Transcript Document

The Foreclosure Boom
Home Buying Secrets
1
The Foreclosure Boom
Who we are:
A North American Group Of Real
Estate Professionals Who
Specialize in Foreclosed Properties
2
How Did It Happen?

The dot.com Bubble Burst in 2000-2001.
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People bailed out of the stock market and into
real estate after 9/11 Terrorist Attacks.
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The Federal Reserve attempted to avoid a
recession by dropping interest rates to 40 year
lows fueling the biggest real estate boom in U.S.
history.
3
Risky Loans
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Banks and Lenders created risky loan
products and loaned money to virtually
anyone who was “breathing.”
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Lots of Easy Credit
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Bad Lending Practices
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Rapidly Rising Real Estate Prices
4
Wall Street Greed
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Wall Street “packaged” risky
mortgages and loans and sold them to
other financial institutions around the
world.
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2007 – Reality sets in and real estate
markets across the U.S. adjust sharply
downward.
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Enter the Foreclosure Crisis
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The Numbers are Staggering
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The Housing Market was rocked by nearly 2.5 Million
foreclosure filings last year.
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2009 is projected to rise to 3 Million according to RealtyTrac
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Almost 7% are falling behind on their mortgages.
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1 in 10 are delinquent or in foreclosure.
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+ 72% from last year.
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Many project that the crisis will rise and peak in 2011
7
Disturbing Economic
News is Everywhere!!!
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Banks, Stocks, Money-Market Funds, Bonds
and Mutual Funds are losing
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Over 220 Mortgage Lenders are Out of
Business
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Unemployment, Layoffs & Cutbacks Fuel
Daily News Headlines
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“The Foreclosure Explosion”
Crisis or Opportunity?
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Meltdown Realities
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The U.S. Foreclosure market is at an
All-Time High.
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You have a once-in-a-lifetime
opportunity to buy property at prices
that were unthinkable only one year
ago.
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It’s a Huge Opportunity!
(Investors)
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The Best Investment Opportunity in over
30 Years!
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Buy Positive Cash Flow Properties for a
Fraction of their Original Value.
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Increased Demand for Rentals
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Fortunes will be made by those who
“Take Action.”
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It’s a Huge Opportunity!(Owner Occupied)
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Purchase homes at a fraction of the cost
– Means instant equity PLUS a bigger
boost when the market rebounds.

Afford a larger and/or nicer home
compared to 2 years ago during market
bubble

Pay less on mortgage than rent
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This is the time to
Take Massive Action!
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What is a Foreclosed Property?

A foreclosure occurs when an owner
can’t make principal and/or interest
payments on the mortgage or loan
secured by the property.
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The bank takes the property back and
hires a real estate listing agent to
market and sell the property.
14
Foreclosed Homes
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For today’s class, we are focusing on the
real estate transaction after the bank
takes back ownership.
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REO = Real Estate Owned
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REO Properties will be listed by a Real
Estate Agent and Sold
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Other??

Let’s quickly review some other
types of real estate that are often
confused with foreclosed homes
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Pre-Foreclosure/Short Sale
Courthouse Auction
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1. Pre-Foreclosure - Short Sale
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Short Sales- when a lender, through
negotiations, agrees to accept less than
what is owed on the home to satisfy the
loan.
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Complicated and time consuming
process. We could spend 8 hours just on
short sales
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Perception of Short Sales
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“Short sale” has become a buzz word in a
market desperate to hear something less
discouraging than “foreclosure.”
Buyers see the short sale list price and
mistakenly believe they can obtain the
home for that price or less.
Buyer thinks bank should be thrilled to
have the property sold and out of trouble.
Buyers think Short Sale is a great deal
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Reality of Short Sales
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Only a SMALL Percentage of short sales close
List price NOT realistic-Price set to get buyer’s
attention NOT at price the bank will accept. Agent
doesn’t know what bank will accept.
The bank doesn’t have to respond on your timeline.
Typically takes 60-90 days to hear from bank.
It doesn’t make sense that a bank should be thrilled
and answer quickly and sell home cheaply!
Bank is already facing a loss so they aren’t eager
to let someone steal it when the next person may
come in and offer more
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2. Sheriff AuctionCourthouse Sale
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After 90 days of non-payment, a
Notice of Sale (NOS) is published,
setting an auction date within 45 days
and detailing the amount owed.
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Not all homes that fall into foreclosure
go to public sale because owners have
the right to make up back payments up
to the point of auction
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Foreclosure Auction Pitfalls
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In today’s market, the price you pay at an
auction is usually higher than market value,
based on mortgage amount due.
Must pay with cash or cashier’s check.
As is – no warranties or inspections
Must be an expert title researcher.
Bidding war could leave you out or force you
to pay more than you should.
No Clear Title & No Title Insurance.
You may need to evict residents.
Property could be trashed by angry owners
Lost of cash, resources and risks.
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Foreclosed Home (REOs)
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Let’s take a closer look at these
properties…
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Perception of buying
Foreclosed Homes
1. The home is a good deal since it is a foreclosed
2.
3.
4.
5.
home
Buyer will save money by purchasing a
foreclosed home vs. buying on the open market
The home needs a lot of work
Anyone can make money (equity) buying
foreclosed homes
Any Real Estate Agent can help buy and
process foreclosed home transactions
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1. Bank Foreclosed Homes
Are Good Deals
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Definition of a foreclosed home - Bank takes
ownership due to non-payment. Doesn’t mean the
home is a good deal.
The bank’s goal: Get the highest sales price
possible in order to cover mortgage
The list price could be more or less than market
value
You need knowledge in the particular market and
must perform market research to determine what
the property is worth to you
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2. Buyer Will Save Money By
Purchasing Foreclosed Home
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There are many additional risks and potential
expenses purchasing a foreclosed home vs. an
occupied, MLS-listed home
Financing a foreclosed home can be costly and
time-consuming and many times can’t be
completed
Potential repair costs are unknown many times
and will usually require cash out of pocket to fix
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3. Foreclosed Homes Need
A Lot Of Work
In the current market, approximately 510% of homes are in move-in
condition (and increasing)
 10-20% of homes need little work.
Less than $5k
 70-85% need work, and repair costs
vary depending on the home
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4. Anybody Can Make Money
(Equity) Buying Foreclosed Homes
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If you listen to all the radio ads, Internet
ads and everywhere else you turn, you
believe foreclosures are easy money –
homes are just being GIVEN away.
Well, if it were that easy, why isn’t
everyone doing it?
The truth is that for the inexperienced,
buying a foreclosure can be a difficult
process if they try to go it alone.
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5. Any Real Estate Agent Can Buy &
Process Foreclosed Transactions
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Well, if it were that easy, wouldn’t EVERY
real estate agent be listing and selling
foreclosures?
Most agents do NOT want to deal with
foreclosures, which means few have
experience
You’re no better off than going it alone.
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The Property
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What Makes A Good Foreclosed
Property?
How Do We Find the Homes?
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The Property
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Locate Homes in nice neighborhoods
Preview homes to make sure the home fits
client’s wants and needs.
We perform extensive market research to
determine value of home
Looking at the big-ticket items in the home
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The Property
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1 out of 15 homes is a best buy
If we find 3 Best Buy homes, we
have previewed 45 homes
Time-consuming process
These best buy homes reflect the
best values in the current market
with low fix-up costs
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How Do We Get The
Best Deals?
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We Closely Examine the
Mind of the Bank
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What is the bank thinking?
What can we do to capitalize?
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How To Get The Best Deal?
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Most banks will not even consider an
offer in first seven days on market
You must know WHEN to negotiate.
There is a point when banks will start
negotiating.
There are critical points in the
foreclosure timeline when banks will
make price adjustments. Your agent
MUST anticipate these points.
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Negotiating Strategies…
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Good Negotiating Strategies can save
you thousands of dollars and hours of
time
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How and When You Submit
Your Offer Is Critical
1. If offer will be accepted
2. Price of home
3. Terms of deal
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#1 item bank is considering
when reviewing your offer
ABILTIY TO CLOSE
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Submitting The Offer
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32.4% of Foreclosed home transactions
fall apart before they close
Lenders are:
 Getting burned on non-closing
agreements
 Getting more discriminating when
accepting purchase agreements
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Submitting The Offer
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CASH IS KING!
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Cash Deals are better than finance
deals
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Line of credit is NOT the same as cash
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Financing deals are possible but must
be structured properly
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What And How to Offer
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Low-ball offers will not get reviewed or
considered by bank. Based on % of
list price
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Higher $ earnest money deposits
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Bank will ALWAYS counteroffer
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What And How To Offer
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If financing is required:
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Strong Pre-approval letter
National Lender
Local Lenders???
Longer closing
Lender needs to have experience
financing bank foreclosures
$100 per day if closing date is missed
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Property Inspections
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Buyer can walk through home and
observe the home before making offer
Buyer can perform home inspection
Timeline of inspection is critical -verbal
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REO Pitfalls For The
Inexperienced Buyer
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Banks can be difficult and unresponsive
Contracts may be overwhelming
Bank selects Title Co. even though you pay
Utilities may not be on for inspections
Cash takes precedent; no contingent offers
Close on schedule or subject to $100/day fine
Default on closing and lose deposit
May be countered with “Highest & Best Offer”
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Our Real Estate Network
And Foreclosed Properties
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We are a North American group of Real Estate
Professionals who specialize in foreclosed
properties.
We do extensive market research to find the
best priced homes for our clients.
Our clients (investors and owner occupied) have
purchased many foreclosed homes over the
years, before the foreclosure market was
booming.
Let’s look at some examples
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Foreclosed Sale Example
Clients:
James Bailey and Leah Sator
Market Value:
Purchase Price:
Savings:
Percent (savings):
$220,000
$ 49,000
$171,000
-78%
1202 Chapel Oaks Drive
Capitol Heights, MD
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Foreclosed Sale Example
Client:
Mike Hardy
Market Value:
Purchase Price:
Savings:
Percent (savings):
$104,000
$ 48,000
$ 56,000
-54%
Devoe Avenue
Euclid, OH 44123
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Foreclosed Sale Example
Clients:
Anonymous
Market Value:
Purchase Price:
Savings:
Percent (savings):
$135,000
$ 73,900
$ 61,100
-45%
4740 Grasset Avenue
Charlotte, NC
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Foreclosed Sale Example
Clients:
Jackie and Tim Benson
Market Value:
Purchase Price:
Savings:
Percent (savings):
$180,000
$135,000
$ 45,000
-25%
21625 Palmer Court
Robertsdale, AL
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Foreclosed Sale Example
Clients:
Jim and Patricia Fogarty
Market Value:
Purchase Price:
Savings:
Percent (savings):
$670,000
$485,000
$185,000
-28%
653 and 655 Lisbon Street
Daly City, CA
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Foreclosed Sale Example
Clients:
Vale and Deidra Bacon
Market Value:
Purchase Price:
Savings:
Percent (savings):
$295,460
$225,000
$ 70,460
-24%
3063 Sweetgum Way
Saint George, UT 84790
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What Did We Learn Today?
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Only a SMALL % of short sales close
Bank is not motivated to sell home in short
sale. No timeline required
Sheriff auctions are risky:
 Bidding starts at mortgage owed
 No inspections
 Need cash
Purchasing foreclosed homes correctly
results in lower purchase prices vs. short
sale or sheriff auctions
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What Did We Learn Today?
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All foreclosures are NOT good deals
Extensive market analysis need to be
completed to determine market value
Significant amount of time is required to
find the home
Knowing WHEN to submit an offer will
affect the price you pay
HOW you submit an offer will determine
if the offer is accepted
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What Did We Learn Today?
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Banks can be difficult to work with
Potential risks for unknown repairs – no
utilities/inspections
National Lender with experience in
foreclosures is a must
$100 per day fine for missing closing
date
Lose earnest money if transaction is not
completed
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What Did We Learn Today?
We also learned that Foreclosed
opportunities are everywhere
BUT
They must be purchased correctly
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What Did We Learn Today?
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Do you see why a Real Estate Agent
specializing in foreclosed properties
could easily be the #1 reason you will
succeed or fail in buying foreclosed
homes?
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Real Estate Agents Must:
1.
2.
3.
4.
5.
6.
7.
8.
Have experience in buying foreclosed
homes
Find the best deals in the local market
Find the best quality homes
Know when to make the offer
Know how to make the offer
Know how to negotiate – counteroffers
Know how to handle home inspections
Be able to time the purchase closing $100 per day if they don’t.
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The Buyer Must Realize
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The Process of buying a foreclosed home is
completely different from a traditional home
purchase.
Prior to last year, only a handful of real estate
agents ever purchased a foreclosed home.
Investors only bought foreclosed homes prior to
2008.
Currently there is a huge foreclosed home market
and some real estate agents are advertising the
market. However, most of these agents have
ZERO experience buying foreclosed homes
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Would You Let a Foot Surgeon
Perform a Brain Operation on You?
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Our Real Estate Network And
Foreclosed Properties
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We have engineered our foreclosure search
process and market research around timing. The
critical points on the timeline are crucial in REO
negotiations.
We are able to save our clients a great deal of
time, frustration and money.
Most foreclosure lists are not built around the
best timing for buyers. You get sent on a wild
goose chase.
Experienced Lenders
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Our Real Estate Network And
Foreclosed Properties
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You can probably tell that the foreclosure
crisis presents enormous opportunities
for those who take action.
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Here’s a serious point for you to answer
about investing in a foreclosed home today…
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If you do, will you be better off in a few short years?
Or
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If you don’t, will you be kicking yourself for standing
still today?
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Are You Ready?

If you are ready to take action and capitalize on
this tremendous opportunity, then our team
might be able to assist you.

So if you are ready, then you should take the
next step and together we’ll see if this is right
for you.
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We have a simple and short process…
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Next Steps

Reply to the email that was sent to you
regarding the call in details for this
class and include a note stating that
you are ready to take the next step.

Be sure to specifically include all of the
information on the next page for our
team’s review.
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Next Steps
Reply to the email and include the following:
Contact Information
First and Last Name:
Address:
Phone 1 (best):
Phone 2 (cell):
Fax Number:
Questionnaire
1. Are you interested in a primary residence or investment property? (Pick one)
2. What is your time frame for purchasing a home? (Pick one from below)
Next 3 Months 6 Months to 12 Months 12 Months or Later
3. Are you Pre-Approved with a lender? (Yes or No)
4. Have you purchased a foreclosed home before? (Yes or No)
5. Have you owned a home any time in the last three years? (Yes or No)
6. Other comments (Please add is needed)
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Next Steps
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Once your information is received, you will be
contacted by a team member shortly.
Our team member will consult with you to determine
if this is right for you.
If so, we will schedule a One-on-One Consultation
meeting with you
At the meeting we will:

Review your goals, buying criteria, & time frame
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Set personalized searches & tours focused on
your buying criteria
Help you get Pre-Approved with mortgage lender
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Next Steps
Important Notes

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Please know that we can’t guarantee that
every applicant will be accepted as a client.
Register immediately because client spots
are limited.
If you apply at a time when client openings
are not available, we will put you on a
waiting list.
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Thank You
Enjoy Your
Big Profits!
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Next Steps
Reply to the email and include the following:
Contact Information
First and Last Name:
Address:
Phone 1 (best):
Phone 2 (cell):
Fax Number:
Questionnaire
1. Are you interested in a primary residence or investment property? (Pick one)
2. What is your time frame for purchasing a home? (Pick one from below)
Next 3 Months 6 Months to 12 Months 12 Months or Later
3. Are you Pre-Approved with a lender? (Yes or No)
4. Have you purchased a foreclosed home before? (Yes or No)
5. Have you owned a home any time in the last three years? (Yes or No)
6. Other comments (Please add is needed)
67