The Do's & Don'ts of Buying Preforeclosures

Cassi DeHaas and RJ Bates III from Titanium Investments break down what to do and what to avoid when trying to help a seller during preforeclosure. They go into detail in regards to buying a property subject to the existing mortgage, when to utilize a short sale and the magnitude of wholesaling a preforeclosure. Remember, if you love the format of these episodes we don't know unless you leave us a 5 star review and click that subscribe button!

For the best Skip Tracing in the industry go to https://titaniumtrace.com/home

To join the #1 Online Real Estate Mastermind visit https://nextlevelflipping.com/

For more video content from Titanium Investments subscribe at http://www.youtube.com/c/RJBatesIII

Connect with Titanium Investments at https://www.facebook.com/titaniuminvestments/

Transcript

spk_0:   0:01
It's not real estate investors, entrepreneurs and agents. You're in the right place. Unlocking the secrets to real estate investing in entrepreneurship. Welcome to the Times Young Vaults hosted by R. J. Bates The third years. Hey, guys, Welcome to the titanium vault. I'm your host, R. J. Bates. Today I'm with my partner, Cassie dos, Are you fantastic? So today we are going to talk about the importance how to handle a cellar in pretty foreclosure and fully understanding the different strategies and when you should use those and when you should avoid those. So the first strategy that I kind of wanna touch base on because it's become this new trend be, um everybody's talking about it, and I think everybody's trying toe utilize it as best as they possibly can is subject to, um if you're not familiar with subject to this is probably not the best video. If you don't watch, there's probably, ah 1,000,000 other videos on YouTube. Oh, our podcast on iTunes to go listen to to learn when a subject to is, we're just gonna assume you already know what that is in this episode. So the reason why bring this up is because subject to is a very powerful acquisition strategy, right?

spk_1:   1:37
Correct. It is an acquisition strategy, not a disposition strategy. And I say that a lot.

spk_0:   1:44
So the reason why we bring that up is because what we've been seeing is is a lot of wholesalers going to a seller's house in pretty foreclosure, where Foreclosure Day is already said, and they are essentially selling the seller that is highly distressed on the fact that they're going to solve their problem, right? We don't buy houses, we solve problems, and they're gonna take this property subject to the existing mortgage. But in all reality, what they're doing is is they're trying to get it subject to, then wholesale

spk_1:   2:26
it right, and that's where it can become convoluted. Um, I think that what I've seen a lot of, um, that I've noticed is if you are not running like you, you have different strategies, exit strategies, disposition strategies. If you're gonna take it down, subject to and you're going to catch up, what is in arrears? Good on you. You have a contract that you're going to perform on. But if you are going to try to sell it subject to That doesn't mean the repairs don't help. Um, if your buyer is potentially an owner, finance or landlord, um, that doesn't mean the repairs don't count. And I see a lot of people running their numbers just like they went on a wholesale and putting it out there where, you know, you can take this down subject to they don't have sub two amendments and our agenda mes in place. They don't have, um, you know, even sometimes the correct payoffs in place, they don't. You know, it's good to have multiple exit strategies, but if you're running your numbers on a flip, it looks different than an owner Finance than a rental. A cz faras the repairs for your buyers. So if you're putting it out there, Um, and just saying it has, like, a very low, you know, repair estimate. Um, and it's all inclusive repair estimate. Um, your buyers number one aren't gonna go walk a house and see foundation and you no need for remodeling and want to take it down a za flip. They're not gonna want to take it down as ah, as an owner, finance, probably for those numbers. So your numbers are off number one. Number two, you're putting the if you're not running your number, right? Even if you do sell it, subject thio and your wholesaling it and they're about to get foreclosed on. You're putting that cellar at risk, so there's a point in time where it comes up, which I don't want to get into, like running your numbers right, that kind of thing. But you're there's a point in time that comes up where you're you're risking the sellers potentially being foreclosed

spk_0:   4:52
on. Exactly. And here's another aspect of this that I don't They, a lot of people contemplate, is, is that even if you're able to wholesale this subject to and the numbers are not accurate, you were still putting that cellar at risk because you're essentially putting your buyer at risk, and that buyer can then turn around and say,

spk_1:   5:18
I can't close on this for the numbers you gave

spk_0:   5:21
or they could close on it and then say, this asset is not performing. And look, there's a shady People in this world walk away and say, Hey, I'll lose the money that I caught up that was in arrears or maybe even a little bit of rehab, but the mortgage is not in my name. I'm not getting foreclosed on and then walk away and still put that cellar right back in the same position. So very important to understand that here is probably the most important part of all of this, that I want everyone to understand when it comes to subject to and in stopping a foreclosure. A subject to is not an acquisition strategy for a property that is upside down. It is not a substitution for there's no equity. But if I get it subject to now, suddenly becomes a good deal. That's not the case. That's what a short sells. Therefore, okay, a short sell is there for when a seller falls on hard times. They have some kind of personal or financial distress, and there's no equity or even negative equity in the property. That's when you go to a short, so expert lightning course. Spinoza. There's many others across the country, and they can turn that deal and negotiate with the bank and turn it into where you need it to be.

spk_1:   6:48
And that all goes back to also knowing your numbers, which again I'm not getting into. But knowing your numbers and knowing howto run a property like properties in perfect condition, you can actually hold till it cool. Um, but you have to know your numbers to know if it's a good if it's upside down, right? So know your numbers is like, really important before you get into some of these different strategies. So that's step one. Um, and I see a lot of people out there that just don't know their numbers because they're not landlords, because they're not people who have done on our finance. They're not people who have done flips. Um, so it's really important for you out there, asshole sailors, um, to keep, you know, staying in business, to know how to run your numbers. And then another thing I really want to talk about is like your strategies, um, to stop the foreclosure, because if at the end of the day you as a wholesaler completely intend thio catch up alone and close on it yourself. Cool. Do whatever you want, but if you're not planning to do like, you know, let it go until UK. Until that date comes where you have to catch up the loan If you don't sell it, you're gonna catch a phone. But if you're not going to do that again, it is. I mean, I hate to be cut through on public for him, but it's unethical like it's not okay, you're This is this is their life, You know, they're only gonna buy so many homes. Um,

spk_0:   8:28
but but here's the other aspect of this and not to beat a dead horse on subject to but subject to is a is an advanced strategy from just a cash offer. Um, you have to understand how to fill out the paperwork correctly, like you need to understand that there needs to be a purchase sell agreement. There's a Lord D D. There's a power of attorney. And then there's other Denham's as faras the insurance notifying the mortgage company. And we have seen numerous times where this information is filled out incorrectly.

spk_1:   9:03
Letter to the insurance. It depends on your actual purchase agreement, whether you need a sub too attend. Um,

spk_0:   9:11
we've seen people trying to take ST propagated contracts and just mark them up and turn it into a subject to agreement of some sort. Um, where it doesn't even make sense that you're essentially putting down that you're buying the house for nothing more than what's in the readers. Um, and in all reality you as the wholesaler, they didn't really think that they were screwing over the cellar. But they are, and the seller doesn't know any better, right? Because what we go into the house where we say we're the expert in this situation and we could solve your problem. If you're not an expert or you don't fully understand, there's plenty of people out there. There's free content and there's mentors out there. I know we live in a day and age where everybody gets roasted for education or being a guru, But there are really smart people that have done hundreds and thousands of subject twos really know what they're talking about, that have programs that have courses that will walk you through that will even know the specific laws for your state on how to do a subject to correctly. It's very important that if you want to utilize this acquisition strategy that you get educated in this and you know how to do it correctly because you could be really doing something unethical, and not know it right and and fully not understand it. I think Daniel Moore from Propel Leo says it best where he says there have been times in his career where he he literally did illegal activities unknowingly because he just wasn't educated and somebody told him how to do something on a free YouTube video, and he didn't know any better. And then looking back at it was like, Dude, he was actually doing something illegal like he could have gotten in a lot of trouble. It'll paying out for him. But you don't want to look back 35 years from now and realize you're doing something incorrectly,

spk_1:   11:07
right? I mean, nobody's perfect. Everybody's gonna have those moments and I mean, we've even had those moments where we just, uh, for lack of a better word, put it. We're ignorant as Thio. Other factors that went into how we structure it a specific deal, for We've been very fortunate that we haven't had a lot of those moments were both kind of education junkies, but we're also would be put this content out not because we're trying to be gurus, but because we really just want to have that out there in the space. You know, we're located in D F W as well as other markets. And I think that, you know, it's very important for us to put that out there. You know, like there's people. There's a lot of people who, you know, they get in for quick money. Um, they become wholesalers, and then they started learning just the surface level knowledge of some of these strategies. And then they go and they put them into play because they think that it's probably the best solution for a specific seller situation. Um, and I would just encourage you guys if you have not, um, done a lot of those because, yeah, there's trial by fire. But you you have people out that that put content on that put free content out. Um, and I'm really big on, you know, Ask those people if you have to j v the first couple ones or, you know, pay Emma fee to help you help him help you with through the transaction. Whatever it costs. Just to make sure you're protecting your business and you're protecting your cellar,

spk_0:   12:48
right? And why is this topic important, right? it's because pre foreclosures are the low hanging fruit of of motivation. When it comes to buying houses right, it's the easiest. It's like, you know, these people they haven't issued that needs to be solved. And so a lot of investors are gonna go after pre foreclosures. A lot of wholesalers are going to go after pretty foreclosure. So what are the ways that you can solve this issue right? You could make it cash offer, and this is good if you plan on taking it down or wholesaling. But if you plan on wholesaling it, but you have to understand the magnitude of that decision, which is these people are entrusting their credit and their future moving forward financially in your hands. You have to take this very seriously, so you make a cash offer. You can also do subject to but again the importance of understanding that decision. You need to be prepared to take that down yourself to catch up the arrears, to make that monthly payment

spk_1:   13:55
and to have run your numbers correctly right,

spk_0:   13:58
because even if you plan on selling it as a subject to you need to understand what is the exit strategy for your

spk_1:   14:06
buyer because subject again, subject to is an acquisition strategy. That's it. Is there to help the cost of the loan? It is there to help the cost of the acquisition. It is they're

spk_0:   14:19
cheaper money. You probably don't have to pay a e. I mean, you're avoiding the origination points of your take down hard money or even sometimes private money help save on some of the closing costs. This is why subject? Who is attractive for a buyer.

spk_1:   14:33
It's also attractive for a cellar because that arrears gets caught up and you know they look better on paper. Um, you know, you you wanted usually do it more short term than some people plan Thio just depending on the situation. But without getting into, like all of that, that's not your exit strategy.

spk_0:   14:54
Here's the crazy thing. I've actually seen people try to wholesale subject twos where they had not even open title yet to see if that was if the mortgage was the only lien on the property. But you have to open title. You have to check to see if there's multiple leans. What is on this property? Really, it is a acquisition strategy that. Yes, there are still steps that you have to go through. It's not a simple as get them signed two or three documents and it's over.

spk_1:   15:27
And you'll even ask sellers a lot like this is like a really good point that you brought up. I can't believe I didn't bring it up myself. But so when you run title like we've actually had this happen where we have the perfect sub to prop, right? Like we're like, Oh, this is golden. We run title on it. They had already told us they had not done a loan modification. They did not have any other lanes. And lo and behold, they had a $30,000 2nd mortgage on the property. Essentially, they had another lane because they had tried. They had done ah, lone mud. And that changed the entire, you know, strategy for that property. Like there were off like most of our options were completely unavailable because it was not like something that could sustain a 30 $30,000 additional purchase. So, um okay, people don't realize those things are vital. Thio, actually. And then what situation are you in? You ask the seller they said no. Well, it's the seller's fault. You're going into a situation where the sellers are distressed. They don't know what you're supposed to know. You're supposed to be the expert. You're supposed to make sure that that's actually able to go through. And while you might be able to say, Hey, I've got to make a couple of you know changes to this it's not to discourage you from, you know, using this strategy. It could be very powerful, but no. What? You have to know if you're gonna go into it because your buyer is gone of the door if you get a $30,000 additional lean

spk_0:   17:08
so cash offer subject to. If you're looking at a property subject to and you run the numbers and it doesn't work as a flip, it doesn't cash flows of rental, and it's in a higher price point the most owner finance, Then it's not a good subject to, and he probably can't make a cash offer. So what's your last option? It's a short sell. That's what a short sell is there for. Negative equity situations, no equity situations. The house needs repairs.

spk_1:   17:39
The seller is financially distressed.

spk_0:   17:41
That's when you utilize someone like the call Espinosa the shorts. Oh, Queen. You put them in contact. She stops before closer. She negotiates it down to your price point most of time when we turn things over to Cole, we will. Didn't say. You know, for example, uh, to buy this house, it would have cost $150,000. Take it subject to and catch up the arrears. Maybe we want to purchase it for 80,000 Children negotiated down with the bait to get it as close to that number. It's possible for us

spk_1:   18:13
we may not even get the property. A couple of other quick points that I do want a highlight on before we, you know, take off. Here are a lot of people when it comes to pre foreclosures, which is actually what? This what this whole topic is about Not necessarily sub twos. But, um, you know, you hear of strategies like people finally bankruptcy or um, filing a temporary restraining, aren't you Order or T r o um, or filing filing? A lot of times, banks will agree. Um, Thio, if you if you give them a purchase contract. Um, and a proof of funds. Usually, um, you know, they'll they'll give the cellar time, 30 days, whatever it might be in, depending on where you are. And some of these things might not be possible where you are. They are here in Texas. Um, and people think, Oh, well, I'll just do that. Or I'll tell the seller to do that, and, um, then I can help them. Then I can close on the seal or I can hold. So still, I want you guys to understand a couple of things that I'm noticing also, that people don't necessarily understand. You're not an attorney. You're not an attorney. You should not be advising people to file bankruptcy if they already know about it. And they say, um, well, I know I can file bankruptcy and at least get this stopped. You just you do not want to mess with that. You do not want to put your business at risk over one deal? Um, if that is their strategy and you purchase the property, that's on them. But it is fraudulent activity. If you are filing bankruptcy, um or at least I think it is like if you're if you're doing something knowing you don't have the intent to follow through with it. That puts you at risk. Let's just say that and I'm not an attorney. But that's kind of the way that I've always looked at it with our business. If we're not intending to actually follow through with it and cannot prove that we're intending to follow through with it than you don't want to perform that action, right. So filing, um, a contract that you absolutely intend or a temporary restraining order You. They go and file one on a contract that you absolutely intend to close on, and perhaps you do wholesale it. But if you can't hold sale that you know, you have to take that down. That's completely different than knowing that you're not able to close on the property or you're giving legal advice to a seller. Uhm, you just you don't want to run into those things. And with a lot of, um, we're in a market that has a lot of, um, for lack of a better way to put it, people who are a little bit green, um, other newer to this other newer to these strategies and their wholesaling and they just think, Oh, well, I know how to stop the foreclosure. This is what you do. Just just protecting your business and protect yourself in and continue to, um, gather that knowledge. It was really funny. I think the first time that somebody actually filed that we actually had Ah, contract file or t r o I can't remember which one. It waas um we had to call one of our friends and they were like, You've really never file I'm like, No, because I've never had to because I just don't go into, like, we go into it with a strategy that it's it's closed. And we we don't really have to file those things. We make sure that, you know, that's that's on the cellar, you know, at that point in time, So my point being, um don't act is an attorney Protect your business, protect the seller. Uhm go in two strategies with full intense on actually using them or taking them down yourself. Um, because at the end of the day, that one little hole selfie, is probably not worth putting your business at risk. We're getting sued or losing your business or harming your entire

spk_0:   22:30
team, right? So the reason why we bring these things up because these air strategies we like to utilize in our business we don't want to see these strategies go away. Yeah, like these options here in Texas really difficult to be done. You know why? Because people that didn't know what they were doing screwed it up for the rest of us and it was abused. So we don't want that to see happen. Was still a financing owner financing subject ooze. We don't want to see legislation come down, okay, And we want people to understand that there's the right way to do these things. And then there's the wrong way to do these things. We just want to bring lights. That and honestly, just educate yourself more. Take This is serious, as you would want someone to take it. If you were signing your mortgage over someone subject to or if you were in foreclosure and you had a week left before your house was about to be auctioned off and they came in, said they were going to solve your problem, would you really want to see that blasted all over Facebook groups and email and say, Wait, that person's actually not solving my problem. They're actually just trying to sell my house to someone else for a feat. But we love wholesaling, Yes, but there's a time and place for it, and you need to make sure that you're prepared and you have the capability to take care of these people when they're in this situation. Okay, so no harping on that subject.

spk_1:   23:59
We're here. We're, ah, last point on it. You know, we're and we're not giving you all the information that, you know in this, like, short little video. Like to be clear, you know, we're not attorneys. We just no, like there's a better way to go about it. And we want people to make sure they educate themselves. Go and go to all the different resource is you can tow, learn about all the different points of this. So

spk_0:   24:23
right, so a couple of exciting things that we want to announce on it. Last week, we announced with Dutch Jackson We have new podcast called the titanium underground. It's officially out now. Um, so check it out. We're live on Spotify titanium underground. You could check it out, will be live on iTunes. Assumes apple get sir stuff together and makes us live. But titanium underground. We've already got two gonna have three episodes later today. Up and ready for. You guys gonna be quick 10 15 minute episodes, Just sitting a couple of topics and really just getting out there with the people that are out the field, grinding away and trying to make generational wealth for them and their families. Okay, Uh, that's our episode today, guys. Hope you enjoyed it a little bit different, and we kind of came on a little bit strong, but eight. That's who we are fascinated with. You guys enjoyed it. If you're listening on iTunes, right, we only like five star ratings, right? What could they do with those four blows our ratings? They can give them

spk_1:   25:26
to someone else, someone else? Be nice.

spk_0:   25:31
Only give us five star ratings. Make sure you subscribe for all future notifications of episodes you're watching on YouTube. We love the thumbs up. Make sure you subscribe and hit the bell for all notifications. Alright, guys, we'll see you all next week. Thanks so much for listening to the titanium vault with your host our Jane base that hurt more imposing. To stamp the date, visit www dot podcast on the titanium vault dot com and on facebook dot com slash the titanium vault. He enjoyed the episode Please rate in review and we'll catch you next time.