Archive for September, 2009

Loan Modifications – The Top 5 Myths


Loan modification is quickly becoming a household word, commonly used and understood by almost everyone. And yet there are many misconceptions and myths about home loan modification that are still commonly held.

Home loan modifications have always been around, but most people don’t even know they existed until recently.

Here are Top 5 Myths that we consistently hear from our clients and various seminars:

Myth #1: You have to be late on your payments to get a loan modification.

You do not have to be defaulted on your mortgage in order to be granted a modification. You need to prove to your lender that you are in imminent danger of defaulting because of your financial situation.

Myth #2: Lenders would rather foreclose than modify your loan.

Not true! Lenders lose a lot of money whenever a house is foreclosed, especially in today’s wilting housing market. They have so many foreclosures on their hands right now that they definitely would rather adjust your loan terms and see successful payments. In fact, this is probably one of the best times to get a loan modification, especially after the passing of the President’s Making Home Affordable plan.

Myth #3: Loan modification will hurt my credit.

It really depends on the type of loan modification you get, but in general modification will not hurt your credit. Furthermore, you aren’t required to have good credit in order to obtain a loan modification. Just a steady job and proof of economic hardship should be sufficient.

Myth #4: You can easily get a loan modification by contacting your lender.

While you’re free to try it, going it alone is not advisable. Use a financial counselor to be your advocate. Choose a counseling company with legal representatives who will work for you and know the laws better than you do. Letting them work it out with your lender will get you the best solution.

Go to for Loan Modification services.  Click the large button that says, “Click here to save your home now!”  Complete the contact form so that a financial counselor can determine if a Loan Modification is right for you.  And there is no obligation whatsoever when you submit the contact form.

Myth #5: If you already received a foreclosure notice, it’s too late.

Again, foreclosure is not a profitable option for lenders. They send these foreclosure notices out not because they want to foreclose on your house, but because they want to impress on you the importance of paying up. While waiting until you’re extremely delinquent limits your options for modification, it certainly doesn’t preclude modification.

Stopping the foreclosure process on your home can be done with loan modification. There are a lot of myths about home loan modification swirling around homeowners right now, but knowing the facts can help you to stop foreclosure and keep your home.

Feel free to peruse the Backyard Home Help Center for more information and/or to request for a no obligation consultation and see if a Loan Modification is right for you.

Original article from Lindsey Emery.

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How to Become a Real Estate Investor with No Money and No Credit


Yes! Believe or not… You can become a real estate investor even in today’s real estate market.

There is an old Chinese proverb that says, “Where there is Chaos there is Opportunity“.

The time to get into real estate is NOW. During the depression more millionaires were created in that time than anytime before and the opportunity to create great wealth has come around again.

In just 6 very simple steps, this is how to get your piece of the pie.

Step 1:

Find a property. This can be done by walking around your neighborhood. It’s always best to start close to home. There are a number of ways to do this but this is the easiest.

Step 2:

Due Diligence is extremely important. Do your research on the property. You can do an online search to find the owner or you can use a paid search service if your budget can handle it.

Step 3:

Contact the owner, talk to the owner, listen to the owner and get the house under contract.

Step 4:

This is where your no money or credit not needed comes in. You can take the contract to an investor who has the money or credit and sell your position as principal for a fee of $500 to $5000. This was all done with you not having any money or credit.

Step 5:

Make sure you do your research on the property because this is going to tell you whether or not you have a deal. Remember, it is the deal you are selling and if it doesn’t make sense it will not sell.

Step 6:

One of the most important factor in your becoming a successful real estate investor is your mindset. If you are still thinking like an employee who is looking for approval and asking for permission to succeed, then you will never get there.

Suggested reading: Bubble Proof – Real Estate Strategies That Work in Any Market by Tonja Demoff.


This is a resourceful book to get your mindset prepared and aligned with your goals as a real estate investor.  How to think like one…breathe like one… make money like one.  Give special attention to the chapter, “Equip Yourself with a Millionaire Mindset”… it’s eye-opening.

Important Tips to remember:

* If you can find an experienced investor to consult with before you find the house, this will make it easier.  Join a real estate investment group, such as your local Millionaire Mentorship Challenge.  See below for more details.

* This way you get paid to become a real estate investor – making money while you learn the ropes.

* Always know your ARV – After Repair Value – so you know whether or not you have a good deal.

* This is not easy to do but once you have completed your first deal, you will gain more confidence.

* Don’t let the mistakes you make stop you from moving forward.

* Learn from your mistakes.

* If you can learn from a mentor or someone who has done it before to hold your hand and walk you through the process this will always be best.

* However, there are many who have done this without assistance and bumbled through it without a mentor and was still successful. They just learned from their mistakes and did not make those mistakes on their second deal.

Check out the Millionaire Mentorship Challenge.


An intense 10-month program for real estate investors who are serious about transforming their lives through real estate investing and creating a rewarding, profit-generating business.  This would be a perfect group to belong to when you are fairly new to the world of real estate investing.  You would be able to network with like-minded people, receive continual guidance and discuss deals with many investors in their own stage of investing.

Original article by Simone Hardy.

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The Backyard Wealth founder – The Truth

tonja demoff

When you meet me, if your first and immediate impression is, “Tonja certainly doesn’t sugar coat much of anything,” I will compliment you for being an excellent character judge and personality analyst. Camouflaging or bending the truth has never been my approach, simply because I don’t believe that adding a sweetener profits you in any way, manner or form. And I am certain that sugar coating the truth serves neither me nor the planet.

Instead, I believe in educating and speaking to my audience. My intention is to let them hear what nobody else is saying about real estate – the flip side, the uncoated truth, a.k.a. reality. I believe that if you have done your homework, researched your project and gathered all the correct facts, you are in an opportune position to make a conscious choice to select an option that will benefit the entire family. This is why all my training programs and seminars are down to earth, basic and interactive. Each one is designed to show you how to attain your objectives.

So, the burning question remains: How did I do it?

Tonja Demoff

Tonja Demoff - Founder of Backyard Wealth

Many people ask me how I amassed my success and wealth, as if it just required a yes or no answer.

Honestly, I just can’t give you either a full description or a cut and dry answer regarding how I did it. The question seems so difficult to answer. I really have to pause a moment to think! And maybe that’s because at first, I did it by following my heart and my gut!

However, I will assure you that I know what it’s like to be so broke that you look forward to happy hour just to get a bit to eat! On the other hand, I also know what it’s like to be so wealthy that I can jet from coast to coast just for dinner.

My professional journey has taken me from flat broke to the acquisition of multi-millions in a very short period of time and has taught me how to amass great wealth from nothing. I know this works because I have lived it and I have done it. I also know that you and I share some remarkable similarities; we both have an interest in real estate and believe in being informed by keeping up with market news and trends.

To get back to the “how” – you know that it involved working smart even if at first it was hard. And it was hard because initially, change is usually difficult until it just isn’t anymore. If you really want to do it – if you’re passionate about doing it – you will make the necessary decisions and take the required action to help you attain your objective.

Once I had acquired the knowledge I needed, I knew that to succeed, I had to put into action what I had learned – this was my “how” process. I shared a few examples in my book, “The Casual Millionaire“, but don’t forget to ask the “why” question. This is the essential link to achievement because without a strong and valid reason to do it, you will neither set nor take action on an intention – that is the “why”!

The greatest thrill in my life is to watch my clients achieve their objectives and climb to success; that’s what my Big Win chapter in my book is all about – You!

Excerpts from Tonja Demoff’s book – The Casual Millionaire: Wealth by Intention.

Casual Millionaire book

You can get a Free ebook of The Casual Millionaire here.

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Short Sales – The Nitty Gritty

house short sale

What is a short sale?

A short sale occurs when the net proceeds from the sale of a home are not enough to cover the sellers’ mortgage obligations and closing costs, such as property taxes, transfer taxes, and the real estate agent’s commission. The seller is unwilling or unable to cover the difference.

Some — although by no means all — short sellers may also be in default on their mortgage loans and be headed for foreclosure. However, home owners who bought at the top of the market or who took out large amounts of equity with a refinance and who now need to sell because of divorce or job transfer may also find themselves upside down, owing more than the home is currently worth when closing costs are factored in.

How do I know it’s short?

A real estate agent can run a  CMA (a comparable report) for you as  your first indicator.  You also need to know what the outstanding debt is and calculate the cost associated with a sale — from transfer taxes to commissions. This will give you an estimate of the net proceeds that will be realized. This information can then be entered into a HUD-1 Settlement Statement to calculate out the final, negative result at closing. Some lenders also have their own forms.

Check with a title company and the lender to get exact figures on closing costs and loan balances and to find out what procedures they have in place. If they can afford it, you should also consider getting a home inspection to determine what repairs are needed on a home and how this might affect its value.

What information will the bank need to decide whether to accept a short sale?

The short sale department of your bank will outline the items they need from you for the short sale package. The  package usually includes W-2 forms from employers (or a letter explaining you are unemployed), bank statements, two years of tax returns, and other financial documents outlining income and debt obligations. The bank will also request a hardship letter from you explaining the reason why you need to short the sale. The bank will also need comps and will conduct an appraisal or broker’s price opinion (BPO) which will show an estimate of value.

What are the options besides a short sale?

Thanks to programs such as those proposed by Fannie Mae and Freddie Mac to assist subprime borrowers, many lenders are more willing to offer loan modification options. This option can extend the term of the loan, add on delinquent payments to the loan principal, and/or reduce the interest rate to make the loan more manageable for the home owner.

Another option is a repayment plan that requires home owners to increase their monthly payments until the loan is current, says Loni Parmelly, a real estate practitioner and consultant who specializes in short sales. Parmelly also is author of Success in Short Sales (2004), a book she sells on her Web site. It may be possible to refinance an adjustable rate loan with a Federal Housing Authority or conventional fixed loan. Note that lenders will not postpone a foreclosure just because a property is listed, although they may postpone if you have a reasonable offer in the works.

How should I price a short sale property?

In general, most short sale experts say to price the property at or near fair market value, although a few will begin with the total payoff amount owned by the seller. How frequently prices are dropped will depend in part on whether the property is in preforeclosure. Most banks have a formula for what percentage under market value they will accept, say interviewees. Figures cited vary from 8 percent under to almost 20 percent under.

Most lenders will want to get a broker’s price opinion or even an appraisal to see what the property is worth before you and seller set a list price.

How long does it take to complete a short sale?

Although response times vary from lender to lender, it can take as long as 90 days to receive an approval of a short sale from a lender. That’s why it’s critical that buyers and their representative understand and accept that time frame before they make an offer.

What can my real estate agent and I do to make a short sale more attractive to a lender?

Getting a lender to approve a short sale is primarily a question of economics. You have to provide hard numbers to show that the amount of money a bank will realize on the short sale is better than the amount it may recoup from foreclosing on the property and selling the property as an REO.

A buyer that is willing to close in 30 days and who can make a substantial down payment may make the deal more attractive than a buyer who wants 95 percent financing.  All buyers should be preapproved for a mortgage before submitting the offer.

What are my options if a short sale is rejected by the lender?

There are a variety of reasons a bank will reject a short sale — from too low a price to too many files on the loss mitigator’s desk. You can look for another buyer or even try resubmitting the same contract. “Banks don’t want to take properties back in foreclosure, so they are going to do everything they can to make it work,” says Pierce. You also need to prepare your seller in advance for the possibility of foreclosure if a short sale fails, says Parmelly.

A short sale might be rejected if the loan is less than a year old. In such cases, the servicer that’s bought the loan can often require the original lender to buy it back.

What financial or credit liabilities will I have as a result of a short sale?

Many lenders ask sellers to sign a promissory note for all or part of the difference between the proceeds of the short sale and the debt obligation as a condition to a short sale. In such cases, the note gives lenders the right to sue a seller and attach other assets if the note is not paid when due.

It’s particularly important to understand this distinction if you work in states such as California that have a nonrecourse mortgage, says Churchill. In such states, the lender cannot pursue a deficiency judgment against a seller for any deficiencies after a property is foreclosed. Because of this distinction, sellers who are already in default on a mortgage and do not have the resources to pay off a separate promissory note after a short sale might be better off letting the lender foreclose, he says. If you are working in a state in which mortgage loans are nonrecourse, be sure and alert your seller-clients to this distinction.

Having a portion of a loan forgiven may have an adverse affect on the seller’s credit. Encourage your client to try and sign a lease on an apartment before credit is further damaged, suggests Roberta Murphy, an associate broker with Windermere Exclusive Properties, San Diego.

What tax liabilities will a seller have as a result of a short sale?

One often overlooked aspect of short sales is that a seller must count any amount forgiven by the lender as income and pay taxes on that income, even if no actual money was received. The IRS requires lenders to submit a Form 1099 stating the forgiven amount. Sellers who meet the Internal Revenue Service definition of insolvency (either in bankruptcy or with debts exceeding assets) will not have to pay taxes on the forgiven amount.

The U.S. House of Representatives has introduced the Mortgage Cancellation Tax Relief Act (H.R. 1876), which would eliminate taxes on any debt forgiven on a principal residence through either short sale or foreclosure. The NATIONAL ASSOCIATION OF REALTORS® has been working to support this bill.

Original article by Mariwyn Evans.

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Hump Wednesday Funnies


Visit our collection of Backyard Wealth Funnies for more laughs.

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Subject-To’s vs. Wraparound Mortgages – What’s the difference?


Many investors have asked me to explain the difference between “Subject-Tos” and “Wraparound Mortgages.”

Both are very useful types of financing that can help you get a deal done when conventional financing isn’t possible, without having to use expensive hard money.

Subject-To’s (short for “Subject To the Existing Financing”) are deals where the buyer purchases a property subject to the existing mortgage. The buyer will acquire the property and take over the payments of the existing mortgage. The seller and buyer will make an agreement and the seller will hand over the payment booklet to the buyer. There is no new mortgage. Subject-To’s are often used when the seller is behind on their mortgage.

In other words, when you purchase a home subject to real estate, you are responsible for the payments on the loan. The seller will deed the property over to you, so you will officially be the owner of the home, but the mortgage will stay in the seller’s name.

You are offering them a way to sell the home, pass the loan to you, and take some cash away from the deal. They will have concerns about their liability for the loan, so you may have to set up a payment system that allows them to monitor your prompt payments. You can also assure them that your investment, the down payment, is something you don’t want to lose by going into default.

One thing to be aware of when buying a property Subject-To is the Due-On-Sale clause. Most mortgages have a due-on-sale clause that states the balance of the loan is due if the property is sold. Normally, this would mean the seller has to payoff the loan when the property is sold. However, banks rarely enforce this clause. As long as the mortgage is still being payed, the banks are usually happy. Remember: banks don’t want homes to go to foreclosure, as they are not in the business of buying/selling real estate. So, while you need to be aware of the Due-On-Sale clause, it usually isn’t an issue.

A Wraparound Mortgage or a Wrap (can also be called, All Inclusive Trust Deed (AITD)) is commonly used when you sell a property that you have an existing mortgage on and are willing to owner finance. You set the terms of the new loan so that the buyer is making you a monthly payment that is higher than your current payment on your existing mortgage. Therefore, the buyer is making you a payment which you will use to pay your mortgage, thus the “Wraparound.” The difference between their payment and your payment is your monthly cashflow.

Here is an example:

The Smiths have a $70,000 mortgage on their home. They sell it to you for $100,000. You pay $5,000 down and then borrow $95,000 on a new mortgage that they grant you. This new mortgage “wraps around” their original $70,000 mortgage because there are still payments to be made on the old mortgage.

So, what are the main advantages to you as an investor?

The first is leverage. Here’s an example to illustrate how you gain leverage with a wrap-around mortgage:

Assume that the Smiths original $70,000 mortgage has an interest rate of 6%. Assume the new $95,000 “purchase money” mortgage has a rate of 8%. The Smith’s “equity spread” is $25,000 ($95,000-$70,000) and they will earn 8% on that portion. But, the Smiths also are earning the difference between 8% the Buyer pays on the full amount and 6% they have to pay on the $70,000 underlying loan that remains in place. So, the Smith’s total return is a full 8% on the $25,000 and 2% on the 70,000 that they still owe. In fact that 2% return is huge because it is really not their money, they still owe it on the first mortgage.

Question: How would you like to earn 2% on someone else’s money?

Answer: All day long!

So, through this strategy, you’ve taken the existing mortgage’s lower interest rate(6%) and leveraged it into a higher yield (8%) for yourself. In addition, you can deduct all interest paid on a yearly basis as well as the real estate tax. Of course, as a shrewd investor, you can also use wrap around mortgages to turn around properties quickly at a profit.

There will be more details in future posts that outlines the advantages and disadvantages for each strategy. Subscribe to our feeds for regular updates, free gifts and a menu of resources.

For a comprehensive list of real estate resources, visit

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$8000 Home Buyer Tax Credit extended?


Many people want to know if the existing $8000 first time home buyer tax credit that expires on December 1st, 2009 will be extended.

This is a good question.

As it stands, if you don’t take advantage of it by November 30th, you will not get the tax credit. If you are still trying to take advantage of the existing $8000 first time home buyer tax credit, the time to act is now.

Here is the good news! There are a five bills that have been introduced to Congress to extend the first time home buyer tax credit.

S. 1230: Home Buyer Tax Credit Act of 2009 — introduced on June 10th, 2009. This Act proposes to replace the current tax credit for first-time homebuyers with a one-time credit for 10% of the purchase price of a principal residence, up to $15,000. Requires repayment of credit amounts if the taxpayer sells or fails to occupy the residence within 24 months after the date of purchase.

H.R. 2801: Home Ownership Moves the Economy (HOME) Act of 2009 — introduced on June 10th, 2009. This Act proposes the following:

* extend the first-time homebuyer tax credit to all individuals who purchase a principal residence (currently, only first-time homebuyers as so defined);
* extend the credit and the waiver of recapture requirements for such credit through 2010 (expiration would be moved to January 1st, 2011);
* and repeal the limitation on the credit based on modified adjusted gross income.

H.R. 2606: Home Buying Credit Expansion Act – introduced on May 21st, 2009. This Act proposes the following:

* extend the first-time homebuyer tax credit to all individuals who purchase a principal residence (currently, only first-time homebuyers as so defined);
* extend the credit and the waiver of recapture requirements for such credit through 2010 (expiration would be moved to January 1st, 2011).
* and expand the election to treat a purchase of a principal residence as made in a prior taxable year for purposes of such credit.

H.R. 2619: To amend the Internal Revenue Code of 1986 to temporarily expand the credit for first-time… – introduced on May 21st, 2009. This Act proposes the following:

* to allow until June 30, 2010 a first-time homebuyer tax credit for all purchasers of a principal residence (not just first-time homebuyers);
* and provide a refundable tax credit, up to $3,000, for the costs of refinancing a principal residence.

H.R. 2655: To amend the Internal Revenue Code of 1986 to expand and extend the first-time homebuyer credit – introduced on June 2nd, 2009. This Act proposes the following:

* extend the first-time homebuyer tax credit to all individuals who purchase a principal residence (currently, only first-time homebuyers as so defined);
* extend such credit and the waiver of recapture requirements for such credit through 2010;
* and expand the election to treat a purchase of a principal residence as made in a prior taxable year for purposes of such credit.

On September 8th, Congress will reconvene and we will see if any of these (or a hybrid version of some/all of them) will pass.

Here is the bad news! There is less than 90 days for Congress to extend the first time home buyer tax credit and there are major issues (i.e. healthcare) that may take priority and push the tax credit to the side.

For now, we can either wait and see if the intense lobbying by groups such as the National Association of REALTORS® and National Association of Home Builders can sway our lawmakers to believe that this is a priority item or we can contact our local senator or representatives’ offices and tell them ourselves.

Original article by Steve Lines.

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