training today let it be this...

– The GRAND-MA program is designed to solve the problems of today’s economy

– It is embraced by both buyers and sellers!

• The best time to start on is TODAY!! So let’s get out there and get GRAND-MA moving!!!

Questions?

Contact information:

Dennis Henson6902 Shore Breeze Ct.Arlington Texas 76016Phone: 817-371-8658dennisjhenson@yahoo.com

Web site: http://www.dennisjhenson.com